This article was first published by the organisers of Hydrogen Week here.
The world is looking to decarbonise, and hydrogen is poised to have a key role in the energy transition. Whilst hydrogen-based technologies have been around for many years, with the hydrogen fuel cell being invented in 1842 by Sir William Grove, there is an ever-growing interest in hydrogen technologies motivated by climate change concerns. Indeed, according to a recent joint report from the European Patent Office (EPO) and the International Energy Agency (IEA), technologies motivated by climate change concerns accounted for nearly 80% of all patents related to hydrogen production in 2020.
The EPO report provides some encouraging trends relating to the growth of innovation in hydrogen technologies - but it is clear that further innovation is required if we are to achieve the goal of net zero.
What can we learn from patent filing information?
Patent information is one of the most accessible – but arguably untapped - sources of business intelligence relating to industrial innovation, and is often an early clue as to where industrial innovation is progressing most quickly. Patent applications are published 18 months from the initial date of filing and are required to include sufficient information to allow a person who is skilled in the technological area of the patent application to understand the nature of the invention being protected. Consequently, patent filings provide a publicly available source of information on what new technologies have been deemed commercially important enough to seek patent protection.
Investigating patent trends not only helps us identify where the most technological innovation is happening it also presents opportunities as we can see the blind spots where additional innovation support could be useful.
Who is leading the way with Hydrogen?
Globally, Europe and Japan are the current leaders in hydrogen-related innovation with 28% and 24% of patent families respectively. On the Japanese side, hydrogen-related innovations are dominated by the large car manufacturers, primarily relating to hydrogen fuel cells, whereas in Europe, the filings are more evenly spread across production, storage, distribution and transformation, and end-use applications.
South Korea and China file 7% and 4% of all hydrogen-related patent families, but the growth rate of filings from South Korea and China outstrips that of Europe and Japan, so it will not be long until Europe and Japan are overtaken if this situation remains unchanged.
Indeed, by a measure of a country’s technological specialisation, which compares the number of applications in a given technology area compared to the total number of patent applications filed, South Korea and China file proportionally more hydrogen-related applications than Europe or Japan, demonstrating that they are already punching above their weight in the area of hydrogen innovation. Both Europe and Japan file proportionally fewer hydrogen-related applications than would be expected based on the total number of applications filed.
As such, it is vitally important that support is provided for innovators in the hydrogen-area in the UK, and Europe, so that we are able to maintain our competitive advantage and realise the benefits of innovation.
What are some key areas of innovation?
Whilst the majority of hydrogen produced today is from hydrocarbon sources, patent filing trends also show that carbon-intensive methods of producing hydrogen are diminishing in favour of decarbonised hydrogen production, particularly electrolysis.
Specifically, Japan seems to be more focused on alkaline electrolysis technologies, whereas Europe is more focused on solid oxide electrolysis cells. There is a disconnect between leading in innovation and leading in manufacturing capacity, demonstrated by the US leading in proton-exchange membrane manufacturing capacity, but is less active in innovation. Similarly, China contributes less than might be expected in electrolysis innovation, but is ramping up manufacturing capacity more than any other nation.
After a peak between 2007 and 2011, non-electrolysis based hydrogen production, such as from biomass or waste, has dropped off sharply. This may be reflective of the increased use of waste to produce hydrocarbon fuels, such as bio-diesel or aviation fuel, as opposed to hydrogen. Innovation in e-fuels, which are produced by combining hydrogen with carbon dioxide, has also decreased since 2011.
Innovation in the distribution and storage of hydrogen has also grown steadily over the past two decades, with car manufacturers growing their share of the patent filings, likely because of the need to store hydrogen on fuel cell EVs. Indeed, patent filings in the automotive sector have grown at a very high rate, but this has not been reflected in applications related to industrial uses of hydrogen, such as the manufacture of glass or iron.
How has patenting supported investment and growth?
The EPO and IEA joint report found that over 80% of later-stage investment in hydrogen went to companies that had already filed at least one patent application. It also revealed that start-ups that filed patent applications received a greater share of capital funding than those that did not.
The importance of patent applications is further demonstrated for companies that raise funding at IPO or post-IPO, with 95% of such companies having filed at least one patent application.
It is not possible to say whether the type of companies which need to file patent applications are the ones which are more likely to attract funding, or whether the very fact of having a patent application means that funding is more likely. Even so, seeking protection for innovations should be high on the list of considerations for any companies that are seeking funding.
In addition, there are schemes that reduce the amount of tax paid on profits from patented products. The so-called patent box scheme in the UK rewards innovators for their innovation and for disclosing that innovation in a patent application. Depending on the success of a product or process, the reduction in tax paid on a patented product or process can greatly exceed the costs of obtaining and maintaining patent protection.
Where do the opportunities lie?
With the EPO and IEA's joint report, it can be seen that electrolysis is an area of immense innovation. This points to exciting opportunities for obtaining market share through innovative inventions - however with a large number of patent applications filed in this field, having enough novelty to stand out may become more difficult.
Compared to the established and efficient fossil fuel market, the hydrogen market remains fragmented and so presents many opportunities along the whole value chain, from production to distribution to end-use, for innovators to find a niche and support the drive towards net zero. With a lot of investment being put into hydrogen, it seems likely that established players in the market will buy-out promising start-ups and SMEs. The likely value of the buy-out will be heavily dependent on the intellectual property and know-how of the start-up or SME, and will require a detailed due diligence process, so it is vitally important that innovators in the hydrogen sector give themselves the best chance of success and growth in this exciting market.