Movers and SHAKERS
Unhyped Hydrogen Investments
Hydrogen finally seems on the road to fulfilling its “promise” of becoming a large contributor to the renewable energy mosaic. The interest in hydrogen energy became renewed last year with the push toward zero carbon emissions. Some other drivers of this interest were increased government support and public interest in clean energy options. Hydrogen has been spoken about since the gas crisis during the ’70s as being the answer. It appears as though when it comes to lower emissions, power storage, and abundance, hydrogen is a prime candidate to be part of the answer.
There are many applications for hydrogen and hydrogen fuel cells, and as with most renewable energy solutions, there is some level of “baggage” that comes with each. We’ll discuss the baggage alongside the applications and provide the names of investable companies operating in and with the potential to benefit from the growth of hydrogen as a power source.
Powerful Applications for H
Processing Chemicals - Hydrogen's primary use today is as a catalyst or agent in chemical and industrial processes. Among the chemical processes include the production of methanol and ammonia. The ammonia produced is used directly or indirectly as fertilizer. Hydrogen is also used to refine oil and as part of a process to remove impurities from crude oil. In steel production, it can be used to replace the traditional fuel (cokes) in a blast furnace. These processes are all currently being used and largely executed by what is called “dirty” or “grey” hydrogen.
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Automotive Fuel Cell- At the turn of the Millenium, hydrogen was going to be the clean-energy answer. President George W. Bush even brought it up in his 2003 State of the Union address, saying, “the first car driven by a child born today could be powered by hydrogen and pollution-free.”
The unfilled expectations around hydrogen to power transportation have their reasons. From a practical standpoint, from a driver’s perspective, the shift would seem easy. Fuelling a car with liquid H takes a similar amount of time as gas or diesel; the driving range would also be about the same. One issue preventing widespread use is the infrastructure for hydrogen refueling is not in place. And, as we have seen with electric vehicles, one can’t sell alternative “fuel” cars without the ability to fuel them along the road. On the other hand, building fuel stations isn’t economically feasible until there are customers. The solution to this chicken/egg question has yet to avail itself.
Heavy-Duty Transport- This category is comprised mainly of trains and boats. Hydrogen is a high-density energy source that can provide the appropriate power for heavy goods vehicles. It can provide power where we now implement diesel. Hydrogen is quick to refuel, which reduces downtime in these applications.
Forklifts- Fuel cells are already widely used in forklift fleets. One big advantage of hydrogen-powered fuel cells is it saves time compared to battery-powered machines. The benefits are particularly strong in a three-shift, round-the-clock operation. Fuel cells powered by hydrogen are also without carbon monoxide, which is preferable indoors. Large warehouses operated by Amazon and Walmart use hydrogen-powered forklift fleets.
Power Plants- Stationary Power plants are also using hydrogen fuel cells. They can be used as primary and backup power. The power is reliable and can support on grid or off grid power generation. These stationary fuel cells are able to connect directly to the gas infrastructure.
Grey Hydrogen vs. Green Hydrogen, What’s the Difference?
Hydrogen is as clean as the production method. Most hydrogen currently produced is called “dirty” or “grey” hydrogen. This means it was produced from natural gas and emits greenhouse gas. Grey hydrogen is produced using a process called steam reforming. This isn't the super clean hydrogen envisioned 20 or more years ago. That hydrogen, the one that emits no greenhouse gases, is referred to as “green” hydrogen. The difference provides a challenge and investment opportunities for this emerging field. There is a lot of grey hydrogen used today that can be replaced by green hydrogen. It is estimated more than 95% of hydrogen production in 2019 was grey. Converting one to the other isn’t without cost, but it is then truly green.
Hydrogen can be produced using another method that is somewhat cleaner than grey. It uses natural gas and is called steam reforming. With steam reforming, it's possible to capture 80% to 90% of the CO2 produced in the process. This CO2 is then used in other processes. You’ll hear hydrogen separated in this way called “blue” hydrogen. An alternative natural gas technique that doesn't generate CO2 creates “turquoise” hydrogen.
Investments In Hydrogen
There are many companies worldwide in this space. The largest companies are hydrogen producers, which mainly use the method of steam reforming. Smaller niche companies focus on specific aspects of hydrogen. These can be sub-categorized into electrolyzer producers and fuel cell producers. Some companies will combine the two providing a fully integrated hydrogen producer.
There is a movement toward green hydrogen for most involved. This movement includes joint ventures, sometimes the small helping the big. Linde (LIN), for example, has a joint venture with ITM Power (OTCPK:ITMPF). ITM Linde Electrolysis provides industrial-scale turnkey solutions for green hydrogen production.
Electrolyzers are one way to invest in green hydrogen. There is a lot of wind, solar and tide-produced energy coming onto the power grid. One problem with this is the unstable production associated with these methods. By transforming this energy into green hydrogen, it can replace the current supply of grey hydrogen. I believe electrolyzers are the best way to invest in hydrogen.
Electrolyzers use a system that, with the use of electricity, break water (H2O) down into hydrogen and oxygen in a process known as electrolysis. McPhy Energy SA (OTC:MPHYF) is a designer, manufacturer, and integrator of hydrogen equipment. Its product range features two main categories: Electrolyzers (hydrogen production equipment) of all capacities and hydrogen refueling stations (refueling/distribution equipment) for hydrogen-powered mobility. Another company, Nel Hydrogen (NLLSY) covers the entire chain from hydrogen production to the manufacturing of hydrogen fueling stations, providing all fuel cell electric vehicles with fast fueling similar to conventional vehicles. The company's segments include Fueling and Electrolyzer. ITM Power PLC (ITMPF) designs and manufactures integrated hydrogen energy systems for energy storage and clean fuel production.
The above companies are European with valuations that may cause concern in other industries. They are listed because they are pure-plays on green hydrogen and electrolysis.
SunHydrogen (OTCPK: HYSR) could become an alternative to electrolyzer companies. SunHydrogen is working on an innovative hydrogen generator. The generator uses solar energy to split water into hydrogen and oxygen directly. The technology is still in the design and test stage.
Fuel Cell Companies
Fuel cells are necessary to convert hydrogen into electricity. They can be used in transportation or stationary power systems. Fuel cells can also be powered by other fuels such as natural gas. Most companies are focusing on fuel cells powered with hydrogen or flexible fuel cells. Ballard Power Systems (Nasdaq:BLDP) designs, develops, manufactures, sells, and services fuel cell products for a variety of applications, focusing on motive power (material handling and buses) and stationary power (backup power, supplemental power, and distributed generation). Fuel Cell Energy ((Nasdaq:FCEL) designs manufactures, sells, installs, operates, and services fuel-cell products, which efficiently convert chemical energy in fuels into electricity through a series of chemical reactions. It serves various industries such as wastewater treatment, commercial and hospitality, data centers and communications, education and healthcare, and others. Plug Power (Nasdaq:PLUG) just announced their plans to build a plant to create green hydrogen. The plant will produce 15 tons per day of liquid green hydrogen, produced using 100% renewable energy and intended to fuel transportation applications, including material handling and fuel cell electric vehicle fleets. Plug Power is investing $84 million in the facility, which is expected to create at least 24 jobs in the local community starting in 2022. Plug is an innovator of green hydrogen and fuel cell technology.
Wind, solar, nuclear, and other Renewables are getting investors’ attention. Hydrogen has been spoken about for decades, but like electric vehicles, technology had to catch up with the desire to benefit from the potential. Globally, a move toward renewables is being supported by the major economies, closing the gap on the needed technology is now happening and ramp speed.
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