Energy

How to play the hydrogen sector through ASX listed stocks

Wed 02 Mar 22, 7:28pm (AEST)
image

Stocks in article

lio
MktCap:
-
hzr
MktCap:
-
ph2
MktCap:
-
org
MktCap:
-
fmg
MktCap:
-
ipl
MktCap:
-
adx
MktCap:
-

Share article

Key Points

  • There any many ASX-listed stocks offering exposure to the hydrogen sector
  • Alan Finkel sees hydrogen as “Australia’s next multi-billion-dollar export opportunity
  • FFI is to build world’s largest hydrogen equipment manufacturing hub at Gladstone

Despite the uptick in valuations experienced by most companies connected to hydrogen recently, the argument for investing in this sector locally, and the what’s propelling a handful of hydrogen ASX-listed pure-plays forward, remains largely untold.

Unless you have these hydrogen companies on radar, their announcements can, due to their size, get overlooked by brokers and media alike.

Before drilling down into some of the company specifics, it’s important to get a handle on what this dynamic clean energy is really all about.

What’s the big deal about hydrogen?

To the uninitiated, hydrogen’s primary use today is as feedstock in chemical and industrial processes. However, there are also countless other applications including clean and heavy-duty transport, materials handling, and stationary power systems.

Hydrogen can be produced from almost all energy resources, and the Global Hydrogen Council predicts it could supply 18% of the world’s energy by 2050.

Best estimates suggest the world produces around 115m tonnes of hydrogen, comprising 69Mt directly and 48Mt as a by-product of other processes. The main uses are for production of ammonia (chemical code NH4) and fractionation in oil refining.

Where’s the money trail

Most of the companies active in the hydrogen economy globally are using steam reforming to produce hydrogen. But there are also companies focusing on fuel cells powered on hydrogen or flexible fuel cells.

Australia’s chief scientist Alan Finkel sees hydrogen as “Australia’s next multi-billion-dollar export opportunity”, and is impressed by the EU’s plans to build 6GW of green hydrogen electrolysers in the next four years.

Mixed bag

There’s a growing mixed bag of hydrogen stocks on the ASX, ranging from oil and gas companies with side projects – like Lion Energy (ASX: LIO), through to a cluster of small-caps offering pure-play exposure to the sector, like Hazer Group (ASX: HZR), and Pure Hydrogen Corp (ASX: PH2).

For example, Hazer Group is undertaking the commercialisation of the Hazer process, which in layman’s terms is a low-emission process that converts natural gas into clean and economically competitive hydrogen and high-quality graphite, using iron ore as a catalyst.

Another aspirant focussed on Australia’s green hydrogen future is Infinite Blue Energy. The ASX aspirant plans to become Australia’s first commercial scale green hydrogen company.

Upon completion, the company’s landmark Arrowsmith Hydrogen project is expected to produce over 25 tonnes of 100% clean green hydrogen daily.

The bigger end of town

The big end of town is also getting in on the act, with the likes of Origin Energy (ASX: ORG) conducting a feasibility study into building an export-scale renewable energy plant in Tasmania.

Then there's the Fortescue Metals (ASX: FMG) subsidiary Fortescue Future Industries which plans to produce zero-emission green hydrogen from 100% renewable sources.

Fortescue’s founder, Andrew Forrest believes FFI initiatives are a valuable step in the company’s transition from pure-play iron ore producer to a renewables and green resources powerhouse.

One FFI initiative is to build the world’s largest hydrogen equipment manufacturing hub at Gladstone, Qld. FFI has also reached an agreement with Incitec Pivot (ASX: IPL) to study the feasibility of constructing a green hydrogen facility on Gibson Island, Qld.

A creative solution

But when it comes to seamless segues into the hydrogen sector, oil and gas microcap explorer ADX Energy (ASX: ADX) has an interesting story to tell.

While the company’s Gaiselberg and Zistersdorf fields in the Vienna Basin continue generating revenues for the company, it’s the depleted gas reservoirs that are being earmarked for special treatment in the future.

Management believes these reservoirs are at the ideal temperature and pressure for hydrogen storage and are conveniently located next to the biggest wind farms in Austria.

In short, the plan is to use excess renewable energy – courtesy of the Austrian wind and solar power – which overloads the grid every summer, to produce hydrogen and store the gas in the depleted reservoirs in winter.

This essentially creates a hydrogen battery where each reservoir can store about 500 times more energy than the largest Tesla energy storage Mega Pack (about 200MWh) at a much lower price.

image

ADX share price: A 12 month snapshot

Other ASX-listed stocks with exposure to the hydrogen sector include:

 

 

 

 

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

Get the latest news and media direct to your inbox

Sign up FREE