𝐖𝐡𝐲 𝐧𝐨𝐰 𝐭𝐡𝐞𝐫𝐞 𝐚𝐫𝐞 𝐠𝐨𝐨𝐝 𝐨𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 𝐭𝐨 𝐞𝐧𝐭𝐞𝐫 𝐭𝐡𝐢𝐬 𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝐭𝐡𝐞 𝐟𝐮𝐭𝐮𝐫𝐞 - 𝐚𝐧 𝐢𝐧𝐬𝐢𝐠𝐡𝐭 𝐢𝐧𝐭𝐨 𝐭𝐡𝐞 𝐦𝐚𝐭𝐭𝐞𝐫 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 𝐢𝐧𝐯𝐨𝐥𝐯𝐞𝐝
Huge amounts of subsidies are flowing into companies investing in green hydrogen, which is produced purely from renewable energies, for the purpose of climate neutrality for the industrial sector. One example is the conversion of the steel industry from blast furnaces to hydrogen-based production.
This shows that hydrogen (H2) is seen as part of the future energy mix, although it currently still plays a negligible role. For example, analysts at Bank of America believe that green hydrogen can meet up to 24 percent of global energy needs by 2050 and would help cut emissions by a third. In the process, the transition to green hydrogen could provide $11 trillion in investment opportunities and $2.5 trillion in revenue worldwide by 2050. There is a huge money printing machine behind the hydrogen theme.
The potential uses would be many: to heat buildings or industrial plants, or to fuel ships, planes, trains, buses and trucks. This is no longer utopia: $TM (Toyota Motor Corporation) has the hydrogen bus "Sora" on offer, and several examples are already running in Tokyo. Even Hamburg, which returned its four H2 test buses from $DAI.DE in 2019, has already invited tenders for additional buses in 2020. Daimler buses are also said to be back in high demand.
The bright future prospects and massive support from numerous government programs created hype for hydrogen stocks in 2020. Some shares of companies in the sector, most of which are still far from profitability, climbed 300 or 400 percent. As a result, they were heavily overvalued. Many of the stocks plunged 50 percent or more since the beginning of the year, including $BLDP (Ballard Power Systems Inc.)$PLUG (Plug Power Inc)$FCEL (FuelCell Energy Inc) .
The funding needed is high. The obstacles to establishing a network of filling stations are no smaller. Germany currently has a good 90 hydrogen filling stations. This makes it one of the leaders in Europe. Experts estimate that at least 1,000 hydrogen filling stations are needed in this country alone to create a nationwide network.
Another challenge lies in the cost-effectiveness of fuel cell technology. The catalytic converter required is expensive. It currently requires 60 grams of $PLATINUM, three times as much as a gasoline engine. In addition, H2 is only emission-free if it is generated from regenerative electricity, i.e. wind, sun, water. That is still expensive. It is much cheaper to generate it with natural gas, but this increases CO2 pollution.
𝐁𝐮𝐭: 𝐂𝐨𝐬𝐭𝐬 𝐰𝐢𝐥𝐥 𝐟𝐚𝐥𝐥
Because of these problems, development is still in its infancy. Technology and infrastructure are not fully developed. But the costs will come down. And the fact that there will be an enormous demand for hydrogen in the future has been brought about by governments themselves through subsidies - even if it is still expensive and inefficient at the present time.
However, the current level is an entry opportunity for courageous, long-term investors. This situation reminds us of the new-economy era. Small companies with a lot of capital requirements (and, at least at the present time, no book profit) dominate.
𝐂𝐨𝐥𝐥𝐚𝐛𝐨𝐫𝐚𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐭𝐨𝐫
Even now, some of the companies are bringing strategic partners on board or cooperating with other companies to meet the costs of expensive product developments. Sweden's fuel cell manufacturer 𝐏𝐨𝐰𝐞𝐫𝐜𝐞𝐥𝐥, for example, is working with 𝐁𝐨𝐬𝐜𝐡 on a breakthrough in heavy-duty transportation. Canada's fuel cell pioneer $BLDP is making common cause with the traditional Chinese engine manufacturer $2338.HK (Weichai Power) . In the coming years, further takeovers and cooperations are likely to boost share prices.
Among the special cases with high profits are $LIN (Linde PLC) and $AI.PA (Air Liquide SA) , both of which cover the entire value chain around hydrogen. Moreover, the groups have other business areas outside the H2 sector. Investors either invest in one of these two companies or spread the high risk over several stocks in the sector via an ETF or a certificate. A single investment in a pure hydrogen stock is not advisable due to extreme fluctuations. Investors must be aware that high opportunities are also accompanied by enormous risks.
What do you think about it? Let me know in the comment section!