What makes hydrogen stocks attractive?
Hydrogen is considered a crucial element in helping countries reduce emissions from energy consumption and achieving net-zero by 2050. It’s a cheaper and greener alternative to natural gas.
In the UK, the government is committed to investing up to £4bn in hydrogen, including production facilities, between now and 2030. The aim is to produce enough hydrogen to replace fossil fuel gas for heating and cooking in around 3 million homes. The government is hoping that hydrogen will power between 25% and 30% of UK homes by 2050. In the US, President Joe Biden’s infrastructure bill includes $8bn for capturing, transporting, and storing clean hydrogen.
There are various companies, big and small, working on hydrogen technologies, from hydrogen fuel cells and cars that run on them to companies that produce hydrogen. The allure of trading and investing in these stocks is in their growth potential over the long term. If hydrogen gains traction as an alternative fuel source, then these stocks could have similar potential to oil and gas companies in their infancy many decades ago.
Hydrogen stocks to watch
Toyo Engineering [6330]
The traditional way to produce hydrogen is steam reforming, where hydrocarbons react with water. Japanese firm Toyo Engineering has experience in the field of designing, licensing, and constructing steam reformers. Its activities account for more than 10% of the hydrogen produced globally. Technology developed and used by the company is said to improve the thermal efficiency of the process, and this brings with it environmental and economic benefits.
ITM Power [ITM]
Another method of producing hydrogen is electrolysis, which requires electricity and is more expensive than steam reforming – but could become cheaper over time as technologies advance and scale. This, in turn, may make electrolysis-based hydrogen production more competitive. ITM Power, a leading electrolyser manufacturer, is aiming to reduce the cost of its electrolysers by 40% over the next few years. Its existing customers and partners include transport company National Express, business group Sumitomo, carmaker Toyota, and mining business Anglo American.
