Thu. May 19th, 2022

A hydrogen plant and Australian $ 100 bills.

The hydrogen industry is on its way back. How to invest (Source: Getty)

Hydrogen is fast becoming a coveted investment as the world moves away from fossil fuels, something Australia’s economy is still heavily dependent on.

And while some of the richest people in the country have built their wealth on mining and are resistant to the shift to clean energy, that is not the case for everyone.

The prospect of what hydrogen can do is enough for Andrew “Twiggy” Forrest, former CEO of iron ore giant Fortescue Metals, to work hard for the government to back green hydrogen.

Twiggy has said the hydrogen industry will be worth $ 16 trillion by 2050, and it’s not hard to see why.

Governments around the world are committed to resetting 2050, and hydrogen will be the key to making that happen.

So let’s take a look at what hydrogen is, how it works, and how you can invest.

What is hydrogen?

Hydrogen is the lightest element and is a colorless and odorless gas.

It is also highly flammable and has gained a bad reputation since the Hindenburg disaster of 1937, in which an airship burned in just over 30 seconds, killing 36 people.

But with modern technology can be used to create completely clean energy that can be used to drive homes and cars – replacing things like gasoline.

And it’s not like we have to look far to get it – hydrogen is actually the most abundant chemical in the universe.

It has three times the energy potential of gasoline on a weight-for-weight basis and only produces water vapor when it is burned — so absolutely no greenhouse gases.

How is hydrogen produced?

Essentially, hydrogen is used to create clean energy – but there are a number of ways it can be extracted, and not everyone is clean themselves.

Kanish Kaugh, head of distribution at ETF Securities explained to Yahoo Finance that the hydrogen industry consists of five specialized components, including:

  1. Fuel cells: just like the engine used to convert hydrogen into electricity and energy. They can be used in car engines, in central heating or in other areas as data centers.

  2. Electrolysers: machines that zap water with electricity and break it down into its component gases hydrogen and oxygen. They are essential for producing green hydrogen.

  3. Gas stations: a bit like gas stations, but for hydrogen. This is where ships or other vehicles refuel their hydrogen tanks.

  4. Ammonia: the main ingredient in fertilizers used in agriculture. It is formed by reacting hydrogen with nitrogen from the air.

  5. Green hydrogen: made from water using renewable electricity. It differs from other “colors” of hydrogen – such as gray, brown and blue – in that it does not consume fossil fuels in its creation.

Why is ‘Green Hydrogen’ different?

As Kaugh explained, there are different colors of hydrogen depending on how it was made: brown hydrogen comes from coal, gray hydrogen comes from non-renewable energy and green hydrogen is made from renewable energy.

“Hydrogen is all around us, but to use it we have to extract it. So the easiest way to do that is by getting it from water, ”Kaugh said.

“Gray is the most common, and it is produced by reacting methane with steam. Then you have this idea of ​​blue hydrogen, where fossil fuel companies are trying to capture the carbon created by making gray hydrogen. ”

While all of this may seem confusing, the most important thing to remember is that green hydrogen is what industries and governments are looking for in a carbon-neutral future.

Twiggy himself has said that the fossil fuel industry must take shape – and the use of anything other than green carbon is a “highway to climate disaster”.

Hydrogen, specifically of the green variety, is starting to make a big comeback because it has zero carbon emissions and has a significantly better energy potential than what we are currently dependent on.

And as more countries commit to being carbon neutral by 2050, the industry looks like the next big thing.

How can I invest in hydrogen?

Due to Australia’s continued dependence on fossil fuels, no Australian company creates or uses green hydrogen.

However, this week ETF Securities launched Hydrogen ETF (ASX: HGEN), which includes 30 companies from around the world that are either completely green or on their way to it.

“It’s a megatrend. It is a pure technology solution, but it is still in its infancy when you think of the pure part of hydrogen, ”said Kaugh.

But it’s starting to catch on, and the industry will only evolve more from here, Kaugh said.

For example, the reason why pickup has been slow for green hydrogen is the cost. It costs about $ 6.50 per person. Kilo for green hydrogen and about $ 1.50 per. Kilos for fossil fuels.

But in 2010, green hydrogen cost about $ 15 per gallon. Kilo – so it is in a transition phase where there is more innovation that drives costs lower.

But if it’s more your speed to go global, then there’s The Global X Hydrogen ETF (HYDR), listed on the New York Stock Exchange (NYSE).

This ETF is a little different and seeks to invest in companies that can benefit from the progress of the global hydrogen industry.

This includes companies involved in hydrogen production; integration of hydrogen into energy systems; and development / production of hydrogen fuel cells, electrolyses and other technologies in connection with the utilization of hydrogen as an energy source.

Correction: An earlier version of this story said 2025 instead of 2050. Now that would not have been an investment!

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