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Hydrogen far from ‘fool cells’: EV trends and the major ASX players

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If you’re interested in electric vehicles (EV) and ASX lithium shares then you may already baulk at the idea of hydrogen-powered cars. Perhaps, following in Elon Musk’s footsteps, you even call them ‘fool cells’. 

The day that hydrogen fuels your daily commute is probably a long time away — and may never happen — as hydrogen production is worse for the environment, costs more to recharge, and doesn’t currently power your kettle. This is why Tesla (NASDAQ: TSLA), Volkswagen and the Mercedes-Benz division of Daimler AG have already sworn off the burgeoning technology for their EVs.  

However, companies like Hyundai and Toyota are shipping fleets of hydrogen-powered vehicles to Australia this year. Let’s take a look at the lay of the land. 

The advantages of hydrogen over lithium batteries

Hydrogen currently has four main advantages over lithium batteries: the rate of technological development is faster, the fuel cells weigh a lot less (making them potentially useful for aviation), recharging is far quicker and the time between recharging is far longer.

Hydrogen-powered vehicles’ distance advantage is why Japanese manufacturers are already shipping them to Australia to be used in government fleets, and public transport companies across Europe are already investing in hydrogen buses.

But there is another reason why hydrogen could be of interest. It’s a process called electrolysis, where electricity and low-cost metals like nickel and iron can form a catalyst to split hydrogen from water (the H from the 2O). This not only cleans up the production of hydrogen and makes it more efficient, but it also has the potential to make it an infinitely portable fuel source.

This process, which is continually becoming cheaper and more flexible, holds the promise to one day replace lithium batteries all together, according to some enthusiasts.

Australia’s future in green hydrogen power 

The Australian National University believes that by the end of the decade, Australia will be producing this net-zero emission fuel source for just $2/kg, competitive with current fossil fuels. 

One of hydrogen’s biggest proponents, Fortescue Metals Group Limited (ASX: FMG) Chair Andrew ‘Twiggy’ Forrest, gave an insight into what to expect around hydrogen for the foreseeable future.

“We nudge the wheel, make sure our systems work, reduce costs, free up capital and create demand,” he said in his recent ABC Boyer Lectures.

“Then we encourage that momentum and reduce costs further, creating an even larger, more reliable supply, that again creates more demand. The flywheel begins to spin, on its own, faster and faster. Now, we’re building – at global scale – the flywheel of green energy.

“But let’s not underestimate the challenge,” he warned. “The fossil fuel sector will react to falling green hydrogen prices by slashing the cost of oil and gas until it’s almost zero. At the end, it will be grim – think of a knife fight in a telephone box.”

How have the major hydrogen players performed in 2021?

The year-to-date (YTD) returns on the 4 major hydrogen players on the ASX show how exuberantly the market is responding to the potential future of green hydrogen.

Pure-play hydrogen producer Hazer Group Ltd (ASX: HZR) is up 364.1% YTD with positive results in commercialising hydrogen’s production process, while big-cap oil and gas producer Santos Ltd (ASX: STO) is up 130.4% YTD in light of its exploration of the hydrogen-producing capabilities of the Cooper Basin.

“The Cooper Basin hydrogen concept study builds on our progress towards the 1.7 million tonne Cooper Basin Carbon Capture and Storage Project,” Santos CEO Kevin Gallagher said last year.

“Carbon capture and storage (CCS) is the fastest and most efficient route to a hydrogen economy, using less water, de-carbonising natural gas at its source and eliminating Scope 3 emissions. CCS enables the capture of carbon dioxide from the production of blue hydrogen, making it a ‘zero-emissions’ fuel.

“With over 65 years of experience in the safe production of natural gas, Santos has the operational knowledge, capability and infrastructure to be a leader in the creation of a hydrogen industry right here in Australia.”

The Province Resources Ltd (ASX: PRL) share price is up a whopping 2,258% YTD to 12.5 cents per share, after its acquisition of the HyEnergy hydrogen production project in Western Australia’s Gascoyne region.

Last, but certainly not least, is Twiggy Forrest’s Fortescue, with the Fortescue share price up 96.62% YTD. The blue-chip share is planning on investing billions into hydrogen fuel and is likely to be the most vocal proponent in this space as the company aims for net-zero emissions by 2040.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

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Lucas Radbourne