The Origin Energy Ltd (ASX: ORG) share price has stepped into the red from the opening of trade on Monday.
Origin shares are now exchanging hands at $4.365 apiece, a slight dip into the red from the market open.
Let’s take a closer look at what’s at play here.
What’s up with the Origin Energy share price today?
Origin Energy’s share price is on the move despite there being no market-sensitive news for the company today.
However, one factor that could be weighing in is the company’s continued push into renewables, specifically green hydrogen.
It’s a funny-sounding name – “green hydrogen” – but it simply refers to hydrogen fuel made from renewable energy instead of fossil fuels.
For those interested in the technical side, it is hydrogen fuel obtained from the electrolysis of water where electricity is generated through low carbon/renewable sources. Obtaining hydrogen this way supposedly only leaves oxygen as the by-product, versus other nasty wastes.
The end product, along with its derivatives, is then used for things like electricity and transportation fuel.
Origin’s play comes amid a wave of interest from ASX resources names in developing green commodities.
Zooming out, it’s clear the wider trend has seen ASX energy and resource companies divesting and/or pivoting away from fossil fuels, re-investing instead into renewable energy solutions.
This appears to be related to a combination of government mandated actions and in alignment with the Paris Agreement on Climate Change.
Strengths in the broader commodity markets in 2020–21 have lead to resource and energy companies generating high margins and equally as high cash flow over FY20–21. As such, they have free cash on the books ready to spend.
So, in a bit of a paradox, the recent trend of ASX energy and resource companies investing heavily into renewables is somewhat fuelled by strengths in underlying “fossil fuels” commodity markets.
What does all this mean for Origin Energy’s share price?
Origin commenced a $3.2 million feasibility study into building an “export scale green hydrogen and ammonia plant” in Tasmania back in November 2020.
Origin’s proposal indicates it will produce green hydrogen in Bell Bay, Tasmania, from “sustainable water using sustainable energy”.
This hydrogen will then be processed with nitrogen to create “green ammonia” which Origin intends to sell for export.
The “greater than 500-megawatt plant” has a capacity to produce 420,000 tonnes of green ammonia each year and could cost up to $1 billion.
The feasibility study is nearing completion in December 2021 and Origin is gearing up to pull the levers on its Bell Bay venture, pending the study results.
Speaking to The Australian, Origin head of future fuels and growth, Tracey Boyes, said the company’s first steps into green hydrogen were “definitely about learning and not making a loss”. That sounds about right in business acumen terms.
Boyes expects with the “first few projects, (it) won’t be making millions of dollars”, acknowledging that Origin “wouldn’t be expecting as high a return at any rate” on the green projects.
However, Origin is seeing past the numbers in its step into renewables, with Boyes’ stating the reason hydrogen is interesting for the industry is “because of (its) decarbonisation in many ways”.
Origin Energy is gradually pivoting into renewable energy solutions, much like several of its ASX-listed energy and resource peers.
Origin’s push is into green hydrogen and ammonia. It has a feasibility study on a site in Tasmania that is nearing completion in December 2021. The outcomes of the study are yet to be heard.
This could have an impact on the Origin Energy share price, which has struggled this year to date and posted a loss of 8%.