Hydrogen, particularly the 'green' kind, has been the talk of the ASX in 2021, and many shares involved with the energy source have boomed.
With some of the ASX's largest companies now having jumped on the hydrogen train, will the momentum continue in 2022?
Let's take a look at what experts are predicting the new year will bring the hydrogen sector.
What might 2022 bring the hydrogen industry?
According to experts, the new year will likely see more companies moving into the hydrogen space. But does that mean the sector is a good investment?
Analysts from global research firm, Wood Mackenzie predicts 2022 will see established companies stepping in to bat for hydrogen – a trend we seem to be seeing in Australia.
The firm's senior vice present of corporate research, Tom Ellacott, believes European majors will join the likes of Australia's Fortescue Metals Group Limited (ASX: FMG) and Woodside Petroleum Limited (ASX: WPL) to commit to the greener energy source.
The United States' renewable energy sector is also looking strong, according to Deloitte. The firm is predicting green hydrogen will continue its upwards trajectory in 2022, driven by renewables' penetration of the energy grid.
Turning back to Australia, the Federal Government's Resources and Energy Major Projects report for 2021 found that there's already $185 billion invested in Australian hydrogen, carbon capture and storage, as well as ammonia projects. Therefore, new projects could soon be popping up all over the country.
But, according to Ausbil, while the hydrogen sector has huge potential, it also houses major risks. The investment manager's analysts commented:
When we look across the hydrogen value chain there are still many unknowns regarding the competing technologies, but if you believe that green hydrogen will be successful, on the infrastructure side we see the biggest opportunities in the renewable energy sector …
Investing in renewable energy generation is a way for investors to benefit from the hydrogen thematic without underwriting a specific technology or speculative start-up risk.
The outlook for ASX 200 companies involved in hydrogen
Fortescue Metals
While Fortescue isn't a renewable energy stock, its subsidiary, Fortescue Future Industries, is aiming to become a leader in the hydrogen industry.
However, according to Morgans senior analyst, Adrian Prendergast, Fortescue's focus on its renewable energy leg might be detrimental to its core iron ore business.
As the broker is predicting 2022 might be a tough year for iron ore, it's maintained its 'hold' rating on the company's shares and slapped them with a $16.90 price target.
Woodside Petroleum
While Woodside is copping major criticism from environmental groups, mostly over its Scarborough Development, the company is branching out into green energy technologies.
It's planning to build what could be one of the world's largest hydrogen and ammonia production facilities near Perth. It also holds numerous other hydrogen projects.
Prendergast believes the company's hydrogen activities, as well as its other renewable energy branches, could "prove material" for the Woodside share price.
Morgans has rated the company's shares an 'add' with a $29.95 price target.
How did smaller ASX hydrogen shares perform in 2021?
Other ASX shares involved in hydrogen include Pure Hydrogen Corporation CDI (ASX: PH2), Provence Resources Ltd (ASX: PRL), and Hazer Group Ltd (ASX: HZR).
Over 2021, their share prices have grown 500%, 1,320%, and 37% respectively.
No doubt, there will be plenty of eyes watching their movements in 2022.
