The election of the Labor government has many investors wondering what the future holds for ASX hydrogen shares. The newly-formed cabinet is dedicated to a green economy, which includes hydrogen as an important part of that equation.
Hydrogen, specifically green hydrogen, is seen as a key contributor to the goal of electrifying everything, and it's expected to play an important role in industrial applications. However, that isn't to say the sector isn't without its risks.
If you're thinking about investing in ASX hydrogen shares, here's what you should know.
What's the plan for hydrogen?
Energy has become a hot topic as the world faces its greatest energy crisis since the 1970s. A global fossil fuels shortage was already being felt last year, now exacerbated by the conflict between Russia and Ukraine.
This has prompted the International Energy Agency (IEA) to describe the current situation as a "much bigger" crisis than that of the 70s. Portraying the significance of the situation, IEA executive director Fatih Birol said:
Back then it was just about oil. Now we have an oil crisis, a gas crisis, and an electricity crisis simultaneously.
Australia's fresh faces in Parliament will be looking to reduce the country's reliance on dinosaur bones. As laid out in its policies, Labor is targeting a commitment to net zero emissions by 2050 with the interim aim of reducing emissions by 43% by 2030.
In turn, ASX hydrogen shares such as Fortescue Metals Group Limited (ASX: FMG), Pure Hydrogen Corporation (ASX: PH2), and Province Resources Ltd (ASX: PRL) could be set to benefit.
However, two industry experts are cautioning investors about the volatility that comes with hydrogen investments. Firstly, KPMG partner and head of climate change and sustainability Adrain King warned:
If we're going to achieve our ultimate goals, then hydrogen is probably required. But it is still in the innovation stage; it's very small and still pilot-based compared to what it would need to be.
Similarly, Saxo Markets strategist Jessica Amir said:
The (hydrogen) market is very volatile at the moment. There are a lot of hydrogen companies on the ASX and the smaller ones, in particular, are probably worth staying away from just because of the volatility.
How have ASX hydrogen shares performed?
The performance of ASX hydrogen shares this year is split between small-caps and large-caps. Those with a market capitalisation below $200 million have lost the support of investors, resulting in heavy losses.
Whereas the likes of established companies, such as Fortescue Metals and AGL Energy Limited (ASX: AGL), although not pure-play hydrogen shares, have managed a positive performance.
