Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Hydrogen is like the internet in the 1990s
There’s a lot of buzz around hydrogen and its use as a renewable energy source. Most hydrogen produced today is grey hydrogen, delivered by using natural gas in steam methane reforming. Looking out into the future, green hydrogen manufacturing, using electrolysis, is under consideration to replace the fossil fuel based gas production.
Following Joe Biden’s push for the US to decarbonise, Australia has committed $1.2 billion towards emission reduction technology with carbon offset schemes and four “clean” hydrogen export hubs. Hydrogen is an abundant fuel that emits no carbon. It can be burned as a combustible fuel, or it can generate electricity in a fuel cell. It’s done in four ways:
With virtually no carbon footprint, “Green” hydrogen is, for many, the obvious way to go, current technology which is based around fossil fuel-based hydrogen.
Recognising the importance of hydrogen, ETF Securities have launched an ETF that invests in a concentrated portfolio of companies with deep exposure to hydrogen. The ETFS Hydrogen ETF (ASX:HGEN) will give investors access to opportunities in the emerging hydrogen economy via
30 stocks from developed markets, Korea and Taiwan. The team will focus on companies that produce hydrogen fuel cells, make hydrogen refuelling stations and other infrastructure like storage, and companies that generate hydrogen or build electrolysers.
ETF Securities Head of Distribution Kanish Chugh says, “The new ETF aligns with the company’s focus on providing investment opportunities that tap into social and economic megatrends. The hydrogen economy is a greenfield investment opportunity, still in its early development stage. However, its potential applications are limitless – from making fertiliser to powering the world’s transport
systems.”
In the same way Australia has done, Governments around the world are providing subsidies to support the development of clean energy technologies, including hydrogen. There is already a significant pipeline of hydrogen power projects in a number of countries. A good example is local iron ore produce Fortescue Metals Group (ASX:FMG), who have pledged to achieve carbon neutrality in so-called scope 3 emissions by 2040. It will by making emissions-free steel while providing a renewable fuel for its fleet of eight iron ore carriers. Most of this would be done through absolute emissions reduction rather than the use of offsets. The company has identified a 300 gigawatt pipeline of potential, including 40GW in the Pilbara, and hopes to build as much 1,000GW in the longer-term.
Chugh says, “Hydrogen may be like the internet in the 1990s, or semiconductors in the 1970s. In these instances, disruptive technologies reached tipping points and saw exponential uptake. Their uptake was driven by megatrends – which are one-off structural shifts in the economy and society.”
Despite much of the current methods of producing hydrogen are based around fossil fuels, i.e.
Here are the top holdings in the portfolio:
Bloom Energy in the US and Ceres Power in the UK are two companies in the portfolio that produce solid oxide electrolysers (SOEs). The technology in these devices split water into hydrogen and oxygen. Green hydrogen produced quick and easy. Waste heat produced by these units can be used to boil the water. Canadian firm Proton Technologies uses advanced coal seam gas technology which can extract hydrogen from abandoned oil fields while leaving the carbon underground. In the same way as steam reforming by reacting methane with steam but underground and with a palladium filter that only collects hydrogen.
Evan Metcalf, Head of Product at ETF Securities says, “the fund includes an ESG filter, using data from Minerva Analytics, that excludes companies involved in controversial weapons, small arms, gambling tobacco and fossil fuels, or which are non-compliant with the United Nations Global Compact. The fund also removes oil, gas and coal companies.”
