Consider, for a moment, how game changing the steam engine was.
It powered bigger factories, deeper mines, and a large network of railroads. After starting the Industrial Revolution, the steam engine became the dominant source of power… Until the internal combustion engine came along.
Despite their power output, these engines come with a cost – they require massive amounts of fossil fuel each year. Fossil fuel is a limited resource. And, it carries environmental consequences like carbon emission and pollution.
On the other hand, renewable energy sources like wind and solar offer many benefits… No greenhouse emissions, reduced dependence on foreign suppliers, and best of all – it won’t run out.
That’s why switching to renewable energy will be one of the biggest transformations in the history of the world.
But renewable energy has some drawbacks of its own…
Right now, the biggest argument against renewable energy is intermittency. In other words, energy sources like wind and solar can be inconsistent depending on the weather.
For example, wind turbines can provide large amounts of energy. But, if the wind is blowing like crazy and the demand is too low, there’s an abundance of wasted energy. And if the demand is high but it’s a still day, there’s not enough energy to go around – potentially creating blackouts.
It’s not a problem with controllable energy sources like gas. We can simply shut off the supply when the demand is low and increase it when demand is high.
Ideally, there’d be a solution for storing excess energy from wind and solar sources. Right now, they need backup power for when it’s either calm or cloudy. If the excess energy could be charged up like a battery when they overproduce, it would be an ideal solution.
Fortunately, we might have already found our solution: Hydrogen.
This Solves the Renewable Energy Problem…
Hydrogen isn’t as energy dense as oil on a volume basis. However, unlike oil, it’s not limited to fueling transportation. In fact, hydrogen even has the potential to be competitive with coal or utility-fed electricity.
Large companies are beginning to invest in hydrogen production. Just last month, the CEO of Fortescue Metals (a global leader in metal production) gave a speech at a Credit Suisse investment conference. In it, he laid out his plans to become a pioneer in green hydrogen production. That’s important because green hydrogen is produced without fossil fuel inputs.
The company has a strong balance sheet. They expect to complete construction of their hydrogen infrastructure without issuing more debt. And, they can afford to pay for the new infrastructure with cash.
As a major iron ore producer, Fortescue will be the first large-scale company to be carbon free. They even expect to make its cost competitive with natural gas. Once complete, it’ll make Fortescue a major energy producer. More importantly, they anticipate creating almost as much energy as Saudi Aramco, who has the largest daily oil production in the world.
Until quite recently, there were no major companies involved in hydrogen production. Fortescue has a market cap of $48 billion. That’ll make it the largest hydrogen producer, but not by far.
It won’t be the last large company to invest in the future of hydrogen power either. But, it will start the trend of large companies adopting hydrogen power, while fueling the widespread shift to renewable energy.
The reason I’m bringing this story to your attention now is the performance of the company’s shares. Fortescue (FSUGY), Plug Power (PLUG), Ballard Power Systems (BLDP), and Bloom Energy (BE) are all testing their moving averages (MA). This is a logical area for investors to start getting interested again.
In fact, almost every company working on renewable energy has followed a similar trend. That suggests they’re all marching to the same beat of the market. Stocks have surged higher last year as renewable energy investments soared. They’ve all now retraced a lot of those moves and are pausing in the region of their 200-day MAs.
Keep in mind, there’s no ETF dedicated to hydrogen investing… Yet. While hydrogen research has been going on for decades, commercialization is very new. The big money is only just beginning to flow… Which makes it the perfect time to start paying attention.
Hydrogen energy has the potential to be a major investment sector within the decade.
All the best,
Eoin Treacy
Co-Editor, Market Minute