Hydrogen vs Electric
Tesla CEO Elon Musk has made his views on the hydrogen fuel cell technology quite clear. He once called it a “staggeringly dumb” idea when compared to storing power in an efficient battery. But given he runs an electric car company, it’s fair to say he is biased.
Hydrogen technology is gaining significant popularity in several European nations – including France, Germany, Spain, Portugal, Holland, and soon the UK. Prime Minister Boris Johnson recently announced plans for a Green Industrial Revolution and one of its critical points is the use of hydrogen to power industries, transport, and homes.
The UK, along with other European nations, is slowly transitioning to a net-zero emissions economy. I’ve previously discussed what this means for the energy sector. But another crucial evolving industry is the automobile sector.
Today the two most viable solutions to eliminating vehicle emissions are to change the power source to either electric or hydrogen.
An opportunity to beat Tesla?
NASA have been using hydrogen to power its rockets since the 1950s. It is the most abundant element in the galaxy. However, a significant problem with hydrogen technology has been sourcing the fuel.
Originally, hydrogen was extracted from hydrocarbons — commonly referred to as fossil fuels. This is not exactly an environmentally friendly way of acquiring the material.
Luckily ITM Power (LSE:ITM) found a much better solution. Using patented technology, it uses a process called electrolysis to convert water into hydrogen and oxygen. The process produces zero greenhouse gas emissions.
Three projects – three hydrogen opportunities
Today ITM Power has three major projects underway.
The REFHYNE project is the leader in the effort to supply clean refinery hydrogen across Europe. Partnering with Royal Dutch Shell, and the European Commission’s Fuel Cells and Hydrogen Joint Undertaking (FCH JU), ITM will install and operate the world’s largest hydrogen electrolyser in Wesseling, Germany.
Its second project, HyDeploy, is experimenting with the viability of blending up to 20% hydrogen into the normal gas supply. The research is being funded by Ofgem, with the University of Keele testing the new solution. If successful, households could see a dramatic drop in energy bills with no changes to their consumption or domestic appliances.
The third project is by far the largest. H2Mobility is an effort to install and operate hydrogen refuelling stations across Europe. Supported by the British and European governments, 21 companies – including Honda, Hyundai, and Nissan – are collaborating to complete the project with ITM providing the fuel.
The bottom line
Combined, these projects, along with new supportive legislation, are making a hydrogen-based energy solution increasingly viable, not just for vehicles but households as well.
Like Tesla in the electric vehicle market, ITM Power has the technology and expertise to lead in the hydrogen market. However, the stock valuation today is borderline insane.
The market has priced the company at £1.6bn. While it may be worth that in the future, today it remains unprofitable and has little more than £3m in revenue.
I am keeping a close eye on the company, but for now, I’m not buying shares.