Renewable energy stocks: here are my top 2 UK hydrogen fuel companies

Renewable energy is the future of transportation and hydrogen fuel may be the technology to take the place of fossil fuels. James Reynolds discusses two of his top UK companies taking on hydrogen power.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Electric cars charging in station

Image source: Getty Images

Renewable energy is the future. There’s no two ways around it. While electric cars may be making all the headlines, there is another technology that I think is far more viable. Prime Minister Boris Johnson has announced his hopes that the UK would become the ‘Qatar of hydrogen’.

But what is hydrogen? How is it different and what are its benefits?

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Hydrogen fuel

Hydrogen is the simplest atom in existence and it is very, very abundant. However, it is also highly reactive, meaning it usually combines with other elements to form compounds. This is how we get water (hydrogen and oxygen). That reactivity gives it great energy potential, if it can be separated from whatever it’s bound to.

Hydrogen has an advantage over the lithium-ion batteries used to power electric cars. It is far more energy dense, so it can power heavy machinery or industrial manufacturing.

People can also transport it easily without the hydrogen losing energy in the process, unlike electricity sent over long-distance cables.

Renewable energy conversion

Right now, ITM Power (LSE: ITM) is my top pick in this field. The company builds the modular hydrogen electrolysis machines which separate hydrogen from water. The machines are attached to existing renewable infrastructure, producing green hydrogen.

Green hydrogen is any hydrogen produced by a method which does not release carbon dioxide, standing in stark contrast to blue or grey hydrogen, which are both made by reforming methane gas and release CO2 as a by-product.

ITM has a lot of debt right now but has recently raised £250m to fund construction of two new factories and is poised to meet growing demand.

My main worry with ITM is that it has struggled to turn a profit for several years and still isn’t forecast to do so for at least another three. However, I believe that this is because demand for hydrogen has historically been low — fact which is currently changing.

Higher efficiency

Another hydrogen-based company on my radar is AFC Energy (LSE: AFC). This company manufactures the fuel cells needed to turn hydrogen fuel into electricity. What makes AFC special is their patented alkaline fuel cells which are able to run on lower purity hydrogen with the same efficiency.

On the financial side, unfortunately, AFC suffers from many of the same setbacks as ITM power. High debt, low revenue, and it has yet to turn a profit.

But AFC is growing. It increased revenues in 2021 and expects further growth through 2022. On top of that any company that uses its alkaline fuel cells will be able to use cheaper, lower grade hydrogen, giving AFC a competitive advantage.

Conclusion

Hydrogen power still remains untested at a commercial scale and I consider it a riskier investment compared to more established fuel companies.

But the market has a clear desire for hydrogen.

JCB just signed a multibillion-pound deal with Fortescue Future Industries (a subsidiary of Fortescue Metals Group) to import green hydrogen all the way from Australia. 

What I’m betting on is that other firms around the world need access to a low carbon fuel. I fully expect ITM and AFC to have some growing pains, but to ultimately come out on top. This is why I’m adding them both to my portfolio.

Our 5 Top Shares for the New “Green Industrial Revolution"

It was released in November 2020, and make no mistake:

It’s happening.

The UK Government’s 10-point plan for a new “Green Industrial Revolution.”

PriceWaterhouse Coopers believes this trend will cost £400billion…

…That’s just here in Britain over the next 10 years.

Worldwide, the Green Industrial Revolution could be worth TRILLIONS.

It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead!

Access this special "Green Industrial Revolution" presentation now

James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Electric cars charging in station
Investing Articles

Lithium stocks could be set to soar! Here’s 1 I like

Lithium stocks are rising in prominence. This Fool delves deeper into this penny stock to see if it could be…

Read more »

Preparing a budget during a pandemic
Investing Articles

With the Jupiter dividend over 11%, should I keep buying?

With the Jupiter dividend yield now north of 11%, should our writer load up on the fund manager's shares?

Read more »

Lady wearing a head scarf looks over pages on company financials
Investing Articles

Am I missing something about Royal Mail shares?

Jon Smith scratches his head at the continued fall in Royal Mail shares and tries to find out what's going…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

This Warren Buffett gamble could return over 20% in the next year

Warren Buffett has loaded up on Activision Blizzard stock, aiming to make a handsome profit in the next 12 months.

Read more »

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".
Investing Articles

IAG shares fall again! Is this stock now too cheap to miss?

IAG shares have not been kind to shareholders this year. And losses were compounded on Thursday amid more bad news.

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

3 reasons to buy investment trusts

Investment trusts have been paying out the biggest total amount of dividends in history. Our writer explains why he would…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Why I’d use a spare £1,000 to buy shares and start building wealth

If our writer had a spare £1,000 right now, he would consider using it to buy shares. Here is why…

Read more »

Female Doctor In White Coat Having Meeting With Woman Patient In Office
Investing Articles

Here’s why the Renalytix share price is tanking

The Renalytix share price has lost almost 90% of its value in one year. Our writer is a shareholder --…

Read more »