Powerhouse Energy Group (LSE:PHE) is an alternative energy stock whose share price has seen explosive growth of over 1,000% since early 2020. The surge in share price appears to have been triggered by the announcement of site preparation for its Protos plant.
But what does Powerhouse do? What is the Protos plant? And should I be considering this alternative energy stock for my own portfolio? Let’s take a look.
A pioneering alternative energy stock
Powerhouse is an energy producer. It recently developed a new and proprietary technology called the DMG System. Put simply, it uses a thermal conversion chamber to take non-recyclable waste plastic, end-of-life tyres, and biomass products, to transform them into a synthetic gas called EcoSynthesis.
Beyond providing a solution to the environmental landfill problem, EcoSynthesis gas has two uses. The first is as a suitable fuel for traditional gas turbines and steam cycle engines that generate electricity for most homes in the UK.
The second use case is what I think has investors excited. EcoSynthesis gas is rich with hydrogen. Powerhouse extracts this element to create hydrogen fuel cells. These can be used to generate clean electricity, as well as power zero-emission vehicles.
With UK environmental legislation pushing towards carbon neutrality by 2050, hydrogen technology has proved to be a viable, clean energy source. And the ability to create it from plastic waste sounds like an exciting investment proposition to me. Especially since current forecasts indicate the waste-to-energy market will reach $54.8bn by 2027.
Turning waste into energy with Protos
The Protos plant is Powerhouse’s first energy plant that received planning permission and began construction in 2020. Once on-line, the facility is expected to process 4.9 million tons of plastic waste each year using the DMG system, and generate 140MW – enough to power more than 250,000 homes.
However, as promising as this technology is, the alternative energy stock is still exceptionally early in its business cycle. As I just said, Protos is the company’s first facility. Until it’s finished and operational, Powerhouse has no source of revenue, with plenty of expenses. And so it needs to continually raise capital to keep the lights on — that’s quite risky.
While no official completion date has been announced, a facility of this size and complexity is likely to take between two and three years to complete. Any delays or disruptions might begin to spook early investors. And given that the firm is continually issuing equity to raise funds, a loss of investor confidence could significantly impact the future of Protos and Powerhouse itself.
The bottom line
The alternative energy stock looks like it could be an incredible business for investors and the environment. But, until the Protos plant comes on-line, the business model remains unproven.
Personally, I think it’s too soon for me to be investing in this company. There are simply too many unknowns. And the recent surge in the share price only adds additional risk.
But the technology could be vital to a carbon-neutral world. Therefore, I’m keeping a close eye on this stock.
Zaven Boyrazian does not own shares in Powerhouse Group. 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.