May 08, 2023 • Paul Rodden • Season: 2023 • Episode: 212
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In episode 212, Nel announced his big plans in Michigan, and money week talks adventurous hydrogen investment opportunities. I'll go over all of this on today's hydrogen podcast.
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Nel announced his big plans in Michigan, and money week talks adventurous hydrogen investment opportunities. I'll go over all of this on today's hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen and this podcast will give you the answers. My name is Paul Rodden and welcome to the hydrogen podcast.
In a press release on May 3 Nel plans Gigafactory in Michigan, today may 3 Nel announced its plans to build a new automated gigawatt electrolyzer manufacturing facility in Michigan. When fully developed, the facility will employ more than 500 people and be among the largest electrolyzer manufacturing plants in the world. The announcement was made at the Select USA Investment Summit in Washington with the Department of Commerce Secretary and the governor of Michigan, Gretchen Whitmer, and a quote from Governor Whitner. We're thrilled to bring home up to $400 million in investment from nel hydrogen, creating more than 500 Good paying clean energy jobs right here in Michigan. She also continues to say earlier this year, I went on an economic mission to Europe to show the world what Michigan has to offer. And as a result, our efforts on the trip, we secured an investment from Nel to continue building our leadership in cars, chips and clean energy.
As a major player in all three of these sectors. Michigan is serious about leading hydrogen development and winning today's investment proves that the best manufacturing in the world happens right here in Michigan. Now over the past year, Nel has assessed a wide range of states for the location of its new manufacturing facility and the company has now concluded that Michigan is the best option. In a quote from Nel CEO Håkon Volldal, the choice of Michigan is based on an overall assessment of what the state can offer in terms of financial incentives, access to a highly skilled workforce and cooperation with universities, research institutions and strategic partners. He says he will also highlight the personal engagement from Governor Whitner and her competent and service minded team Volldal emphasizes that the short distance to General Motors headquartered in Detroit has played a decisive role in the choice of the state. The two companies collaborate to develop further and improve Nel's PE M electrolyzer technology. And a quote from GM executive director of Hydrotech Charlie Freese says having Nel's new facility close to our home base of Hydrotech development, and southeastern Michigan will help us more quickly accelerate our electrolyzer collaboration. He also says this technology is critical and helping bring down costs while also creating a more sustainable hydrogen supply.
Now, when fully developed, the Michigan facility will have a production capacity of up to four gigawatts of alkaline and pem electrolyzers. Going forward, Nel will build on its fully automated alkaline manufacturing concept invented at their plant in Norway. Similarly, the company's expansion of the facility and Wallingford will play a critical role in creating a blueprint for scaling up the production of pem electrolyzers Nels PE M. electrolyzers have been deployed through decades of support from the US Department of Energy again and going to Volldal nearly two decades of research investment through the Department of Energy's hydrogen and fuel cell office has led to technological advances that will now be transitioned to gigawatt scale in our Michigan facility. The factory will be built in steps to match supply and demand, a final investment will require a separate decision. Okay, well, I know this news was just about everywhere late last week, and rightly so this is a big deal, especially in Michigan, and for the hydrogen industry in North America. But also knowing that Nel is going to be working even closer with GM could mean big things are on the horizon for US made hydrogen cars in the near future.
Now it's no secret that Detroit as a city has been struggling for some time economically. This new facility could be a game changer for that town itself. And so fingers crossed that fid does come through and they decide to invest in the project. Next in an article in money week, Bruce Packard writes five hydrogen stocks for adventurous investors, Bruce writes, What do Roman Abramovich Jim Ratcliffe and Peter Hargreaves have in common? You might be thinking of trophy assets like super yachts or football clubs, but all three have been early backers of the hydrogen economy. The gas has been used for decades and industrial processes such as oil refining and ammonia production.
To create fertilizer and agriculture for instance. However, hydrogen does not occur naturally except in stars, and we can't dig out hydrogen from the ground and burn it like natural gas. Well, a quick aside from the article, yes, you can, and we've covered that several times. But back to the article, so more than 90% of the 70 million tonnes of the world's current annual hydrogen production comes from burning hydrocarbons. The attraction of hydrogen is that electrolyzers can split water molecules into hydrogen and oxygen and the gas can then be stored and converted to power via a fuel cell. The only waste product is water. Think of hydrogen not as an energy source, but as an energy carrier like electricity. Elon Musk isn't a fan suggesting that it is the most dumb thing I could possibly imagine for energy storage, but governments and corporations have identified hydrogen as capable of delivering a shift from burning hydrocarbons to renewable energy. The gas is light and has a much at lower volumetric energy density than LNG or liquefied natural gas that takes up a relatively large amount of volume. For a given amount of energy stored.
It also freezes at a lower temperature negative 253 degrees Celsius compared with negative 162 for LNG. The upshot is that when producing hydrogen, transporting it and converting it back to electricity via a fuel cell, the delivered energy can fall below 30% of initial input, according to the IEA. As a result, most hydrogen is produced close to its end use. Unlike with software, the investment required intangible assets, such as storage tanks, refueling infrastructure and pipes will be vast. At the start of 2021. There were over 228 announced hydrogen projects with a capital cost of $300 billion. And in the past 12 months, the US has announced 370 billion worth of funding for clean energy, of which 9 billion was earmarked for hydrogen. There will be no hydrogen businesses founded in a garage in Silicon Valley, now established hydrocarbon companies like Shell which operates a blue hydrogen project in Alberta or Spanish utility Iberdrola, which is developing a green hydrogen plant with 100 megawatts of solar panels are likely to be a major source of funding in the UK cadent backed by Australian investment bank Macquarie plans to trial hydrogen villages in Whitby and Redcar. Using hydrogen to heat 2000 residents homes cadent will convert homes and install hydrogen appliances then transport hydrogen by pipeline with a natural gas pipeline for households that opt out. There are also competing electrolyzer and fuel cells.
Some electric cars use hydrogen fuel cells. aim listed ITM power mix electrolyzers using proton exchange membranes. A drawback of PMS is that they require precious metals such as platinum, but competitor AFC energy has an alkaline fuel cell using nickel and its electrodes rather than platinum. While Series Power holdings another hydrogen company uses solid oxide technology. Clean Power technology has developed a membrane free electrolyzer from easily available or recyclable materials. Now historically, hydrogen sector has traded like a speculative asset such as cryptocurrency. It recorded impressive returns in the liquidity driven rally of 2020 and 2021 but sold off in 2022. Even as investors worried about energy security after Putin's invasion of Ukraine. Series, AFC energy and ITM power have been on aim for more than a decade.
More recently, they have been joined by Atome Energy, Clean Power Hydrogen, Hydrogen Utopia and the investment vehicle HydrogenOne Capital Growth, backed by Ratcliffe. A month ago Melrose the industrial manufacturing business de merged its automotive powder metallurgy and hydrogen storage operations into a separately listed entity Dowlais hydrogen one and Dowlais have a premium listing on the main market of the London Stock Exchange rather than aim. Alright, so what about hydrogen one capital growth, it's an investment vehicle containing hydrogen focused assets across the world. It listed in 2021 and since then, has invested more than 100 million pounds in hydrogen assets and 18 million pounds of cash as of the end of December of last year, more than 82% of the fund's assets are unlisted. While 3% comprise listed companies such as ITM power, and AFC energy, which the article covers in just a little bit. The group has been hit by the broad sell off and now trades at a discount of about 50% of its December 2022 net asset value. As a fund hydrogen one is the most diversified way of investing in the sector. It may make more sense than concentrated investments in the fuel cell or electrolyzer companies where a clear winner has yet to emerge.
AFC energy is a flex fuel cell manufacturer of alkaline fuel cells, which uses nickel and its electrodes. They're competing methods of making hydrogen fuel cells and AFCS. alkaline fuel cells have much cheaper components than the proton exchange membrane fuel cells that ITM power makes. The downside is that it's alkaline technology is less efficient. Recently, AFC announced a successful field trial of its first prototype methanol fuel tower, with , an engineering company listed in Spain. The company reported revenues of 2 million pounds in the year to the 31st of October of 2022. And this is forecast by brokers to rise to 11 million pounds this year and then jump to 140 million pounds two years later, when the company is expected to break even.
There are no institutional investors on the shareholder list with the exception of Irvington investments, which has connections to Roman Abramovich, a tome energy is a green hydrogen company with projects in Paraguay and Iceland. The projects are in such far flung places because their fuel cell technology operates more effectively with a continuous power source. So electrolysis using solar and wind power are less suitable. Iceland has an abundance of hydroelectric and geothermal energy, and Paraguay has hydro atome doesn't make its own electrolyzers but his buying membrane free electrolyzers from clean power hydrogen, which listed on aim in early of 2022 powerhouse energy and hydrogen Utopia have a similar business model to atome except they hope to use waste rather than hydro or geothermal energy to produce hydrogen. Atome is a spin-out from Aim-listed President Energy, which was involved in largely unsuccessful oil and gas exploration in Argentina. President, which has now changed its name to Molecular Energies, still holds a 25% stake. Peter Levine, Atome's chairman, who made his first fortune investing in Siberian oilfields, holds a further 23% of Atome shares. FinnCap, Atome's joint broker, believes that the hydrogen company will need to allocate $660m to capital expenditure over the next five years, with a combination of debt and equity. That compares with a current market value of £35m, so management will need to convince investors of the viability of their projects in order to raise large sums.
Ceres Power (Aim: CWR) has been listed since 2004 and makes solid oxide fuel cells and electrolysers. Its fuel-cell commercialisation is more advanced than its electrolyser, but it believes solid-oxide technology's high efficiency gives it an advantage over PEM and alkaline approaches. Ceres' expertise lies in solid-oxide electrochemistry, but in terms of industrial scale mass-manufacturing it has partnerships with much larger companies. So the group has an asset-light, licensing model partnering with established companies including Weichai in China, Bosch in Germany, and Shell. Revenues are forecast to more than double to over £50m in 2023, though the firm is still expected to make a loss for the next three years. Having raised £180m in 2021 it still has significant cash, so those forecast losses are manageable. After two decades of losses, investors will at some stage want to see that the promising technology can make a profit. And lastly, ITM power, ITM power makes proton exchange membrane (PEM) electrolysers for grid balancing, energy storage and hydrogen production at Bessmer Park, Sheffield.
ITM had net cash of £318m at the end of October 2022, having raised £250m of equity in 2021. Peter Hargreaves of Hargreaves Lansdown fame is a major shareholder, but ITM also has the backing of industry players such as Linde, one of the world's largest gas suppliers, which has invested £38m, and £30m from Snam, an Italian energy infrastructure company. In October 2021, ITM and Linde announced the deployment of a 100MW electrolyser at Shell's Rhineland refinery, and they have signed two more 100MW deals with Linde for a site in Lingen, Germany. Sales are forecast to grow to £67m in the year to 30 April 2025, though the company is still expected to be heavily loss-making. However, its most recent set of results in January showed sales halving to £2m in the six months to 31 October 2022. Following this disappointment Graham Cooley, CEO for 13 years, was replaced by Dennis Schulz, previously of Linde.
The move follows several delays, blamed on supply-chain difficulties and rising costs, which have also seen the share price fall by 90% in two years. Even if sales do jump to £67m by April 2025, the market value of £460m reflects considerable optimism over the business model. Some hedge funds have taken a more pessimistic view: ITM Power is one of the most shorted stocks in London. Okay, so a brief glimpse into some European companies and their recent performance over the last year. Now, obviously, we here at the hydrogen podcast aren't giving any specific investment advice. But more than anything, I'm curious to see which of these electrolyzer manufacturers come out and which technology ends up making the most sense, economically.
All right, that's it for me, everyone. If you have a second, I would really appreciate it. If you could leave a good review on whatever platform it is that you listen to Apple podcasts, Spotify, Google, YouTube, whatever it is, that will be a tremendous help to the show. And as always, if you ever have any feedback, you're welcome to email me directly at firstname.lastname@example.org. And as always, take care. Stay safe. I'll talk to you later.
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