What Are ASX Hydrogen Stocks?
ASX hydrogen stocks are companies listed on the Australian Securities Exchange (ASX) that engaged in the production, distribution, or utilisation of hydrogen as a clean energy source.
Why Invest In ASX Hydrogen Stocks?
As the world decarbonises, hydrogen is gaining recognition for its potential to generate power and heat with zero emissions, producing only water and electricity as byproducts. And plenty of companies, from big energy providers to small cap penny stocks are trying to capitalise. Although many of them (even giants like Fortescue) are years away from large-scale production, investors believe in the long-term potential and are seeking to get in early.
But it is not just companies driving the change. Governments around the world, including Australia, are investing heavily in new initiatives. Australia has its own National Hydrogen Strategy, first launched in 2018 and has published an annual report since then. The most recent one found that Australia’s hydrogen and derivatives industry has an investment pipeline of A$230-300bn, worth 40% of all global projects announced to date.
The Australian Renewable Energy Agency (ARENA) supports several projects, including the development of a green hydrogen plant, that align with Australia’s green hydrogen strategy. This strategy is integral to ensure not only that Australia can realise its ambitions from an environmental standpoint, but from a supply chain one too.
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Sign Up HereFuture Outlook Of The ASX Hydrogen Sector
The long-term outlook looks positive as hydrogen has potential to play a key role in decarbonisation.
According to Norwegian renewable energy advisory company DNV, the world will need 15% of its global energy to be from hydrogen by 2050, if it is to meet targets from the Paris Climate Change Agreement. It could help avoid up to 534PJ of natural gas, 20mt of coal equivalent and 360 kilo-barrels per day of oil. As noted above, Australia is investing a lot of money into hydrogen.
At the same time, many individual ASX Hydrogen stocks (even those that have committed money to the cause) are at early stages. In other words, don’t expect to see them producing hydrogen any time soon. Yet if they can capitalise on the trend, there is a significant opportunity for these companies to make money and have a positive impact on the world in doing so.
How To Choose The Right ASX Hydrogen Shares?
Selecting the right ASX hydrogen stocks requires evaluating companies based on their technological innovation, market position, and alignment with government initiatives. Prospective investors should consider firms with a solid track record in hydrogen projects, robust partnerships, and access to funding.
Companies actively involved in government-backed green hydrogen hubs or those receiving significant grants for research and development are often well-positioned for growth. It’s also crucial to assess the company’s potential for scalability and its role in the broader hydrogen ecosystem, from production to storage and distribution.
How To Invest In Hydrogen Stocks In Australia?
Investing in hydrogen stocks in Australia can be done directly through purchasing shares of companies listed on the ASX involved in green hydrogen energy. Alternatively, investors looking for diversified exposure to the sector may consider exchange-traded funds (ETFs) that include a range of hydrogen and renewable energy stocks.
Engaging with a financial advisor or using online brokerage platforms are practical steps to initiate investment. Due diligence, including research on individual companies’ financial health and growth prospects, is essential to making informed decisions in any asset class, but particularly with stocks, and especially stocks in sectors at such an early-stage as hydrogen is at.
Are ASX Hydrogen Shares A Good Investment?
It is a complicated answer. Although hydrogen has much future potential, it will take a lot of capex and time to realise this potential. The large cap stocks are arguably well-positioned, but even they have had setbacks – particularly Woodside (ASX:WDS). The saving grace with large-caps is that they have existing businesses to fall back on, although they may not be ESG friendly in the way that hydrogen is.
Smaller caps, like GreenHy2 are highly risky and are likely years away from full-scale production, yet may create shareholder values from ‘little wins’ such as pilot programs with big names to test out hydrogen technologies. Small cap hydrogen stocks are not stocks for the faint-hearted and risk averse investors.
FAQs on Investing in Hydrogen Stocks
What are ASX hydrogen shares? CollapseASX hydrogen stocks involve companies on the Australian Securities Exchange that are engaged in the hydrogen energy sector, focusing on clean energy production and technology.
Why should I invest in ASX hydrogen stocks? ExpandInvesting in ASX hydrogen stocks offers exposure to a growing clean energy sector, with potential for significant returns as global demand for sustainable energy solutions increases.
What makes hydrogen energy an attractive investment? ExpandHydrogen energy is attractive due to its clean-burning properties, potential for decarbonizing various sectors, and the Australian government’s strong support for green hydrogen as a key energy source.
Are there risks involved in investing in ASX hydrogen shares? ExpandYes, risks include the nascent stage of the green hydrogen market, potential volatility, technological challenges, and the high initial costs of hydrogen production.
How can I start investing in ASX hydrogen shares? ExpandYou can start by purchasing shares directly through the ASX or exploring exchange-traded funds (ETFs) focusing on hydrogen and renewable energy, using online brokerage platforms or financial advisors with various options like Pure hydrogen Corporation, Hexagon energy materials, Fortescue metals group etc.
Are their any Hydrogen ETFs? ExpandThe Global X Hydrogen ETF provides investors with exposure to the green hydrogen industry, encompassing a wide range of companies involved in the development and deployment of hydrogen technologies. This ETF reflects the growing investor interest in renewable energies and the potential of grey hydrogen to significantly reduce greenhouse gas emissions.