Can Australia Be The Saudi Arabia Of Renewables?

HOSTS Alec Renehan & Bryce Leske|18 April, 2021

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

In today’s episode Bryce and Ren deep dive into the investing potential of the most common chemical in the universe: Hydrogen. In 2019, over 70 million tonnes of hydrogen was used in industrial processing, and the amazing future possibilities of Green hydrogen has a lot of people very excited. Together the guys talk about the different terminology you might have come across, the context of the industry to date, the ways hydrogen could be used, the infrastructure we need to make this happen, and why the CSIRO is the MVP in this story.

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BRYCE LESKE: [00:00:39] Welcome to another episode of Equity. It's a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you going? [00:00:55][15.7]

ALEC RENEHAN: [00:00:55] I'm very excited, excited for this episode. We're doing an industry deep dove on an industry that we've been speaking about off the podcast for a little while. I think we may have mentioned on the show a couple of times that we wanted to do this. So I'm glad that I finally found some time in your busy content schedule to just slip this one in. Yes, we're going to be doing an industry deep dove on the hydrogen industry. [00:01:18][22.8]

BRYCE LESKE: [00:01:19] Yeah, we are. And this is off the back of some feedback from the listener survey that you want more industries, you want more company analysis. So we're going to be doing more of these over the next year. [00:01:32][13.7]

ALEC RENEHAN: [00:01:33] So last week we did talked about a company that does solids and liquids. Now we're going to be talking about a gas [00:01:40][7.7]

BRYCE LESKE: [00:01:42] liquids being wasted, a bit of an ice water. Yeah, but anyway, another another piece of feedback was to get straight into that process. So for for [00:01:49][7.9]

ALEC RENEHAN: [00:01:51] so know that I'm going to ask [00:01:53][2.6]

BRYCE LESKE: [00:01:54] this is this is an important piece of housekeeping, so bear with us. We do have a live show coming up on April the 29th here in Sydney. The good news is, is that if you are unable to secure tickets for the in-person event, we are live streaming it online straight into your lounge room so you can join us for the all access industry night in partnership with Stake, where we'll be taking a deep dive on the alcohol and beverages industry with five experts from both the investing side and the industry side joining us to help make some more informed investment decisions in regards to that industry. So tickets are free prize packs available for those who are going to be joining from home. We're giving away merch booth packs as well as some free stocks, courtesy of steak and information is on our Instagram. [00:02:43][49.1]

ALEC RENEHAN: [00:02:45] The social channels [00:02:46][0.5]

BRYCE LESKE: [00:02:46] will. No, that's not true, is it? [00:02:48][1.3]

ALEC RENEHAN: [00:02:48] Not on all the social channels. Which one missed out? [00:02:50][2.0]

BRYCE LESKE: [00:02:50] TikTok. True, true, true. But anyway, if you want more info, you can email us. Contact at equity markets dot com. We'd love to see you. And we will endeavor to get to the other capital cities throughout the year. But that is enough housekeeping. Let's move on. [00:03:03][12.6]

ALEC RENEHAN: [00:03:03] Yes. Now hydrogen. Let's start with setting the scene. What is hydrogen? Hydrogen has done well over the years. It's the most common gas in the universe, maybe the most common chemical element. [00:03:20][17.4]

BRYCE LESKE: [00:03:21] Yeah, I'd say chemical element can come in not just gas for [00:03:25][4.3]

ALEC RENEHAN: [00:03:26] Number one on the periodic table. A periodic table power rankings of the elements that make up the universe. Hydrogen No. One, the big H. Yes. So but we're not here to talk about the composition of the universe. We'll save that for the Who created the Universe podcast. [00:03:43][17.5]

BRYCE LESKE: [00:03:45] Which is not ours. [00:03:46][0.8]

ALEC RENEHAN: [00:03:48] but hydrogen is used in a number of, I guess, industrial processes, especially in things like making fertilizer. About 70 million tons of hydrogen is used every year currently. But we're not here to talk about the fertilizer industry. That would be a pretty shit episode. [00:04:05][16.9]

BRYCE LESKE: [00:04:06] You could stink. [00:04:07][0.6]

ALEC RENEHAN: [00:04:10] But we're here to talk about it for the growing application and the pretty exciting application around energy. Yeah. Um, so we obviously are all aware of the climate crisis, the need to transition away from renewables. So let's transition to [00:04:32][21.5]

BRYCE LESKE: [00:04:32] renewable, what have you. [00:04:33][1.2]

ALEC RENEHAN: [00:04:35] and also the need to transition our transportation grid away from the reliance on renewables and hydrogen is a lot of chat so far around, you know, solar, wind, hydro for electricity and then using that electricity to power because hydrogen is another option with a growing use case. And we really want to get stuck into it today because there are some interesting companies. But I also think the CSIRO deserves more credit in a lot of areas. But the CSIRO once again coming into bat in a big way for those listening overseas. The CSIRO is the Australian government's, um, I guess, scientific or an R&D organization. They've come through in a big way in the past, including creating wi-fi. And they've done something here. [00:05:30][54.1]

BRYCE LESKE: [00:05:30] We had so it's crazy that they created wi-fi and no one really gives them credit for it anyway. [00:05:35][5.5]

ALEC RENEHAN: [00:05:36] If you there's a whole other podcast. How valuable the government investment in R&D has been, but we'll say we'll save that for the government investing in R&D podcast episode. [00:05:48][12.6]

BRYCE LESKE: [00:05:49] So a bit of context as to what you'll hear in this episode. We're going to go through the high level, what hydrogen is, how it can be used, the infrastructure that is required, as well as taking a bit of a deep dove on what's going on within the industry, how governments are starting to use it and the policies that they're forming. And then the main thing is having a good look at some of the companies and key players in the industry and what that means from an investing point of view and what your options are. So plenty of investment options both here in Australia and around the world, ETFs and individual stocks. And we're going to go through some of the companies towards the end of the episode. [00:06:26][37.4]

ALEC RENEHAN: [00:06:27] Yeah. So let's let's start at the beginning with some terminology that you may have come across. There's been some chatter about it in Australian politics over the last sort of 12 to 18 months. So hydrogen is a gas can be created in a number of ways. And the really exciting thing is how it can be created from renewables. But you'll often hear hydrogen being spoken about on a color spectrum. Yes. So just like no, let's define the terminology at the start. So brown hydrogen is hydrogen created from traditional fossil fuels like coal and sustainable. Hence why it's brown. Not good. Traditionally a non sustainable color. Yes. Next on the I guess the range of hydrogen options is gray hydrogen and that is hydrogen created from natural gas. Blue hydrogen is created from natural gas with carbon capture and storage. And then green hydrogen is hydrogen produced from renewable sources. [00:07:27][60.1]

BRYCE LESKE: [00:07:28] And that's the gold nugget. [00:07:29][0.9]

ALEC RENEHAN: [00:07:30] Yeah. And now you might be wondering, what do we mean when we say produced the probably the simplest. There are a number of ways that hydrogen can be produced, but probably the simplest way to explain it is if you want it to produce hydrogen from water. So water, the chemical symbol for water is H2O. Nice, nice. We're going into some Lifesciences here. So H2O water is two parts hydrogen, one part oxygen. Yeah, you can use a process called electrolysis. Yes. [00:08:01][31.2]

BRYCE LESKE: [00:08:01] To another term that is worth remembering when we talk about investment option options later on. [00:08:06][5.0]

ALEC RENEHAN: [00:08:07] Nice. We'll come back. Yes, I'll come back to that later. So basically through this process you can split the oxygen and hydrogen atoms in water. And so by splitting the water molecule into its constituent parts, you get hydrogen over here, oxygen over here, and then you have hydrogen that you can then use for these industrial applications like fertilizer or now to create electricity and stuff like that. And the byproduct of creating this electricity [00:08:36][29.3]

BRYCE LESKE: [00:08:37] tested it on [00:08:38][0.4]

ALEC RENEHAN: [00:08:38] carbon dioxide. It's oxygen. [00:08:40][1.8]

BRYCE LESKE: [00:08:41] Oxygen. Yeah. And that's why we're in this position where it's becoming a pretty, I guess, favorable source of generating energy. [00:08:52][11.3]

ALEC RENEHAN: [00:08:52] So from a real conceptual framework, you use electricity to split water, you create hydrogen how that electricity is generated, then you turn into space so that electricity is generated from coal. You use that electricity to create hydrogen. You've got brown hydrogen. If that electricity is created from solar, you create hydrogen, you've got green hydrogen. Yeah, that's no CO2 required. [00:09:19][26.5]

BRYCE LESKE: [00:09:21] So Ren hydrogen has a number of use cases. You've already spoken about the use in industrial processes and fertilizers, plastics, explosives, those sorts of things. But more importantly, what we're starting to see now is its use in powering vehicles. Yes. And also generating electricity and producing heat. If we think about vehicles, you know, people would have heard about Mikhaela, which we'll touch on a bit later as well. [00:09:51][30.9]

ALEC RENEHAN: [00:09:52] And I think we'll touch on it. [00:09:53][0.9]

BRYCE LESKE: [00:09:55] But yeah, many use cases we've got here that the CSIRO expects a million hydrogen-powered cars to hit the streets in no less than four years. [00:10:06][11.5]

ALEC RENEHAN: [00:10:07] Yeah. So I think let's just unpack what we mean. So to power vehicles right now, we put diesel or petrol into our car and that runs the engine. Tesla, all these electric car companies have said sacked the internal combustion engine that uses petrol and diesel. We want to have an electric engine that uses battery packs to store electricity that then powers the car. Hydrogen powered cars are another option where you fill the car up with hydrogen, the. Yeah, and then it uses hydrogen fuel cells to power the motor that moves the car, so that's the the the vehicle thing. Toyota and Hyundai are probably two of the leading traditional carmakers investing in hydrogen. They've both got prototypes. We'll touch on them a bit later. Generating electricity is the other really exciting use case. And you'll say how excited I am about it a little bit later in this episode. But the way to think about that is, you know, right now we use natural gas to create electricity. Think of hydrogen taking the place of natural gas being a more sustainable, greener gas that can really use a lot of natural gas infrastructure to create electricity. [00:11:26][79.0]

BRYCE LESKE: [00:11:27] So that is the what which is how it can be used. If we continue down that vein of a train of thought, we need to talk about the infrastructure because hydrogen is incredibly flammable. [00:11:43][15.5]

ALEC RENEHAN: [00:11:43] Yeah, yeah. [00:11:44][0.4]

BRYCE LESKE: [00:11:44] So and yeah, it's somewhat dangerous. So you've got to be thinking about not [00:11:50][6.0]

ALEC RENEHAN: [00:11:51] somewhat dangerous area reacts violently to the oxygen in a risk level low. Yes. So that's why it's been used traditionally great for explosives, but that also makes it incredibly difficult to transport. And so just keep that fact in the back of your mind as we're building up to the exciting part. But, yeah, it's incredibly flammable. So hydrogen, we've always known that a hydrogen is an option in our energy mix. We've always known these use cases. But there are just certain things around the production of it and certain things around the transport and storage of it that have made it not fit for purpose. And you may be able to say, well, this is going, which is that the CSIRO have started to solve this problem. The other just point around infrastructure is, you know, we talk about Ren like renewable energy, like solar and wind, and it requires a whole lot of new infrastructure. The exciting thing with hydrogen is that it can use a lot of natural gas infrastructure so that, you know, there's all this like liquefied natural gas, natural gas pipelines, all this stuff like all this infrastructure has been built up for this whole industry. A lot of it can be retrofitted for hydrogen. [00:13:04][73.1]

BRYCE LESKE: [00:13:04] Yeah, nice. So let's have a look at the industry Ren. There's no doubt that there's a huge move around the globe to push for zero emissions, you know, in our economies. Yes. And we've spoken about that a number of times on the show. The Hydrogen Council says that by 2050, hydrogen will make up 15 percent of the global energy demand, which translates to sales of hydrogen and equipment, or a hydrogen market of two point five trillion dollars. So, yeah, annually. So pretty massive market there. And as a result, the government is around the world. Governments are starting to prioritize, I guess, projects around hydrogen and developing policies to accommodate for this. [00:13:50][46.0]

ALEC RENEHAN: [00:13:51] Yeah. So I love government slogans because of how terrible they are. How's this for a government slogan, H2 Undertow? [00:14:01][9.8]

BRYCE LESKE: [00:14:04] What does that even mean? [00:14:05][0.7]

ALEC RENEHAN: [00:14:05] So the Australian government has a priority to produce clean hydrogen under two dollars a kilo a kilogram [00:14:13][8.0]

BRYCE LESKE: [00:14:14] clean being green? [00:14:15][0.8]

ALEC RENEHAN: [00:14:15] Well, this is a that is a good pick up. The Australian government love away way or the current Australian government love a way to squeeze some fossil fuel. [00:14:24][8.5]

BRYCE LESKE: [00:14:24] It's going to be brown potential. All right, anyway. [00:14:28][3.8]

ALEC RENEHAN: [00:14:29] But age two under two, that's Australia's priority. The government is funding Australia's first hydrogen hub as part of a one point nine billion dollar investment in future technologies. So the Australian government is recognizing the opportunity for hydrogen partly because of how important it can be, maybe partly because it creates another use case for our legacy resources that we haven't got out of the ground yet. But let's leave that. But it's not just Australia that is saying hydrogen is a priority. So, you know, Joe Biden's two trillion dollar infrastructure bill that's been talked about at the moment. I do. In that, he has proposed fifteen decarbonized hydrogen demonstration projects as part of a 15 billion dollar investment in demonstration projects. And he's also proposed a new production tax credit to incentivize retrofitting of energy infrastructure to accommodate new fuels like hydrogen. So that was that goes to what I was talking about earlier about like existing natural gas infrastructure. They want to incentivize, you know, industrial players. To retrofit it to accommodate hydrogen, so the US is is trending in that direction. The European Commission recently set a target to produce up to 10 million tons of renewable hydrogen by 2030. But I think really the key early adopters in terms of government around hydrogen, Japan, and South Korea. [00:15:59][90.3]

BRYCE LESKE: [00:16:00] Yeah, no surprises there. [00:16:01][1.4]

ALEC RENEHAN: [00:16:02] Yeah, well, I don't know. I'm not surprised. You're not surprised. Yeah. And that's the main thing. [00:16:06][4.1]

BRYCE LESKE: [00:16:07] That's that's the main thing. [00:16:09][1.5]

ALEC RENEHAN: [00:16:10] Now, I want to put a term on the table that I think that Australia should be aiming for, which is I think Australia should be trying to become the Saudi Arabia of renewables. [00:16:23][13.8]

BRYCE LESKE: [00:16:25] OK, yeah. Being what the leader or the the richest or [00:16:32][7.6]

ALEC RENEHAN: [00:16:33] so all of the above, I guess. I think if you think about Saudi Arabia for the last number of decades, it's been a net energy exporter. It has pumped oil out across the world and it has benefited massively as a result. It is an oil wealth kingdom. And it is I think Australia should be aiming to be a hydrogen wealth kingdom. But really what I mean by that is there's a number of opportunities where Australia can really be a major net energy exporter when it comes to hydrogen. We're blessed with the serious capacity for renewables. We've got a lot of wind and a lot of suns. We're close to the major export markets like those. Yet Japan, South Korea, the too big, I guess, early adopters of hydrogen. And I think it's something we should be striving for. You know the government and the CSIRO talk about being able to really revive regional towns with stuff like that. Is this as well? But I just think on the whole, there's an opportunity to be a leader in this space. We have a lot of the prerequisites to do incredibly well here and the government are pursuing that. So the Australian government has recently announced it's cooperating with Japan on hydrogen fuel cells and our world's first clean liquefied hydrogen export pilot project, South Korea. We have a hydrogen production action plan, Germany. We're exploring renewable hydrogen supply chain possibilities, Singapore, we're exploring collaboration opportunities and the US, where a member of the US Center for Hydrogen Safety, that one is probably not as economically viable, but obviously important. But, you know, I say this. The government are doing all these things to partner with other countries around hydrogen. But the fact of the matter is, you know, as we said at the start, hydrogen is incredibly difficult to transport. It's incredibly volatile. How does Australia become the net energy exporter? How does it become the Saudi Arabia of renewables when you can't transport the stuff? [00:18:50][136.9]

BRYCE LESKE: [00:18:51] I've got to figure that out. Well, and that's what leads in to that. [00:18:54][3.1]

ALEC RENEHAN: [00:18:54] And I write the CSIRO, but firstly, an outbreak. [00:18:59][4.1]

BRYCE LESKE: [00:19:03] All right, so we want to pick it up from the cliffhanger that was delivered around, how do you export hydrogen safely so that we can become the Saudi Arabia of renewables? Yes. And at the start, we were also teased with the underappreciation of the CSIRO. So we're now going to move on and not talk about any of that. All right. So hydrogen as an export Ren, we've already touched on the fact that's traditionally very volatile to transport, which leads us to the CSIRO. Yeah. Making an incredible breakthrough. [00:19:38][35.2]

ALEC RENEHAN: [00:19:38] Yes. So just to take a step back and I promise there won't be too much of a preamble. But you know how we talk about natural gas and then the acronym is LNG. So that's because to transport natural gas, you have to liquefy it. So it's stable. And so the question was the same here. You know what? How can we make hydrogen stable so it can be transported and then turn it back into something, you know, back into the gas, hydrogen that can be used for all these different use cases that we're talking about? No one could figure it out. And so hydrogen was next. And then the CSIRO came and made a breakthrough, I think decades in the works. And it is super simple, but it's it's pretty cool. So they've made this metal membrane and the metal membrane filters out pure hydrogen gas from ammonia. Now, going back to a few life sciences, do you know what the chemical symbol for ammonia is? That's a tough one. [00:20:43][64.7]

BRYCE LESKE: [00:20:44] Yeah, it's [00:20:45][0.9]

ALEC RENEHAN: [00:20:47] no, no. That's what I needed to die. But it's an H3, so one part nitrogen, three parts hydrogen. And so basically what this metal membrane does is you have decomposed ammonia on one side and you transport the ammonia, which is stable for transport. You get to the export market, you get to Japan, you get to South Korea, you get to Germany, you push the ammonia through this metal membrane. The only thing that can pass through is pure hydrogen gas. And so it converts it back to hydrogen. [00:21:25][37.9]

BRYCE LESKE: [00:21:25] You go, girl, the CSIRO. [00:21:27][1.5]

ALEC RENEHAN: [00:21:27] That's I think that's cool. [00:21:28][0.8]

BRYCE LESKE: [00:21:29] Yeah. Nice work. [00:21:31][2.4]

ALEC RENEHAN: [00:21:32] Yeah. So that is the that's the big breakthrough that has now at least, you know, it's it's not commercialized yet, I don't think. But that's that in theory will allow us to transport hydrogen at scale, at scale long distances, not have ships and exploding on the high seas, and be able to be a net energy exporter. So I think that's really exciting. And, you know, the CSIRO has a now in the works of commercializing it. Fortescue Metals have partnered with the CSIRO on a bunch of hydrogen projects, um, prototype to the hydrogen fuel cell, electric car, a bunch of other stuff. Twiggy, he has his finger on the pulse with hydrogen. [00:22:16][44.1]

BRYCE LESKE: [00:22:17] Well, yeah. I mean, he's now taking a pretty strong focus on the renewables part of his business, I think dedicating ten percent of profits from Fortescue to push towards funding renewable projects. I remember during covid, he was gallivanting around the world on his private jet with a small army of people trying to find renewable projects. So, yeah, he's got a bit of a focus on, hmm, that's what you do if you're taking one point six dollars billion in dividends for you. [00:22:45][28.5]

ALEC RENEHAN: [00:22:45] Could you really have some pet projects. Yes. He gave a big speech on hydrogen, I think, earlier this year or late last year as well. So, yeah, he's all in on it now to give you I guess, you know, if people got lost in that description, just number one, just take the excitement over it as an indication. But really think of what this breakthrough is as a way to move solar or wind energy around the world, at incredibly cost effective rates. And you know, what I mean by that is. The generation happens in Australia, but you don't want to build transmission lines to Asia. Well, you can't, although Mike Cannon-Brookes is trying with an undersea cable to Singapore. But really, you know, if you can generate surplus energy but you can't transport it to people who want that energy, it's no quaintness. And so, you know, part of that's part of the reason why oil and coal were so good, because you can transport them. Yeah, but this whole process, you take the cheap solar and wind, you convert it to hydrogen, convert it to ammonia, convert it back to hydrogen in the export market. And you found it an incredibly cost effective way to transport that energy around the world. [00:24:09][83.3]

BRYCE LESKE: [00:24:10] Lock and load, lock and load. Well, now it's getting to the good stuff Ren, which is what does this actually mean from an investing point of view? And who are the companies that we should be thinking about and key players within the industry and where some potential opportunities to put your hard-earned cash if you do want to jump on the hydrogen gas pipeline. [00:24:31][21.2]

ALEC RENEHAN: [00:24:32] Yeah. Yes. Now, obviously, none of this is investing advice. This is an industry deep dove. And we're just going to talk about a bunch of companies and a bunch of players in the industry. So obviously, this is the start of your research process and not the end of it. [00:24:49][16.8]

BRYCE LESKE: [00:24:49] No, no. [00:24:49][0.5]

ALEC RENEHAN: [00:24:50] With that being said, don't kick us off shore. [00:24:52][2.0]

BRYCE LESKE: [00:24:52] So if we talk about key players in the industry, we might as well start with governments and research and development agencies such as CSIRO and the Australian government that are putting a lot of money into this space at the moment, whether or not you can invest directly in the Australian government. [00:25:08][16.2]

ALEC RENEHAN: [00:25:10] I do my taxes every taxes. [00:25:11][1.7]

BRYCE LESKE: [00:25:14] If we look around the world, South Korea and Japan, as you've already mentioned, Ren are investing heavily in the space as well and the US government as well. Through the Biden administration's two trillion dollar infrastructure plan, he campaigned on climate change. So there's no doubt that hydrogen is going to play a part in that. So from a government point of view, those are the main players. Then we move down the rung to the large traditional energy companies and large industrial companies. We said right at the top of the episode that hydrogen is used in a lot of industrial processes, fertilizers, the like. And so these are some of the companies that I guess are having to readjust infrastructure to accommodate for hydrogen within their process. Yeah. [00:26:05][50.8]

ALEC RENEHAN: [00:26:05] Or also just companies that are making like turnkey solutions to create hydrogen or green hydrogen or just like, you know, other big industrial players that are getting their fingers in the pie in different ways, for example. [00:26:20][15.0]

BRYCE LESKE: [00:26:21] And this company has come up a number of times, Simon's Seaman's energy spelled C, E, M and S they're. A German European European year of European Industrials company who now have a hydrogen department within the business, a couple of others, Cummins and ThyssenKrupp, [00:26:43][21.8]

ALEC RENEHAN: [00:26:44] right now, [00:26:45][0.8]

BRYCE LESKE: [00:26:47] some large, large scale industrial [00:26:49][2.1]

ALEC RENEHAN: [00:26:49] players. The first time I read about ThyssenKrupp was about a book about one of the founders who was like a big weapons maker and like World War One, that you start to notice that name everywhere. Once you've heard it, though, like every elevator you go into in Australia, I think is made by us. It's all about investing in what you see around you. [00:27:10][20.6]

BRYCE LESKE: [00:27:12] And then we move into current producers of hydrogen and industrial gases. We mentioned at the top of the show the difference between brown, gray, blue and green now. And there's a couple of here that will go through that are mainly focused on the gray hydrogen. [00:27:30][18.1]

ALEC RENEHAN: [00:27:31] So, yeah, 95 percent of the hydrogen produced in 2019 was either gray or blue. So natural gas is the weapon of choice for a lot of these players today. I mean, like, the exciting thing is green hydrogen. And so part of your research process, if you're excited by green hydrogen specifically, is looking at these three companies that are the big producers of hydrogen and industrial gases today and say what their plans are if they're transitioning from great. A green, right? Yeah. [00:28:03][31.5]

BRYCE LESKE: [00:28:03] So the first is Lind. It's on the New York Stock Exchange. The ticker is light and it is the largest industrial gas company in the world. And it is about to begin construction on the world's first hydrogen refueling station for passenger trains in Germany. So classic Germany leading the way on this sort of stuff. They also have a partnership with Scottish Power Renewables, and it's the power to build a 10-megawatt green hydrogen production facility in Glasgow. So, yeah, they're kind of leading the way on this front. Good to see. Yeah. [00:28:38][35.0]

ALEC RENEHAN: [00:28:39] The two other companies that are the big players in the hydrogen and industrial gases space are air products and chemicals traded on in New York. And then I can't believe I'd say this one air, liquid, [00:28:52][13.4]

BRYCE LESKE: [00:28:54] liquid, [00:28:54][0.0]

ALEC RENEHAN: [00:28:55] which I'm guessing is a French company so that there's some of the traditional players. So we're thinking about. [00:29:02][6.9]

BRYCE LESKE: [00:29:03] So you go, yeah, sorry. I was just going to say, so we've gone governments than your traditional energy companies. Then we've moved into the current producers of hydrogen and industrial gases, [00:29:11][7.9]

ALEC RENEHAN: [00:29:12] traditional energy companies and large industrials. Think of them like Jay and stuff like that. [00:29:16][4.7]

BRYCE LESKE: [00:29:17] And now we're moving into the next rung down, which is where I guess this hydrogen used within product car makers. [00:29:25][8.5]

ALEC RENEHAN: [00:29:26] Yeah, yeah. So we mentioned earlier in the episode Toyota and Hyundai. Toyota is I don't think it's surprising actually that one of these is a Japanese company and the other is a South Korean company because they're their government. So. Yeah. Oh yeah. So Toyota partnered with the CSIRO on the membrane, have invested millions into hydrogen and they've created the Toyota Murai that I think is their prototype hydrogen car undie. The same thing, investing a lot in the space and have created the high undie and so SUV, which is also their prototype. So they're probably two of the traditional car makers making passenger vehicles. Now, that's an important distinction that we'll get back to in a second because the real value proposition with hydrogen compared to electric cars is in trucking. Yeah. So without going too deep down the rabbit hole, the weight and the size of batteries required for an electric truck to do long haul trucking makes it pretty cost prohibitive. And like the amount of space you would take up with the batteries to get the distance you need, you wouldn't really have as much space to take cargo. And also the weight of the batteries like fixed power to weight ratio, all that stuff. So there's always been a question mark around trucking. And is electric motors or electric motors the right solution? Hydrogen. Although the gas tank is larger than your traditional diesel today, it's better than electric. This is I'm really getting to the extent of my knowledge about the Avivah hydrogen fuel cell debate. But trucking is really a use case where hydrogen seems to be a better fit than an electric vehicles. So there are a number of companies that are trying to play in the tracking's. As well, we all well, a lot of us saw Niccola, which would push the [00:31:35][129.0]

BRYCE LESKE: [00:31:35] car down a hill, [00:31:36][0.8]

ALEC RENEHAN: [00:31:37] which was super hyped at the time, people were all in on it. And then turns out they faked a demonstration of a hydrogen-powered truck where they just actually released the handbrake and rolled it down a hill rather than driving it a bunch of other stuff that's still listed, although, I don't know, they got a lot to recover from. If you are interested in the trucking conversation, General Motors have announced plans to sell hydrogen powered heavy trucks and as well as General Motors. Daimler, which is the parent company of Mercedes, are also working on a hydrogen powered truck. So that's in the same way that we're saying all the Volkswagens and all that of the world move into the electric vehicle space that a number of the traditional car makers are also trying to play in the hydrogen space. So, um, yeah, that's probably enough on cars. [00:32:32][54.7]

BRYCE LESKE: [00:32:32] So just like you can invest in the producers of hydrogen, hydrogen, and industrial gases, you can invest in companies that produce the equipment otherwise known as electrolysis. [00:32:43][10.7]

ALEC RENEHAN: [00:32:44] And this is this is a real picks and shovel. [00:32:46][2.0]

BRYCE LESKE: [00:32:47] Yeah, yeah, yeah. And this is what we mentioned right at the start. I put a pin in it. We said that electrolysis was the process of splitting H2O and this is electrolyzer. Are the equipment used or the system used to do it. So there are a number of companies that produce electrolysis. Macfie Energy is one Nele Assa NGL space, Assaye and ITM Power are the three major players in the electrolyzer space. So if you want to do the the picks and shovels over being a gold miner, that's the way to do it. [00:33:22][35.4]

ALEC RENEHAN: [00:33:22] So then the question is, so you've split the water into oxygen and hydrogen with an electrolyzer there. Some of the companies that do it, you've got hydrogen to convert hydrogen to electricity. You need a fuel cell. Yes. And so then there are a number of companies that create those fuel cells to convert hydrogen to electricity. Just a quick list. Ballard Power Systems, Bloom Energy, fuel cell energy, plug power, power, cell sweet. And so a few companies to Google. They're not. [00:33:56][33.3]

BRYCE LESKE: [00:33:58] Yeah. And just to tie this one out before we start having a look at some ETFs and managed funds, you know, if you think more broadly about this, there's a company called Keyon or Chaon and they produce [00:34:09][11.4]

ALEC RENEHAN: [00:34:11] hydrogen for the [00:34:12][1.1]

BRYCE LESKE: [00:34:12] forklifts. I didn't know. But forklift fleets generally have fuel cells within them, pretty popular. And Chaon are a leading manufacturer of of forklifts. And they are going to be using hydrogen as a way of powering these forklifts. They reckon that by 2050, 65 percent of the forklift market will be using hydrogen-powered fuel cells. Keep in mind, if you think about the market for these types of businesses, forklifts used extensively through the warehouse and distribution centers of the likes of Amazon and Wal-Mart, both who are using hydrogen forklifts. And of course, as e-commerce continues to grow and warehousing and distribution continue to be important, you know, forklifts aren't going anywhere. [00:35:00][47.7]

ALEC RENEHAN: [00:35:00] Yeah, yeah, yeah. Electric forklifts are also having a moment as well. Yeah, they'll transition some other company. Alstom operates a hydrogen train. There's I think really what what the point of all this is in the same way that like the coal, the market for coal has everything from those that mine the coal and create the the equipment to do that to the transportation of it through the converting coal to energy and then all the use cases around that. It's the same here or, you know, like the oil industry, you know, it's spits of all these different byproducts that get turned into plastic and all that stuff like these energy supply chains and the ecosystems that are created around these energy sources. And, yeah, are a big so that that really is just a minor snapshot of a number of the key players who are either directly driving the industry or who are changing because of the growth in the industry or who are going to be indirectly affected by the industry. Yeah. [00:36:09][68.2]

BRYCE LESKE: [00:36:10] So to close this out, Ren, I guess the question is, other than those individual companies that we've spoken about that are publicly listed around the world, we'll have a look at some of the ETFs and managed funds. The Bank of America has come out to say that the green hydrogen green hydrogen could help cut emissions. By a third, which would thereby provide 11 trillion dollars worth of infrastructure investment opportunities over the next 30 years, some huge investment opportunity there. [00:36:39][29.1]

ALEC RENEHAN: [00:36:39] But and if you were a startup hydrogen company speaking, they say you'd say 11 trillion dollars if we just get one percent in that market. [00:36:48][8.8]

BRYCE LESKE: [00:36:50] Yes, that's the classic approach that all investors know that [00:36:54][4.4]

ALEC RENEHAN: [00:36:54] all investors hate [00:36:55][0.6]

BRYCE LESKE: [00:36:55] hate so so will cover off some ETFs if you don't want to be investing in individual stocks that touch on the pure play. There are three of them. The first is next gen hydrogen ETF. It is traded on the New York Stock Exchange. Its ticker is HDR. Oh, it's a rule-based ETF where holdings within the ETF must draw at least 50 per cent of revenue from hydrogen or fuel cell technology. Vannak have one called the Vannak hydrogen economy and there's another one LNG hydrogen economy as well. [00:37:32][36.5]

ALEC RENEHAN: [00:37:33] So there are three pure play hydrogen ETFs. I couldn't I didn't say when Vannett created theirs, but the other two have been created very recently, which I think gives an indication of how early this industry still is. So there's a few there in the hydrogen space. There's a bunch of alternative energy ETFs. We've, you know, we've seen in Australia, beta shares and Vannak both recently come out with like a fighting climate change ETF that they would have some exposure to hydrogen, especially as the industry grows. My and there's a bunch in the UK, Europe and America as well. My only word of caution, if you were going to go down that route, is if you wanted to only get exposure to hydrogen. Those alternative energy ETFs will still be driven by the bigger companies, the solar companies, the wind companies, the electric car companies like Tesla. So just just think about what's driving the returns in any ETF. I had to look for managed funds, but, you know, you're not really going to find it's a little bit turned around like a pure-play hydrogen managed fund. But, you know, if you wanted to get some exposure, you could probably look at some of those ethical managed funds or, you know, think about putting it super with an Australian ethical or a future super rather like individual companies. We ran through a number above. So I don't think we really need to rip through them again. One other option that I want to get your thoughts on is I don't know if hydrogen has a spot price now. I doubt it does. It probably got to fit on a mine. I might have a futures market. I probably should have checked that in our research. Would you invest in the price of hydrogen? [00:39:21][107.8]

BRYCE LESKE: [00:39:25] No, yeah, no, I would not. [00:39:28][2.4]

ALEC RENEHAN: [00:39:28] And why would you not? [00:39:29][0.8]

BRYCE LESKE: [00:39:30] It's a commodity, and it's probably going to get cheaper. [00:39:33][3.3]

ALEC RENEHAN: [00:39:34] Yeah, yeah. Like as far as this industry grows, as demand for hydrogen grows well, [00:39:40][5.9]

BRYCE LESKE: [00:39:40] particularly as the Australian government say they want to reduce [00:39:43][2.8]

ALEC RENEHAN: [00:39:43] the price to one to two. [00:39:44][1.1]

BRYCE LESKE: [00:39:45] Yeah. [00:39:45][0.0]

ALEC RENEHAN: [00:39:48] Yes, it's it. They will find ways to make it cheaper and more efficiently. Yeah. And I just so look, I'm super excited by the hydrogen industry, as I'm sure it's been pretty obvious throughout parts of this episode. I do just want to make sure when we're talking about investing options that we are being very clear that an industry can have great growth prospects. But the time it takes for those prospects to be realized can sometimes not be measured in months or years, but in decades. You know, there's there's still a lot of technical challenges. There's still a lot of it. The adoption curve to climb. Like really we are still in the government's creating policies to incentivize an industry and people making technical breakthroughs to enable an industry stage. We pretty early in the broad adoption stage. So I think that's one word of caution. And then the other word of caution is the companies that are ahead now may not be the companies that are the ones that really take the industry mainstream. So, you know, some of the bigger companies like Plug Power and stuff like that, you know, there might be a startup or a disruptor that makes like a fuel cell 10x better, that that actually drives the industry towards mainstream adoption, but blows a lot of these existing companies out of the water. You know, Tesla wasn't the first electric car company. It's the biggest now. But, yeah, that they're probably just my two words of caution at the time. And the winners are yet to be determined. But I'm excited about hydrogen. [00:41:27][98.7]

BRYCE LESKE: [00:41:27] Yeah. I think it is certainly going to present a lot of investment opportunity. But also, if it does play out as as we've just gone through, then the environmental benefits as well are pretty exciting and good to say that Australia is playing a pretty important role in making all of this possible. So I know the CSIRO. [00:41:47][19.8]

ALEC RENEHAN: [00:41:48] Yeah, it's going to say we got to finish with just a big shout out to the CSIRO, UK putting in the hard yards and you keep getting it done for us. We are literally recording. We're looking at our computers because a wi fi, hopefully one day the electricity that's powering everything in this room is hydrogen powered. So just keep keep doing what you're doing and government give them more money. [00:42:10][22.3]

BRYCE LESKE: [00:42:11] So that brings us to the end. We've covered a lot of ground. Hopefully there is some information in there that will help you on your investing journey and to understand the hydrogen industry a little bit better, plenty of companies to go through. I would say that we'll get this up on the website, et cetera, but highly unlikely. What do you mean stage? Well, we always say we'll put it in show notes and all all the [00:42:31][20.0]

ALEC RENEHAN: [00:42:31] toxic assets fluctuate a lot of company. [00:42:33][2.0]

BRYCE LESKE: [00:42:34] So if you would like the notes from this episode, how about we do this email contacted equity mates and we'll flicker through. Should we check that emboss? [00:42:42][8.3]

ALEC RENEHAN: [00:42:43] Should we just should we just make the notes episode? No, it's a blog post with no editing. [00:42:47][4.9]

BRYCE LESKE: [00:42:48] So that's probably just oh, we just just edited it. So I will endeavor to do that. We do have a new website coming in May where we will have a lot more of this information. But thank you so much for listening. Make sure you check out the other podcasts with inequity mates media. We've got get started investing. We've got comedian, economist Mapei Love and you're in good company. Plenty going on as well as our live show on the twenty-ninth of April tickets available on our Instagram link, as well as our Facebook discussion page. There's a link on Twitter as well. So head to those and join the party. It's going to be epic. We're very excited for it. You can tune in from the comfort of your lounge room if you weren't lucky enough to get live tickets. They did sell out before Renner's workup. [00:43:34][46.2]

ALEC RENEHAN: [00:43:35] So they did sell out in under two hours, which was a nice little ego boost for us. [00:43:40][5.1]

BRYCE LESKE: [00:43:40] Yes. So that's because only like seven were available. No, not really. But Ren. We'll leave it there. Always good to chat stocks and we'll pick it up next week. [00:43:47][6.8]

DISCLAIMER: [00:43:47] So good equity makes investing. Podcast is a product of equity, makes media all information in this podcast is for education and entertainment purposes only. [00:43:47][0.0]


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