The energy solutions of the future must be cleaner, lighter and more efficient

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Mikael Syding
28. okt. 2020 | 3 Læsetid
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Everything related to electricity production and distribution offer equally huge business opportunities and great problems. Two of the biggest challenges are both environmental impact and mobility. This is where hydrogen fuel cells come into the picture.

Everything related to electricity production and distribution offer equally huge business opportunities and great problems. Two of the biggest challenges are both environmental impact and mobility. Oil has been a difficult source of energy in terms of portability and compactness power development, which has had to weigh the environmental consequences of the oil.

Although it is far to go before we have battery powered aircraft, we have electric cars that have already come quite a long way and can in many cases replace gasoline driven cars. However, unfortunately, electric car batteries are expensive, environmentally hazardous and heavy. A lot of the energy the batteries are charged with is gone to waste on carrying the hundreds of kilos that the battery weighs. Even several serious studies indicate that electric cars in total, including battery production and daily operation, are worse for the environment than petrol driven cars.

Batteries are also used as a backup energy system where continuous access to electricity is critical. The only reasonable alternative to this has often been diesel generators thanks to their compact power generation and reliability. In the longer term, however, neither diesel nor batteries are sustainable solutions, whether we are talking about vehicles or back-up power.

This is where hydrogen fuel cells come into the picture. Compared to batteries, they are more efficient, lighter and allow longer-range electric cars that can be refueled in minutes rather than hours. On paper, the best of both worlds is wetted. It is a controlled hydrogen explosion that is also used to power space rockets, so no need to hesitate if the power generation is sufficient by weight comparison. Not even the jet engine comes close. The cells are in addition emission-free; when hydrogen and oxygen react, only ordinary water is formed. We cannot yet say with safety that hydrogen fuel cells are the dominant solution for vehicle operation and backup power, but gasoline, diesel and current battery technology are not sustainable anyway.

To facilitate exposure to a broad portfolio of hydrogen applications, Vontobel has launched a tracker certificate with Solactive Hydrogen Top Selection Index NTR as the underlying index. The index consists of 15 companies with operations related to the production, distribution and use of hydrogen. The index includes initially a handful of specially focused smaller companies with market values $ 1-1.5 billion such as Chart (measuring and control equipment), Worthington (steel tanks), Plug Power (hydrogen fuel cells), Chemours (special chemistry), Norwegian Nel (production, storage and hydrogen distribution) and Swedish Power Cell (fuel cells).

At the other end of the spectrum are gas production giants such as ENI, APD and Linde and $ 33, $ 50 and $ 100 billion, respectively, in market value, where the hydrogen part is so far quite marginal. Between these extremes are engine and truck manufacturers such as Paccar and Cummins with $ 20-25 billion in market value. And just above Power Cell's category we finally find Ballard ($ 2.3 billion, fuel cells), Technip, Teledyne (instruments and testing) and Johnson Matthey (specialty chemistry, catalysts and battery technology).

Several of the companies have ridden a breathtaking roller coaster on the stock exchange. For example, Power Cell has rushed from SEK 4 to SEK 70, backed down to SEK 20, and then up over 1000 percent to SEK 260 per share. Norwegian NEL has offered even greater opportunities with a journey from NOK 125 down to NOK 0.6 and beyond up 2000% to NOK 12.50. It gets Chemour's ride from $ 3.50 to $ 58 and finally $ 10.50 to look modest. Also Plug Power's curve from $ 6 to $ 1 to $ 4 feels flat in the context.

Overall, Solactive's index and Vontobel's tracker certificate on the index, give a diversified exposure to large and small companies, with more or less focused activities which are affected by developments in the production, storage, transport and use of hydrogen in various applications, including industrial reserve energy systems and fuel cells for different kinds vehicle. The companies with the greatest weight in the index are thus not the companies with the highest market value, almost the opposite. The smallest companies, Chemours, Plug Power, NEL and Power Cell are the index's four heavyweights corresponding to 31% of the index in total. The index is new but the companies have been around the longer. If you are interested in environmentally friendly energy technology, and do not fully buy the promises from the battery industry so you should definitely read a little extra about the possibilities of different hydrogen solutions and the infrastructure around.

Investors in the tracker certificate should remember that they bear, amongst others, the credit risk of the issuer (the risk that the issuer of the certificate is not able to fulfill its obligations under the product).