HydrogenOne Capital Growth PLC (LON: HGEN) is an investment company building a portfolio of companies across the hydrogen economy. The latest announcement is of a £10 million investment into Bramble Energy. The question is, is this a good investment into an interesting sector?
The first thing we need to say about the hydrogen revolution is that this isn’t going to be an immediate success. This is a technological change that will take time to mature. It is, though, entirely possible that it will mature. Wind and solar simply will not work, not work alone, for a modern economy. There has to be some form of storage of power and a system of dispatchable power to accompany them. Batteries aren’t likely to work at grid scale. Hydrogen is one of the possible solutions to this problem.
Thus the interest by government and long-term investors in this sector. Spreading one’s bets in a new technological sector is a good idea and so perhaps also so is HydrogenOne.
The specific investment in Bramble Energy may or may not work. We’ve seen that Ceres Power is working (and Ceres again here) in the technological sense. There are two things to consider about fuel cells. The first is that they do in fact work. You can put electricity into one and get hydrogen out. You can put hydrogen into a fuel cell and get electricity out. So, that’s the storage and dispatchability problem solved in a technological sense.
The other thing is that of course, any such system needs to be economic. Here the process is aided by the fact that fuel cells – this type at least – work rather like computer chips. They’re a piece of material with lines etched on them – OK, more complicated than that but that’s the essence – and this is like a chip, which is silicon with lines etched. So, there’s something like Moore’s Law for fuel cells. We can make them, each generation, more complex and also cheaper as we go along.
Which is what Bramble Energy is doing. They say that it’s a fuel cell on a PCB – printed circuit board. This is the next stage of making fuel cells cheap and simple. Instead of near hand-made pieces (as the Bloom Box from Bloom Energy used to be) we’ve something mass manufactured and therefore cheap. This is a part of how to make fuel cells economic, therefore so too the hydrogen economy.
Now, whether this specific version will become profit-making is entirely another matter and that’s what we as investors are interested in. But it’s always necessary to grasp the basics first, before we try to decide that. The logic of climate change, switching away from fossil fuels, makes fuel cells and hydrogen one of the interesting technologies of the future.
Actual share price movements are likely to have to wait until there’s a little more proof of economic viability of course but HydrogenOne isn’t obviously investing in the wrong sector, that’s a good start.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.