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Powerhouse Energy | Is It An Energy Company Or A Waste Company?

Tim Worstall
Tim Worstall trader
Updated 1 Feb 2022
  • Powerhouse Energy works to turn plastic and other wastes into usable energy
  • But is Powerhouse really an eneregy company or a waste company?
  • On that rests what might be the possible future for the Powerhouse technology

Powerhouse Energy Group PLC (LON: PHE) certainly thinks of itself as an energy company – just look at the company name. It’s also possible to walk through what the company does and come to the same conclusion. For the Powerhouse technology converts wastes – plastics, tyres perhaps and so on – into usable energy. The output is energy, it’s an energy company.

However, this can be a slightly limited method of analysis. It can be useful to take a wider look at the Powerhouse markets and see whether we should really think of it as being that energy company or more as a waste management one.

We have looked at Powerhouse before, their short term performance, also at the Powerhouse share price over the past year. Climbing up from that level of detail it’s worth having a look at the market in the round.

Powerhouse has developed technology to convert certain wastes – those plastics, etc – into usable energy. One possible option is simply to burn them but that’s out of style these days. Another is to note that the chemical conversion of one hydrocrabon itno another is known chemistry. So, to convert plastics – hydrocarbons – into synthgas – a hydrocarbon remarkably similar to natural gas – is entirely possible. From there it can be used to replace gas, or reformed to make hydrogen which is then used.

But now that question of whether this is waste management or energy production? Both are interesting businesses but the one is hugely larger than the other.

There are uses of synthgas and even for hydrogen reformed from it. If the world continues to go down the lithium battery and electricity route then there’s still a useful outlet for that production. Long distance trucking is lilkely to be fuel cell and hydrogen or synthgas powered for example. So too a use in steel making. So, an interesting niche in both power production and also waste management then.

But think on what happens if the world does manage to make green hydrogen work. One idea being the electrolysis of water using abundant and cheap solar power. At this point the technological focus moves decisively to fuel cells over lithium batteries. But at the same time the point is that this hydrogen is cheap. Which then lowers the value of the output from the Powerhouse plants despite the validation of hydrogen or synthgas as an output. The niche then becomes mucch smaller, as being a useful waste management technology, not an essential part of powering civilisation.

This is the basic conceptual problem we have with any firm – like Powerhouse – dirven by new technology. It’s not just the management of the company, nor even the specifics of the process itself, that need to be thought about it. What also matters is how the rest of the world develops, what everyone else is doing with other technologies.

At this level of abstraction all we can really say for sure is that the Powerhouse Energy share price is likely to be volatile as the varied scenarios play out.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.