Powerhouse Energy Group PLC (LON: PHE) shares could benefit from the float of Hydrogen Utopia International PLC (LON: HUI) for it acts as a test, possibly a vindication, of the base strategy being used by Powerhouse.
As we’ve mentioned before Powerhouse Energy has a process to convert plastics and other wastes – tyres for example – into useful synthgas which can then either be used directly or converted to hydrogen. Synthgas is more understandable as synthetic gas – the chemistry is that complex hydrocarbons like plastics can be converted into other hydrocarbons through well-understood processes. The aim is to take those wastes which cannot be directly reused and convert them into feed products for industry.
One method is, of course, simply to burn the plastics but this meets with environmental resistance. So, instead, the conversion into cleaner – synthgas and hydrogen – alternatives which are then used.
As we’ve noted it can be difficult to quite pigeonhole Powerhouse Energy. Is it really an energy company or a waste recycling one? There is definitely a market for both synthgas and hydrogen out there, just as there is one for recycling plastics and other wastes. But the more hydrogen – say – becomes a standard part of the energy mix then the less important this marginal source from waste recyclings becomes. Even as waste recycling itself is a valid and potentially profitable activity.
The Hydrogen Utopia influence on Powerhouse Energy though is different from this grander view. The Powerhouse Energy ideal is to not, repeat not, run all of its own plants across the country or Europe. Instead, it has been to develop the technology which can be used and then to partner and or licence that to those who will run their own local plants.
This does make a certain sense. Any form of recycling needs to have a localised collection network. Further, the recycling of waste itself can benefit from being done locally, thereby avoiding significant transport charges on what is a pretty low-value input.
Whether or not this will turn out to be a wholly viable strategy is of course unknown at present. But the Hydrogen Utopia float is a useful test and or validation of it. For that’s exactly what this is about. Hydrogen Utopia is using Powerhouse Energy technology to build exactly one of these plants. The HUI float raises the money to do just that.
This does not prove any of the technology, the economics or the strategy. But that other people are willing to spend a significant amount on both the licence and a factory build-out of the Powerhouse Energy technology is a test, even possibly a vindication, of all three of those things, the strategy, the economics and the technology.
As and when more such technology rollouts are announced will be the real test of Powerhouse Energy’s market position and strategy.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.