In a week that was meant to be all about climate change, it feels as though COP27 has been overshadowed for the most part.
Of course, that has a lot to do with the parallel G20 Summit going on — a meeting of political leaders that has seen some frosty relations seemingly start to thaw. At least, that’s what markets seem to be hoping for…
With that in mind, you’d be forgiven for missing one of the bigger energy stories to come out overnight. Because while COP27 isn’t stealing the spotlight, Germany’s new plan very well could.
The German Government, via its State-owned investment bank KfW, is pinning hopes on cultivating a global green hydrogen economy. It is all being grouped under a broader PtX Development Fund that will see an initial €550 million spent to foster new hydrogen infrastructure.
As KfW bank explains:
‘Investments in PtX projects are supported with a mix of grants and other financing instruments from KfW Group. In this way, the fund improves the financing options for the production, transport and use of green hydrogen in the partner countries.
‘At the same time, it strengthens their local economy and supports them in establishing the future PtX technology at an early stage. This gives the countries a connection to an important technology and economic sectors — without the funding, there is a risk that the countries might be “left behind”.’
Power to the powerful
Now, what really stands out to me is the varied applications for these funds.
It’s not just about building out production for green hydrogen, but also transportation, storage, and even innovation. Germany is clearly putting a lot of effort into trying to become a centrepiece of a hydrogen economy that they will outsource via this money.
The kicker is that this initial sum of just over half a million euros is only the beginning. In time, the government hopes to increase the funding to €2.5 billion as needed.
And even that, I’m sure, won’t be the end of it.
Germany knows it needs new energy solutions, and green hydrogen gives it a chance to regain some control. After all, this year has shown how disastrous its reliance on Russian oil and gas has become.
Make no mistake about it, though, this is a long-term investment. Because as Deutsche Welle reports, green hydrogen as an industry is still extremely new:
‘Green hydrogen is still in its infancy, says the International Renewable Energy Agency (IRENA), an intergovernmental agency that promotes renewables.
‘But production is expected to grow from almost zero today to about 400 million tons by 2050, as major economies like the USA and Germany try to reach net-zero emissions. That’s more than four times the 2020 production of gray hydrogen, which is produced from fossil fuel sources like gas.
‘IRENA expects hydrogen trade to be more regionalized and smaller than the big global fossil fuel market that exists today. Still, these prospects are leading to what the agency calls a “new hydrogen diplomacy,” especially by countries with limited renewable potential, such as Germany and Japan.’
Australia’s role in the global hydrogen boom
For Aussie investors, this push for more hydrogen should be seen as one big opportunity.
It’s no secret that we’re in an enviable position to become a leading producer and exporter of this gas. Particularly when it comes to green hydrogen, made from solar and wind power — something that we have in abundance compared to most.
Because of this, we’re already seeing a rollout of local hydrogen projects across the country.
For example, in the small town of Denham, WA, green hydrogen is now powering homes and businesses as part of an early trial of the fuel’s potential. It is hoped that the new power source will cut the need for up to 140,000 litres of diesel per year.
So, while it is a small first step, it’s an important one.
As the industry grows and innovation with it, the hope is that hydrogen can become a new cornerstone of energy markets — a commodity that not only helps power our own networks but can also be exported to others like we have done with coal and gas for so long.
We already know Andrew ‘Twiggy’ Forrest and Fortescue are particularly keen on this idea…
Fortescue is already paving ahead with its plans for a 10 gigawatt ‘Super Hub’ in Queensland — the first of what will no doubt be more to come if this hydrogen economy gains proper momentum.
Forrest himself, though, has been far more ambitious. Earlier this year, in March, he signed a memorandum of understanding with German power company E.ON.
The terms of this deal outline a plan by Forrest to deliver up to 5 million tonnes of green hydrogen to Germany by 2030. That could be worth up to $50 billion if he can make good on delivery!
And that is why, even amid all this market volatility, investors need to be looking at these kinds of long-term opportunities. Hydrogen is almost certainly going to become a big part of the energy mix over the next decade, and you can’t afford to ignore that.
Of course, the best way to potentially play this hydrogen trend is by looking at mining stocks. Because when push comes to shove, they are going to be key for providing a lot of the materials for the infrastructure and production of this novel fuel.
Fortunately for you, we just so happen to have a preeminent expert on the matter…
James Cooper, our commodities expert and former geologist, has recently collated his thoughts on where your money is best placed. You can check it out for yourself by clicking here.
In James’s view, maybe to your surprise, he sees an ‘Age of Scarcity’ coming — one that will test all economies over their access to many key materials. Hydrogen is likely just a part of this bigger theme.
But that is precisely why it’s worth paying attention to.
Our world is quickly headed for a global energy crisis if we do not prepare. New solutions like green hydrogen are just one of the few emerging opportunities that can at least provide some reprieve.
And, for early investors, it could also provide a whole lot of gains…
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
