Hydrogen Investing: Market Insights & ASX Stocks

Hydrogen works where batteries don’t. Try running a steel furnace or a cargo ship on batteries – it won’t happen. Why? Because the amount of energy needed for these activities drain batteries very quickly. Hydrogen can deliver the high heat industry needs, store renewable energy for weeks (not hours), and power trucks across the Nullarbor. When it’s made cleanly, the only emission is water.

The industry uses colours to describe how hydrogen’s made, which sounds ridiculous but actually helps. Grey hydrogen comes from natural gas (cheap but dirty). Blue is the same thing with carbon capture bolted on, meaning instead of greenhouse gases being released into the atmosphere, they are captured and pumped into wells underground.

Green hydrogen uses renewable power to split water molecules, but the end product, the hydrogen itself, costs three times more than grey. Natural hydrogen (sometimes called white, gold or even geological) comes straight from the ground. Cavities below the earth’s surface store this hydrogen, similar to how natural gas is contained below surface. If natural hydrogen can be discovered in large quantities and flow to the surface for use, it changes everything.

Hydrogen doesn’t trade on a global exchange yet. Prices vary wildly depending on how it’s made, where it’s produced, and transport costs. Government incentives can flip the economics overnight and as production scales and infrastructure develops, a more transparent market should emerge – but we’re not there yet.

Government money is driving everything right now. The US, Europe, Japan – they’re all subsidising projects and setting targets. Australia’s positioning itself as the hydrogen supplier to Asia (we’ve got the space and sun for green hydrogen, and we’ve discovered natural hydrogen in South Australia).

The key is to watch which projects move from announcements to actual construction, the large majority won’t. The ones with real customers, government backing and signed customer contracts (offtake deals they are referred to) are worth tracking.

Focus on companies with working technology, not PowerPoints. Real partners matter – if Fortescue or Shell are backing a company, that’s different from a startup’s press release. Check their path to revenue, is this a near term project? or is it a ten to fifteen year play?

Plenty of hydrogen companies will burn cash on pilot plants, meaning the more money they spend, the more capital raisins they are forced to do, and more dilution of your investment. The winners will be those with access to cheap renewable power, existing infrastructure they can repurpose, or natural hydrogen deposits that have good flow rates to surface.