April 15th, 2022 | 12:07 CEST
Exciting hydrogen forecast: Shares of Nel ASA, Plug Power and dynaCERT facing golden times?
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"[...] Why should a modular electrolyzer cost more than a motorcycle? [...]" Sebastian-Justus Schmidt, CEO and Founder, Enapter AG
Challenges include land and water consumption
In a new study on the hydrogen market, Guidehouse Insights expects annual electrolyzer capacity to explode from the current 0.5 gigawatts to 84.7 gigawatts by 2031. That would represent an average market growth of 78% per year and an overall increase of an unfathomable 1,700%. There are, of course, still numerous challenges before the breakthrough of green hydrogen. Aspects of the hydrogen production supply and value chains, including the parts and components that make up the electrolyzers themselves, are still technologically immature, logistically uncertain, and expensive. He said that other challenges include land and water consumption, insufficient government policies and incentives, and the need for more transportation and storage infrastructure.
dynaCERT benefits from Canadian government plans
In order to reduce these challenges, dynaCERT offers a patented electrolysis system, "HydraGEN," for commercial vehicles. It enables fleet companies to improve the efficiency of diesel engines and reduce their emissions without high retrofit costs. By adding a small amount of hydrogen, large diesel engines can reduce CO2 emissions by around 19% - without any loss of power. To officially measure the CO2 savings and document them for the responsible environmental authority, the Canadian Company supplies the appropriate telematics software, HydraLytica. In Canada, the Company's home market, there is now movement to promote CO2 savings.
At the beginning of April, the Canadian government announced planned changes to the 2022 budget. These include new tax credits of 30% for clean technology investments focused on net-zero technologies, battery storage and clean hydrogen. dynaCERT applauds the plans, saying, "Unlike government subsidies, significant tax credits and incentives for clean technologies like those included in Budget 2022 give the private sector the impetus to make business decisions based on reducing greenhouse gas emissions. It gives the private sector the incentive to invest in clean technologies, leveraging private sector capital rather than direct investment from governments." The tax credit is expected to drive demand for the electrolysis system in combination with dynaCERT's measurement software and also in other markets on the topic of CO2 allowances.
Nel: RBC confirms buy recommendation
When it comes to hydrogen production systems, there is no getting around Nel ASA. However, the Company's growth in the last quarter has been disappointing, but the Canadian bank RBC still sees potential in the stock. Yesterday, the analysts raised their price target for Nel shares from 21 to 24 Norwegian kroner and confirmed their "Outperform" recommendation. The sales estimates for the hydrogen specialist were raised. However, costs are also likely to increase, the analysts said. Overall, they added that Nel ASA remains one of the best bets on green hydrogen. Operationally, the Norwegians had recently achieved success in Spain. The joint project with Spanish utility Iberdrola received important financing of about EUR 88 million. Halfway between Madrid and Malaga, the partners want to build one of the largest hydrogen plants in Europe - a solar park with a capacity of 100 MW. The energy is to be stored in a battery with a capacity of 20 kilowatt-hours and then converted into green hydrogen.
JPMorgan believes in Plug Power
There has been little news recently about Plug Power. Even the almost euphoric mood in the hydrogen sector has not really benefited the share. It is currently trading at around EUR 24 and has gained around 20% since the start of the war in Ukraine. Other shares in the renewable energy sector have gained considerably more. At least JPMorgan continues to believe in Plug Power. For the analysts, the US company is one of the leading manufacturers of fuel cells and has the financial resources to establish the technology as a standard. JPMorgan sees the market potential at over USD 200. Plug Power aims for annual growth of around 50% and sales of more than USD 3 billion in 2025. In the view of the analysts, this is a realistic target.
There is no question that hydrogen is an energy with a bright future. Capacities are still lacking at all corners and their development takes time. dynaCERT has a cost-effective solution for CO2 savings but still needs to achieve a breakthrough in commercialization. Nel and Plug Power are among the leading hydrogen pure plays. However, both companies are already decently valued.
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