The top 4 ASX-listed hydrogen stocks for investors to watch

Why invest in hydrogen stocks?

As concerns over climate change translate into policy shift and a concerted push for green energy, the share price of companies that offer an alternative to traditional fossil fuels could be positively impacted.

When it comes to green energy plays, the investor community is well aware of the potential advantages offered by lithium stocks. Given the rapid uptake of electric vehicles in market around the globe, lithium producers stand to benefit from rising demand for the metal as a raw material for batteries.

Less well known, however, is the potential for hydrogen-related stocks to offer investors a way of betting on the global drive for green energy.

Hydrogen – the lightest and most ubiquitous of all chemical elements, is a viable alternative energy source that could help reduce society's long-standing reliance upon carbon-based fuels.

The International Energy Agency (IEA) points out that hydrogen is a versatile carrier of energy, which if produced using renewable methods could help to decarbonise a range of sectors that have long struggled to cut emissions. These include chemicals, iron and steel, and long-haul transport.

The element can be kept in either liquid or gas form, serving as a fuel for transportation and heating or as a storage medium.

This versatility means hydrogen has the potential to serve as an energy source for road vehicles, as well as a means of enhancing the viability of renewable energy options by providing convenient means of storage.

Hydrogen can also serve as a tradable energy commodity on global markets, because it's easy to transport via trucks and ocean-going vessels when stored in liquid form.

At present, hydrogen is primarily employed as a raw input for industrial processes, including the production of key fertilisers such as ammonia.

As one of the world's major resource producers, Australia is host to a number of hydrogen-related stocks whose fortunes could improve on a general push for green energy in tandem with strong government support.

In the 2023-24 Federal Budget, the Australian Government launched the $2 billion Hydrogen Headstart Initiative, to spur scaling up of green energy projects in Australia.

The Australian Renewable Energy Agency (ARENA) has already provided at least $236 million to 43 renewable hydrogen projects, involved in hydrogen refuelling, hydrogen trucks, hydrogen used for the production of green ammonia and hydrogen for alumina refining.

In 2021 ARENA committed funding to its first cohort of commercial-scale hydrogen electrolyser projects, including Engie's Project Yuri at Yara's Pilbara fertiliser plant, which is currently under construction.

In 2022 the agency allocated a $13.7 million grant to the $38 million front-end engineering and design (FEED) study undertaken by Fortescue Future Industries, for the construction of one of the world's largest renewable-energy powered electrolysers in Queensland.

The top four ASX-listed hydrogen stocks to watch

For those investors who might be interested in hydrogen as a green energy play, here is a list of the top four stocks to watch out for.

1. Pure Hydrogen Corp (ASX: PH2)

2. Frontier Energy Ltd (ASX: FHE)

3. Hazer Group Ltd (ASX: HZR)

4. Fortescue Metals Limited (ASX: FMG)

Pure Hydrogen Corp (ASX: PH2)

Clean energy company Pure Hydrogen is a developer of hydrogen fuel cells and related operations, with a presence in both Australia and South Africa.

PH2 is currently striving to expand the use of hydrogen fuel cell vehicles in the Australian market. It plans to launch trials in late 2023 for Australia's first hydrogen fuel cell waste collection vehicle and prime mover, followed by a second trial in early 2024.

The company recently entered a deal with Monard Capital for a $125 million funding facility, to be used for the purchase of hydrogen fuel cell trucks, vehicles and equipment that will be leased out to PH2 customers.

Frontier Energy Ltd (ASX: FHE)

Frontier Energy hopes to become the first commercial green hydrogen producer in Australia, by utilising the offtake from the Briston Springs Renewable Energy Project in Western Australia.

FHE has touted the low initial capital expenditure as well as modest operation costs for stage one production of the project. Executives expect it to be one of the lowest-cost producers of green hydrogen in Australia upon completion.

'At Bristol Springs, we have structural advantages by virtue of the infrastructure surrounding the project,' said managing director Sam Lee Mohan to Proactive Investors.

'We also have an important first mover advantage, having recently completed our definitive feasibility study (DFS).'

In May, Frontier announced it had begun shortlisting preferred partners for the debt-financing of the Waroona renewable energy project in Western Australia, phase 2 of which could cost up to $225 million.

Hazer Group Ltd (ASX: HZR)

Hazer Group Limited chief focus is the commercialisation of the Hazer process – a low-emission method for the production of hydrogen and graphite that uses iron ore as a catalyst for the conversion of natural gas.

The company hopes to use the process to produce hydrogen at a more affordable price for industrial and fuel applications.

HZR has already entered an agreement with two Japanese firms for the construction of a hydrogen production facility that makes use of the Hazer process, describing the deal as 'transformational' for the company.

The company has received around $10 million from the Australian Renewable Energy Agency (ARENA) to fund its commercial demonstration plan and operational activities, as well as reached a Technology Readiness Level of 7 on the NASA scale.

Fortescue Metals Group Limited (ASX: FMG)

While best known as one of Australia's leading iron ore producers, Fortescue Metals Group Ltd is also making a bold foray into hydrogen by means of subsidiary Fortescue Future Industries (FFI).

FFI's goal is to produce green hydrogen that is fully derived from renewable sources, as well as drive the decarbonisation of FMG's operations by 2030.

In 2022, FFI obtained a $13.7 million grant from ARENA for its $38 million front-end engineering and design (FEED) study into the construction of one of the world's largest renewable-energy powered electrolysers in Queensland.

The miner also just launched the prototype for its Liebherr T 264 hydrogen-powered haul truck, dubbed the 'Europe.' Fortescue CEO Dino Otranto said the move brought the company closer to having a fleet of zero emissions trucks at its sites by the end of the decade.

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