Like investing in the smartphone market before the iPhone … a tectonic shift in energy … how Eric Fry is playing it … a handful of investment vehicles to consider
Imagine you invested in the smartphone market just before the first iPhone launched.Or threw a few bucks into a handful of top-tier internet stocks in the late 1990s, just as companies like Amazon were emerging. Imagine what an investment of even a few thousand dollars, held until now, would have done for your wealth. Today, we’re standing on a similar “before and after” investment opportunity. Best of all, it frees us of the anxious handwringing of “is today’s market going to rally or get far worse?” That’s because this opportunity needs time to play out, so what happens tomorrow in the market is irrelevant. We can rest easy, focusing instead on the longer-term scope of this investment’s return-potential – which is enormous.
We’re talking about the global energy market and its transition to clean energy
First, fossil fuels aren’t done – not by a longshot. There’s still plenty of money to be made in “old school” energy.But even though fossil fuels aren’t done, we’ve “crossed the Rubicon” when it comes to new green energy. As global governments increasingly turn to green energy to meet their needs in the coming years, trillions of dollars will flow into next-gen energy technologies. Fortunately, you’re here at the ground floor. Today, we’re going to look at one of the most promising ways to position your portfolio in front of this green tsunami, courtesy of our macro expert, Eric Fry. Now, regular Digest readers might raise an eyebrow at this. After all, Eric has been a fossil fuel bull, having positioned his subscribers for profits in various oil and natural gas plays beginning last December. But this isn’t a “one or the other” investment situation. Here’s how Eric explained it in his latest issue of Investment Report:
“Old energy” investments have been treating us pretty well this year, at least on a relative basis. But I expect “new energy” investments to treat us even better over the upcoming years.In other words, I am bullish on the entire energy transition – from crude oil to solar power… even energy storage technologies like vanadium flow batteries and “green hydrogen.” The world is going to require a lot more of all of it over the coming years.
Today, let’s dig into one of tomorrow’s leading energy technologies that has this fossil fuel bull seeing green.
The newest kid on the block in clean energy
In recent months, you’ve probably read about hydrogen and its role as a clean tech leader.While that’s true, hydrogen comes in different shades of green, so to speak. Here’s Eric to explain:
Hydrogen, as a fuel, is carbon-free. But the typical processes that produce hydrogen are not. That’s why the renewable energy industry uses a palette of colors to designate the source of hydrogen fuels.SMR) or Auto Thermal Reforming (ATR) to split natural gas into hydrogen and CO2. Grey hydrogen accounts for about 95% of the industrial hydrogen produced each year. Because this version of hydrogen production releases the byproduct CO2 into the atmosphere, it generates about nine to 12 pounds of CO2 for every pound of hydrogen produced. “Blue hydrogen,” by contrast, captures and stores the CO2 that results from the grey hydrogen processes. “Green hydrogen” is the newest kid in town. Think of it as the love child of water and renewable energy. Green hydrogen results when a renewable energy facility powers an electrolyzer that splits water into hydrogen and oxygen. Conceptually, therefore, green hydrogen is the ultimate carbon-free fuel. It combines a limitless supply of water with renewable energy to create a zero-emission fuel.“Grey hydrogen,” for example uses processes called Steam Methane Reforming (
Clearly, green hydrogen is the winner here from an eco-standpoint. It seems to be an inevitable future leader of the multi-decade clean tech boom.
Why green hydrogen isn’t the leader today, and the catalysts that will change this
The biggest roadblock to greater adoption of green hydrogen is cost.As Eric points out, green hydrogen technologies have not yet achieved the scale to drive its price down to competitive levels. Back to the issue on this note:
But eventually, maybe sooner rather than later, green hydrogen could become a key solution for what one energy market observer calls a “molecule crisis” – i.e., not enough hydrocarbon molecules to continue powering the world at a reasonable cost.This particular opportunity is so early in its development that none of the sector’s leading companies are booking profits. But the potential is so enormous, and the catalysts for growth so powerful, that I believe it’s worth establishing an initial position in the industry.
On this “cost” note, I’ll quickly point toward the Inflation Reduction Act.Despite the name, this piece of legislation was basically a clean energy bill, sending billions to the sector. Over time, government funding like this will help drive down costs, helping achieve scale. Even now, this legislation is a massive boon for sector buildout. But don’t take it from me, take it from hydrogen leader, Plug Power. From MarketWatch:
In a letter to shareholders, [Plug Power management] said the [Inflation Reduction Act] was a “tremendous catalyst” for all forms of clean energy development, and “a game changer” for Plug, as the PTC [production tax credit, that provides an incentive to product clean hydrogen] should further enhance its leadership in the green hydrogen ecosystem.
Despite all this, Eric isn’t the type of investor who is quick to put money into a sector that’s not generating profits. So, what makes him believe we can trust in green hydrogen’s coming profitability?Well, the first thing is the need for urgent energy security.
Yesterday, we learned that the price of European natural gas has soared to the equivalent of $410 per barrel of oil
Europe’s benchmark gas price surged 14% in three days to a fresh record-high. This comes amidst heatwaves and low supply from Russia.And this morning, we learned that Saudi Oil Minister Prince Abdulaziz bin Salman is considering OPEC+ cuts to tighten oil production because he’s seeing a disconnect between the oil futures market and normal supply demand factors. In other words, investors have been betting on a global recession, and by extension, lower oil prices. Yet, today’s normal supply/demand balance suggests the need for higher oil prices. Here’s Eric’s take on the overall situation in Europe:
Because many European countries now realize their dangerous overreliance on Russian gas imports, they are scrambling to find replacements.Traditional renewables like solar and wind will certainly play a role. But by themselves, they will not be able to replace the “missing” Russian gas. Europe will require an “everything solution” immediately.
Green hydrogen offers a big benefit…Europe remains heavily dependent on fossil fuels. And because green hydrogen is the only combustible renewable energy source, it is the only one that can blend seamlessly with fossil fuels. Europe’s pain here is becoming unsustainable and it needs a solution. Green hydrogen will be a part of it – and that’s likely to begin the snowball toward achieving the scale needed to bring down prices substantially.
For the second green hydrogen catalyst, Eric points toward supply chains
Here he is to explain:
Now that Western companies and countries understand the risk and expense of maintaining fragile, far-flung supply chains, they are moving quickly to onshore – or “near-shore” – those chains.Energy is a critical part of most supply chains.
But why is green hydrogen a good choice for near-shoring?As Eric points out, its nature lends itself to localized production. In theory, any location with a water supply and access to a renewable power source could produce green hydrogen. For the third and final catalyst, Eric highlights the tsunami of investment dollars poised to flood the sector:
Both the private sector and national governments are pouring billions of dollars into green hydrogen production.Importantly, this massive investment is just beginning to sweep across the renewable energy industry.
Eric includes a handful of press releases from just the last two months that illustrate this point.TTE) announced a partnership with India’s Adani Group to invest $50 billion over the next 10 years to produce green hydrogen and develop an entire ecosystem around it. June 15, 2022: BP Plc (BP) struck a deal to take a 40.5% equity stake in the Asian Renewable Energy Hub, and also operate the project. And on July 7, 2022: Shell Plc (SHEL) revealed plans to build the Holland Hydrogen I facility, which would become “Europe’s largest renewable hydrogen plant” when operations start in 2025. Even Amazon is getting involved. On July 4, Amazon and Equinor ASA (EQNR) announced plans to participate in a $198 million funding round for Energy startup Electric Hydrogen (EH2). Meanwhile, over in the public sector, we already highlighted the Inflation Reduction Act. Expect more legislation along these lines here and in Europe in the coming years. Bottom line: This massive investment juggernaut is beginning to pick up momentum in a growth story that will play out for decades.On June 14, France’s TotalEnergies SE (
How do you invest?
If you’re looking to establish some beachhead positions in green hydrogen, you have a number of options.BE). If you’re looking for broader exposure, there’s the Direxion Hydrogen ETF (HJEN). It holds a basket of hydrogen plays including both Plug and Bloom, as well as Ballard Power (BLDP), FuelCell Energy (FCEL), and Linde plc (LNC). Eric is recommending two other market leaders in his Speculator investment service. One has a groundbreaking technology that combines solar power with a proprietary micro-electrolyzer to produce green hydrogen at highly competitive costs. The second is a world leader in the designing and manufacturing of electrolyzer systems that generate hydrogen gas based on Proton Exchange Membrane (PEM) technology. Looking big picture, this is a massive opportunity. These types of tectonic shifts come around perhaps once every decade or two. By luck, we find ourselves in the right place, at the right time. Here’s Eric with the final word:We mentioned Plug Power earlier in this Digest. Another market leader is Bloom Energy (
The new technologies that are spearheading the clean-tech boom will dominate global power generation. But not immediately. The road to a fully renewable, “net-zero” world will be a long and somewhat chaotic one.trillions of dollars will flow into the various technologies that will power the world in 2050. Bottom line: I believe hydrogen, especially “green hydrogen,” will become an increasingly vital clean technology, due mostly to its unique ability to decarbonize heavy industry and revolutionize clean mobility.But along that entire road,
Have a good evening,