Yesterday we looked at the real reason the pound is crashing and gold is soaring in the UK – Boris Johnson’s extravagant spending plans.
Thanks for your replies on that front. Look out for a future letter of Exponential Investor for more on that.
Today I want to take the story a step further and look at something I think Boris’ government – in fact, any future government – is going to plough a lot of cash into.
Inadvertently Boris referred to it over the weekend. Asked to describe his economic plans he replied: “Boosterism!” He wants to put “rocket boosters” on the British economy. He wants to “turbocharge” it!
(A quick head in the hands moment for those of us who understand how he’ll pay for all this. Short answer: spend, borrow, print, trash the currency, rob the middle class via inflation. Why change a plan that’s worked for governments for thousands of years.)
In a pun so lazy my eighteen-month-old son would pass it over, the Guardian claimed his plans “aren’t rocket science”.
But as I want to show you, they actually might be…
The Fuel of the Future
Boris was talking in generalities, of course. His job now is to appear energetic and purposeful, these qualities setting him apart from the near comatose Theresa May.
But to students of the energy markets, like our own James Allen, his words carried a double meaning.
James has been tracking the rise of a new energy source that could bring about major changes in the way we heat and power our homes, travel and do business here in Britain.
Perhaps “new” is the wrong way of describing it. It’s actually been around for a very long time. It was used by NASA to put rockets in outer space. But it could never compete with fossil fuels like oil, coal and natural gas. It was either too expensive or too complicated to produce.
But according to James that’s all changing now. We stand on the cusp of the age of hydrogen. And Britain is gearing up for a major push into the so-called hydrogen economy.
There is already a major effort under way to merge hydrogen into our existing energy systems. This is actually far simpler than it sounds. So much so that thousands of homes in the north of England could be heated using hydrogen in the coming years. Not decades. Years.
But first back to Boris. He doesn’t just have a linguistic connection to “rocket fuel” hydrogen power. During his time as Mayor of London he was part of a shift towards exploring hydrogen power in vehicles. London was positioned as an “early adopter” of hydrogen vehicles, alongside Copenhagen and Munich.
Boris’ words at the time:
“It is fantastic that London will benefit from these new state-of-the-art hydrogen vehicles. By embracing this technology of the future, we aim to consolidate hydrogen’s role as a practical alternative fuel for the 21st century and beyond. I am sure that Transport for London will provide the ideal environment for us to see everything the Mirai can do and, in doing so, take another great step towards improving air quality in our city and protecting the health of Londoners.”
Interesting. Though I’m not sure it really led anywhere. I don’t see hydrogen-powered cars on the streets of London a whole lot. Perhaps Boris was merely talking out of his rocket exhaust in an attempt to appear “green”.
That said, a lot has changed those days. This is the story James has been tracking. The technology required to produce hydrogen in a “clean” fashion has advanced – and that is opening new possibilities.
I should take a few steps back to explain what I mean by that.
Hydrogen has a lot going for it. As a fuel source it is 100% clean. It is also roughly three times more efficient than petrol in an internal combustion engine. So it’s both cleaner and more powerful, if you want to put it like that.
More good news: hydrogen is the most abundant element in the universe. It is unlikely to run out. Or at least, there are a billion other problems we’ll have to worry about before we worry about running out.
But that’s misleading. Abundance doesn’t mean it is easy or cheap to get your hands on the stuff. Traditionally hydrogen is produced by natural gas. In other words, you need a fossil fuel to produce a “green” energy. Which is kind of self-defeating, if you’re inclined to look at the world that way.
That’s held hydrogen back as a major fuel source. Cool fact: the gas network was originally designed to run on hydrogen. But the discovery of the North Sea gas fields made it cheaper and easier to use natural gas instead.
But this dynamic is now changing. In an email thread amongst the analysts here at Southbank Investment Research HQ, James explained it like this:
Right now hydrogen is produced by natural gas, a fossil fuel. This method of production releases a lot of CO2 – around seven to nine thousand kilogrammes per tonne of hydrogen produced. So it’s dirty.
But there’s been a breakthrough. There are nifty things called electrolysers, which are devices that split water into hydrogen and oxygen using electrical energy (via the process of electrolysis).
When rigged up to a renewable source, the electrolyser produces hydrogen that has no carbon footprint. This is co-called power-to-gas.
The company I’m watching allows its customers to convert excess electrical energy into hydrogen for injection into the gas grid or storage for vehicles.
For the gas industry, this type of hydrogen production represents a general-purpose solution to break away from carbon. It could be used for heating as well as in the transport sector, especially for heavy-duty, air and sea transport. So far, submarines and rockets, in particular, have been powered by hydrogen.
James went on to outline a stock he was recommending to his readers in his energy stock service, Exponential Energy Fortunes. I’m not going to share the name of that company here for two very good reasons.
First, it’s unfair to people who’ve paid for those recommendations. Second, producing high-quality, fully researched stock recommendations costs an eye-watering amount of money. I know – I sign off on the paycheques, the research expenses and every other associated cost. If you want free stock recommendations, there are plenty of places out there you’ll find them. And you’ll get what you paid for.
Back to hydrogen. As James put it, the electrolyser is a game changer. It enables the production of clean hydrogen. In ten years’ time that might well go down as a breakthrough as big as the discovery of North Sea oil. It unlocks all sorts of possibilities. Not least the alluring idea that Britain could take big steps towards energy security and reduce its reliance on fossil fuels, in one go.
Which is why the government – and by that I mean the permanent government, the apparatus that doesn’t change with a new person in Number 10 – is getting behind hydrogen in a big way.
James has spotted an interesting development on that front, too.
It involves a virtually unknown, yet powerful, part of the government that is throwing its weight behind hydrogen in a way that could, to paraphrase Boris, “turbocharge” its adoption here in Britain.
For more on that – part two of this hydrogen special – check out tomorrow’s Exponential Investor. It’ll be with you just after 9am tomorrow morning. Don’t miss it!
Publisher, Exponential Investor