The fuel of Britain’s future (part two)

Back to the coalface we go. Wait. That’s a terrible metaphor, given we’re exploring the fuel of Britain’s future – not its past.

Yesterday I introduced you to an energy source that could help heat your home, power your car and do a million other things beside. Read it here to get caught up. I’m going to take that idea a step further today.

But if you don’t want to click that link, here’s the short version. Hydrogen – which is cleaner and more efficient than fossil fuels and can be produced right here in Britain – is coming.

Britain is set to become a world leader in the hydrogen economy. There are already plans under way to mix hydrogen into our existing natural gas grid. In fact, blending hydrogen into 20% of the existing grid would be the equivalent, in carbon reduction terms, of removing 2.5 million cars from the roads.

As I told you yesterday, resident energy guru James Allen has been banging the table on hydrogen energy all summer. Barely a conversation goes by with him or his team in which the subject doesn’t turn to hydrogen.

I’ve seen that happen before. It tends to happen when an analyst spots something no one else has seen and wants to spread the message quickly – before the opportunity slips away.

I reread some of James’ work this morning. And I think he’s right. He’s certainly spotted something I hadn’t seen elsewhere. It suggests the government is about to get behind hydrogen in a big way.

Before I go any further: a disclaimer.

I’m not a massive fan of investment themes that rely on government funding. I think that’s the free marketer in me. I baulk at the idea that any government can – or should – attempt to pick favourites in the economy. Becoming an elected (or unelected) official doesn’t give you the power to see the future. In fact it may uniquely distort your ability to understand the future, because your goal becomes to preserve your own power.

That said, governments do meddle in the economy. All the time. And understanding how and when they do that can be profitable. Nickolai Hubble, editor of Zero Hour Alert, calls this “policy profiteering”. You may not like it, but it happens. You have to invest in the world we actually live in, rather than the world we’d merely like to.

On that front, I feel confident making a prediction. In the next ten years governments all over the world, including our own, are going to inflate one of the biggest bubbles of all time in the green energy sector.

There may well be good reasons for doing this. The technology underpinning renewable energy has improved exponentially in the last decade. That’s one reason.

The shift away from fossil fuels is another. A more stable, controllable and less geopolitically sensitive energy supply would be beneficial for many different countries.

There are plenty of bad reasons, too. Not least politicians attempting to furnish their “green” credentials in order to win votes and funding all sorts of dross to do so. I’m certain that’ll happen too.

To be frank, it may well take a major bubble to shift the economy from fossil fuels to renewable/clean energy. Bubbles aren’t all bad. In fact, they’re very often a good thing. I wrote about this in my book, The Exponentialist (get your copy here).

Bubbles attract capital. They create interest in something new. They create new industries. They lead to innovation, invention and risk-taking. They’re often the phase when the underlying infrastructure for a new technology is built out.

And yes, the consequence of that is a certain amount of malinvestment and loss-taking when the bubble bursts. That’s the point where the weak ideas are revealed and liquidated, while the strong ones survive flourish.

Which means that bubbles aren’t something to be feared. In fact, if you know what you’re doing you can make a lot of money – particularly if you position yourself early, rather than moving late and buying in at the top of the bubble. Which is what most people do.

I’ll talk more about the great green bubble in a future issue. But today let’s turn back to hydrogen. There’s a reason I brought up the idea of government support for green tech generally and hydrogen specifically.

It involves something James spotted and pointed out to readers of Exponential Energy Fortunes. To understand it, says James:

… we need to delve into the Climate Change Act 2008.

You see, tucked away in section 17 of the act is another interesting requirement, namely that it has to obtain advice from the so-called Committee on Climate Change (CCC) and to take account of that advice (see paragraph 4, below).Established 11 years ago under the Climate Change Act, the CCC is a cross-party group of MPs that’s right at the centre of UK climate policy.

In fact, in policy circles, its analysis defines the discussion.

In the decade or so since it was set up, the CCC’s advice has been followed much more often than not. That’s because the government runs a tangible risk of a judicial review if it does not follow the CCC’s policy advice.

What this means is that it’s worth closely following what the CCC says to get an early steer on likely governmental policy.

And it’s here – on the paths the government should take to speed up the UK’s emissions cuts – that the CCC has been clear.

In fact, according to the CCC, there’s one particular gaseous substance that could form the backbone of any substantive efforts to cut emissions across energy generation, transportation, industry and heating.

That substance is hydrogen.

In fact, in its last report in May, the CCC mentioned “hydrogen” a total of 141 times, which was quite something considering the report was 270 pages long.

Hydrogen, in fact, was one of the central themes to emerge from the CCC report, which said it could contribute to the UK actually ending its contribution to global warming within 30 years by reducing national greenhouse gas emissions to zero by 2050.

I added emphasis to those final paragraphs. They’re important. James laid out why that is nicely. The CCC defines debate and policy when it comes to energy policy – specifically the commitments the government has made to reduce carbon emissions.

And it seems the CCC has pinpointed hydrogen has the way of doing this.

That’s significant. Like it or not, taxpayer help and support for the fuel source will provide a tailwind to any company in the sector.

It’s also a logical move. Britain is already a world leader in hydrogen technology. And moving from natural gas to hydrogen isn’t a radical shift in terms of the effort required to make it happen. For proof of that I point you to efforts already underway in Keele to test this out.

And for more proof, look to the town of Buxton. By the way, Buxton isn’t all that far away from where I grew up. It’s a nice place, if you can be bothered to wind your way up there. I think it’s the highest town in England.

It’s also the home of H21, the world’s first ever testing facility for 100% hydrogen power. The test is designed to “establish the critical safety evidence proving that a 100% hydrogen gas network is equally as safe as the natural gas grid heating our homes and businesses today. The results will be critical in determining if it is safe to convert millions of homes across the country from natural gas to hydrogen”.

It’s a test, yes. But an important one. And it shows that the shift towards hydrogen is happening in Britain, right now. It could be a major theme in the energy markets in the coming years. Keep an eye out for it.


Nick O’Connor
Publisher, Exponential Investor

Category: Energy

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