The hydrogen future: AIM's three blue-sky candidates

Hydrogen is the fuel of tomorrow: clean, free and endless. This is not a science fiction scenario, but the bread and butter of three AIM-listed companies: ITM Power, AFC Energy and Acta.

We take a look at their progress in the quest to make hydrogen fuel-cell technology part of the alternative to fossil fuels.

ITM Power

The recent activities from Sheffield-based ITM are a testament to the wide-ranging opportunities of hydrogen. In the past year the company won its first contract for a power-to-gas energy storage plant in Germany, where it is a member of a range of power-to-gas initiatives.

ITM is also demonstrating its breadth of scope by constructing smart grid-linked hydrogen refuelling stations in smaller locations, such as the Isle of Wight and Hyundai's headquarters in California, and is a member of hydrogen mobility infrastructure programmes worldwide.

As the company reported results for the year to June its order book stood at £0.9 million and cash balances at £6 million, but ITM has secured £3.7 million in grant awards with another £3.5 million subject to contracts. While the news of sales in Germany and California are proof the technology can be commercialised in the nearer term, the company has suffered some order delays and is yet to be profitable.

But the EU and UK grants are testament to the technology's potential as a part of the solution as governments look to energy security. Most recently (21 August), the company received confirmation of a €0.35 million (£0.3 million) grant award to work with a consortium to demonstrate energy-efficient technologies for non-residential buildings.

"This year has seen clear and accelerating momentum within the industry," says chairman Roger Putnam. "I do not doubt that ITM Power is well positioned to address the sizeable commercial opportunities within the energy storage and clean fuel generation from renewable power markets."

The blue sky potential for ITM Power and its hydrogen technology peers is significant, and investors may be encouraged by newsflow such as June's announcement of a £1 billion investment into finding new technology solutions for the UK car industry, in a 10-year scheme to be funded by the government and car manufacturers.

The risk, however, remains considerable, any significant profits are years away, and any company reliant on subsidies can find the winds of support subject to change.

This is why Tom McColm, analyst at ITM's house broker Zeus Capital, is keen to emphasise how the group's technology is no longer reliant on subsidies to be competitive: "The improvement in the efficiency of ITM's technology has moved projected hydrogen cost from £6.23 per kilogram to £4.19 per kilogram, which translates as half the cost per kilometre of diesel for the Hyundai ix35." In conclusion: "Hydrogen from electrolysis is a cost-competitive transport fuel today."

AFC Energy

AFC Energy reported a major milestone last month when it proved its fuel cells can generate electric power non-stop for 12 months. Similarly to ITM Power, Surrey-based AFC has developed a fuel-cell technology that is platinum-free, meaning the production cost is much more accommodating for commercial use.

"The next steps are to replicate this 12-month longevity in real-world environments, continue improving our electrode power output and introduce our [250 kilowatt commercial grade fuel cell] large-scale systems," says chief executive officer Ian Williamson.

AFC already has projects underway to demonstrate the commercial applications of its technology, including a long-standing collaboration with chemicals giant Azko Nobel and an EU-supported demonstration project called "Power Up", for which AFC has a €6.1 million grant.

Similarly to ITM, AFC has a mixture of commercial and grant projects on its docket. As the group reported half-year results to May, cash balances stood at £8.9 million, up from £4.5 million last year.

House broker Peat & Co was positive on the group's potential of reaching its lofty long-term goals, pointing out that the current financial performance is "largely irrelevant in the context of what we would expect from the company when it is more mature".

The "Power-up" funds, coupled with other grants, will remain important parts of the group's financing over the years to come, noted the broker, pointing to how these grants represent "an important independent validation of both the company's technology and its potential commercial outlook".

Acta

Italian hydrogen fuel-cell group Acta is gaining traction from commercial customers for its back-up power and renewable energy storage applications, reporting paid trials currently underway with major mobile phone groups. Acta will report half-year results on 25 September, but last month updated the market on its solutions for generating hydrogen on-site.

"The low maintenance and service costs make the system cost-competitive with battery or diesel systems over a two- to three-year period," says the company, adding that the system also offers a significantly lower theft risk than traditional solutions, "an important cost and service factor in remote locations". The group's technology is currently being trialled with telecoms groups in Australia, Africa and most recently in the Philippines.

"We expect to see an increasing level of activity in field trials in the telecommunications and energy-storage markets, with current trials moving through to larger, second-stage evaluations and new trials being initiated in existing and new territories," says the group, which expects to see these developments translate to revenue growth this year and next.

Caroline de La Soujeole and Sam Thomas, analysts at Acta's house broker Cantor Fitzgerald, describe Acta's integrated back-up power system as a "potential game changer for the company". Hydrogen generated as a by-product of industry is suitable for industrial scale fuel-cell operations, but can be impractical and costly for use on smaller sites or remote installations such as mobile telecom bases.

Uncertainty remains also for Acta, however the group is involved in tests in a range of areas: a partnership for vehicle refuelling stations is underway in Taiwan, and earlier this year the group announced a paid trial with Clean Power Solutions for storing power from wind turbines. This project intends to use Acta's hydrogen electrolysers to produce hydrogen from rainwater, using power from wind turbines.