The switch from gray to green hydrogen isn’t just hot air.
For hydrogen to be a meaningful part of the energy transition, the clean-burning fuel also needs to be produced cleanly. Most hydrogen at the moment is made using fossil fuels, creating what is known as “gray hydrogen.” Increasingly, companies are producing “green hydrogen” made with renewably produced electricity that’s used to separate water into hydrogen and oxygen using a tool called an electrolyzer. Companies are also making the fuel cells that convert hydrogen into electricity. There aren’t that many publicly traded pure-play green hydrogen companies, and the ones that exist are relatively new, which may make hydrogen exchange-traded funds more attractive at the moment. Here’s a look at six of the best green hydrogen stocks and ETFs to watch.
Bloom Energy Corp. (ticker: BE)
This company makes fuel cell power generation systems that can run on hydrogen, biogas and natural gas and can be adopted for utilities and the transportation industry. In 2021, it unveiled an electrolyzer that relies on the same technology as its power generation technology. “The company is a leader in solid oxide fuel cells that are capable of running on hydrogen as well as other fuels,” notes Peter Krull, CEO at Earth Equity Advisors. “While they have risen considerably above their 52-week low, we still see the company as having cutting-edge solutions to decarbonizing the economy as well as an expansion into the green-friendly European markets.”
Plug Power Inc. (PLUG)
Hydrogen fuel cells are positioned for competitiveness with lithium-based batteries. As a maker of electrolyzers and hydrogen fuel cells, Plug Power seems to be well positioned to take advantage of growth in demand for hydrogen-powered vehicles, especially for fleet applications. In April, the company announced an agreement to supply green hydrogen for material-handling lift trucks at Walmart distribution and fulfillment centers in the United States. “While we are less excited about the role for hydrogen relative to lithium-ion batteries for passenger vehicles, the opportunity set in other transportation markets — shipping, trucking and aerospace — and industrial manufacturing is enormous and urgent,” says Robert Rendler, portfolio manager and research analyst with Franklin Equity Group.
Fusion Fuel Green PLC (HTOO)
Even before the war in Ukraine threw the global energy markets into turmoil and cast a spotlight on Europe’s dependence on Russian natural gas, European Union countries were already well ahead of the United States in terms of green hydrogen. Europe’s desire to free itself from Russian energy bodes well for green hydrogen companies with exposure to the Continent. With projects in Portugal and Spain, Fusion Fuel Green sells its electrolyzer technology to customers wanting to produce their own green hydrogen. It also sells the fuel from its own green hydrogen farms through long-term purchase agreements.
Global X Hydrogen ETF (HYDR)
For those investors who don’t want to pick individual stocks — especially smaller companies that are emerging in a relatively new industry — exchange-traded funds are worth considering. The Global X Hydrogen ETF holds more than 20 stocks and is also diversified by jurisdiction and industry. “As an ETF it can give you exposure to several hydrogen names, which accounts for the risk of companies who end up failing,” says Josh Answers, host of the YouTube channels “The Trading Fraternity” and “The Stock Market Live,” which together have more than 500,000 subscribers. “This is the same precaution most energy/commodity investors take, which is why ETFs in the space have been popularized,” he says.
Direxion Hydrogen ETF (HJEN)
This fund tracks the Indxx Hydrogen Economy Index, which contains “companies that provide goods and/or services related to the hydrogen industry, including hydrogen generation and storage, fuel cells, hydrogen stations and hydrogen-based vehicles,” the website for the fund says. Like the Global X offering, the fund also includes foreign stocks and those from various industries. “Hydrogen is the lightest and most abundant element in the universe, and it may be the key to fulfilling the world’s growing energy needs while fighting climate change,” David Mazza, managing director at Direxion, said in March 2021 when the fund was launched.
Defiance Next Gen H2 ETF (HDRO)
All three ETFs introduced in this list, including Defiance Next Gen H2, hold Rendler’s top hydrogen stocks: Air Products & Chemicals Inc. (APD) and Linde PLC (LIN). While these aren’t pure-play green hydrogen companies, they are major players in the gray hydrogen business and are expanding into the green hydrogen industry. With their deep experience in the hydrogen business, the two companies help add to the diversification of these ETFs. “Years of experience in handling hydrogen give these players a competitive advantage, where in many regions they can leverage their existing infrastructure of pipelines and storage networks to cost-effectively supply customers,” Rendler says.
6 green hydrogen stocks and ETFs to watch:
— Bloom Energy Corp. (BE)
— Plug Power Inc. (PLUG)
— Fusion Fuel Green PLC (HTOO)
— Global X Hydrogen ETF (HYDR)
— Direxion Hydrogen ETF (HJEN)
— Defiance Next Gen H2 ETF (HDRO)
More from U.S. News
Update 07/26/22: This story was published at an earlier date and has been updated with new information.