Green hydrogen may meet 25% of energy needs by 2050.
If 2022 was the year that green hydrogen came knocking at the door, 2023 could be the year that it kicks that door in and takes center stage. Governments and companies worldwide are pouring billions of dollars into “clean hydrogen.” Take the recently enacted Inflation Reduction Act, passed by Congress and signed into law by President Joe Biden in late 2022. The IRA not only funds $9.5 billion in green hydrogen development, it also offers green hydrogen producers a tax credit worth up to $3 per kilogram for the first 10 years of a project’s duration. Green hydrogen, which is largely defined as utility power that’s generated from renewable energies like solar and wind, is expected to supply up to 25% of the world’s energy needs by 2050. Consequently, it’s a good time to plug into the clean energy stock sector to see which companies are riding the green hydrogen wave.
Ballard Power Systems Inc. (ticker: BLDP)
There isn’t an overabundance of viable green hydrogen power stocks right now, which makes a company like Ballard really stick out. Closing at $5.49 per share on Jan. 19, Ballard has really flipped the switch from 2022 to 2023, gaining 14.6% year to date after falling by 61.9% in 2022. Ballard makes its name selling fuel cells for clean energy products. In particular, the company’s zero-emission proton exchange membrane fuel cell is drawing attention in the industry and on Wall Street. The transport sector — think automobiles, trucks, trains, airplanes, ships and large construction vehicles — should be an immediate beneficiary of Ballard fuel cell products, which work well in the electrification of transportation vehicles. The company has also partnered with other green energy firms to bring green hydrogen into the mainstream. Notably, a deal with ABB Ltd. (ABB) to provide hydrogen-powered fuel cells to ships and another pact with Chart Industries Inc. (GTLS) to commercialize liquid hydrogen fuel cells make BLDP a clear contender in the green hydrogen space.
Bloom Energy Corp. (BE)
Bloom Energy is another hydrogen fuel innovator that’s turning heads. On Jan. 10, Morgan Stanley upgraded the company to “overweight,” with energy analyst Stephen Byrd citing BE’s distributed fuel cell generators, called Bloom Servers, as a key component of the U.S. energy power distribution strategy over the next decade. Bloom already boasts a high-profile list of customers including Home Depot Inc. (HD), International Business Machines Corp. (IBM), Verizon Communications Inc. (VZ) and Target Corp. (TGT). Morgan Stanley set a price target of $35 for BE shares, which is 54.3% higher than the stock’s closing price of $22.68 on Jan. 19.
Air Products & Chemicals Inc. (APD)
Air Products is another clean hydrogen play that’s getting a boost from Wall Street analysts. The company, which runs over 100 hydrogen plants in the U.S. and abroad, saw Deutsche Bank recently raise its share price estimate to $340 from $292. That call follows news that Air Products posted $12.7 billion in sales in fiscal 2022. Air Products is also joining with AES Corp. (AES) to build the world’s largest wind- and solar-powered clean energy facility. The $4 billion energy plant will be built in northern Texas and will leverage 1.4 gigawatts of wind and solar power to produce over 200 metric tons of green hydrogen per day. The Deutsche Bank call came on the heels of two other upgrades, with Bank of America raising its target price from $281 to $308 and Seaport Global upgrading APD to “buy.” As of Jan. 19, the company’s share price was up 5% over the past year and up 24.2% over the past three months.
Plug Power Inc. (PLUG)
Trading at $15.31 per share as of closing on Jan. 19, Plug Power has seen its price rise by 23.8% so far in 2023, after falling 56.2% in 2022. A good chunk of the shares’ boost comes from a highly positive estimate by analyst Amit Dayal at H.C. Wainwright, who gave PLUG stock a price target of $78. There’s good reason for that sentiment, as Plug Power is a big player in the clean energy transport sector, where demand for alternative energy is soaring. Analysts forecast $3 billion in annual sales by 2025; it delivered $500 million in sales in 2021, by comparison. Potentially profitable partnerships include French carmaker Renault and South Korea-based SK Group, as Plug Power gains access to the lucrative Pacific Rim green hydrogen fuel systems market, where its hydrogen fuel cells are already in robust demand.
FuelCell Energy Inc. (FCEL)
FuelCell is another green energy company that produces fuel cell energy products in industries striving to comply with fossil fuel-limit mandates. Tight ties with the U.S. Department of Commerce, where a former FuelCell executive recently landed a key energy role, and a new pact with the U.S. Navy on a clean energy project in Groton, Connecticut, should give the company a big competitive advantage moving forward. FuelCell delivered $39 million in revenues during the fourth quarter of 2022, nearly tripling its revenue output from a year earlier. On the downside, FuelCell has spent a ton of money to compete in the green hydrogen sector, which has crimped profits. The company announced a $43.3 million net loss in the fourth quarter. FCEL should benefit from the recent IRA legislation, though, which favors green hydrogen companies that have access to government clean energy contracts. If management can fix the profit problem, the sky’s the limit with this green energy player.
Global X Hydrogen ETF (HYDR)
Global X Hydrogen is a worthy addition to this list, even though it lost a ton of money in 2022. The two-year-old ETF is starting out on the right clean energy footprint in 2023, rising from about $11 per share in the last week of December to $12.53 per share on Jan. 19, a 15% gain. The fund holds industry stalwarts like Ballard, Bloom Energy and Plug Power (the three companies compose about 30% of the fund), along with high-profile names such as Toyota Motor Corp. (TM) and Nikola Corp. (NKLA). With green hydrogen being touted as the “fuel of the future,” rising prices could be a sign of things to come for the sector. If that trend continues, experts say HYDR is a good place to park clean energy money in 2023. “We believe now is a good time to invest in hydrogen, as significant tailwinds are in place that could lead to strong growth opportunities over the coming years,” said Global X analyst Madeline Ruid in a recent research report.
6 green hydrogen stocks and ETFs to buy in 2023:
— Ballard Power Systems Inc. (ticker: BLDP)
— Bloom Energy Corp. (BE)
— Air Products & Chemicals Inc. (APD)
— Plug Power Inc. (PLUG)
— FuelCell Energy Inc. (FCEL)
— Global X Hydrogen ETF (HYDR)
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Update 01/20/23: This story was previously published at an earlier date and has been updated with new information.