Last year was a big one for green hydrogen, and the future is also looking bright for the nascent industry.
In 2022, the war in Ukraine caused a sharp rise in the price of natural gas, a key feedstock for most of the hydrogen the world currently produces — known as gray hydrogen because of its fossil fuel dependency.
That made green hydrogen, produced via electrolysis and renewable energy, cost competitive with gray hydrogen for the first time ever in Europe and Asia, even without government incentives, according to analysts at Raymond James.
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But U.S. government incentives were also in play. The Inflation Reduction Act of 2022 funds $9.5 billion in green hydrogen development and offers green hydrogen producers a tax credit worth up to $3 per kilogram for the first 10 years of a project’s duration. Across the pond, the European Commission approved more than 5.2 billion euros ($5.7 billion) for renewable and low-carbon hydrogen projects.
The incentives aim to assist the fledgling green hydrogen industry in taking a larger market share of world hydrogen production, allowing manufacturing and transportation sectors to reduce their emissions.
By 2030, global hydrogen demand will rise to 118 million metric tons, from 94 million in 2021, Raymond James analysts said in a November note. By then, about 10% of that amount will come from green hydrogen, compared with less than 0.5% in 2021.
“What makes us enthusiastic is the truly vast extent of the opportunity in transitioning from gray to green hydrogen, at a pace that is faster than we would have envisioned 12 months ago.” – Raymond James analysts
That represents a huge market expansion for both pure-play green hydrogen companies as well as legacy producers that can leverage their gray hydrogen expertise and distribution networks in the new market.
“What makes us enthusiastic is the truly vast extent of the opportunity in transitioning from gray to green hydrogen, at a pace that is faster than we would have envisioned 12 months ago, bearing in mind the dramatic escalation in worldwide gas prices in the context of the war,” the analysts said.
With that in mind, here are seven green hydrogen stocks and exchange-traded funds, or ETFs, to consider:
— Bloom Energy Corp. (ticker: BE)
— Plug Power Inc. (PLUG)
— Fusion Fuel Green PLC (HTOO)
— Ballard Power Systems Inc. (BLDP)
— Global X Hydrogen ETF (HYDR)
— Direxion Hydrogen ETF (HJEN)
— Defiance Next Gen H2 ETF (HDRO)
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Bloom Energy Corp. (BE)
Green hydrogen is made with renewably generated electricity used to separate water into hydrogen and oxygen using a tool called an electrolyzer. Fuel cells essentially perform the reverse operation to convert hydrogen into electricity to power vehicles or the grid.
Bloom makes both fuel cells and electrolyzers. Headquartered in San Jose, California, it creates 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 says its electrolyzer technology can use the excess heat from heavy industries, such as steel and cement manufacturing, to produce hydrogen with less electricity. That hydrogen can be used to power high-temperature furnaces used in manufacturing processes.
“The size of the pie that we ultimately envision equates to capital spending on electrolyzer new builds of several billion dollars per year,” Raymond James analysts estimate for the green hydrogen market overall. “This would make it entirely realistic for a dozen-plus players to reach substantial scale in the manufacturing part of the value chain.”
Plug Power Inc. (PLUG)
Hydrogen fuel cells are positioned for competitiveness with lithium-based batteries in the transportation market.
As another 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.
Based in Latham, N.Y., Plug Power notes electrolyzer-produced hydrogen can be used for storage of surplus electric energy, semiconductor manufacturing, food hydrogenation, and fueling stations for cars, trains and other vehicles.
[READ: 10 Best Energy Stocks to Buy in 2023]
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 U.S. 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, Ireland-based 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.
Ballard Power Systems Inc. (BLDP)
Ballard makes fuel cells that can power buses, commercial trucks, trains, ships, passenger cars and forklifts. The hydrogen its cells use can be created with fossil fuels or renewable energy, positioning it well as the energy transition won’t be an overnight shift.
The company has 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.
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 — then ETFs are worth considering.
The Global X Hydrogen ETF holds 26 stocks and is also diversified by jurisdiction and industry.
“The shift to green energy isn’t confined to a single sector or region,” the fund’s website says. “HYDR invests accordingly, with global exposure across multiple industries.”
HYDR has an expense ratio of 0.5% and has fallen by 42.8% over the past year as of April 3, perhaps creating a bargain opportunity for buy-and-hold investors.
[READ: 6 Steps to Get Started With ESG Investing]
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.
The stocks in HJEN fall into five hydrogen-related sub-themes: production and generation, storage and supply, fuel cells and batteries, systems and solutions, and membranes and catalysts.
HJEN has an expense ratio of 0.45% and is down 25.6% over the past year as of April 3.
Defiance Next Gen H2 ETF (HDRO)
Like the other two ETFs listed here, HDRO holds Air Products and Chemicals Inc. (APD) and Linde PLC (LIN). HDRO allocates roughly 4% to each of those stocks in a 27-holding portfolio.
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 long expertise in the hydrogen business, those holdings help add to the diversification of these ETFs.
This ETF has an expense ratio of 0.3% and is down 42.2% over the past year as of April 3.
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7 Best Green Hydrogen Stocks and ETFs to Buy Now originally appeared on usnews.com
Update 04/04/23: This story was previously published at an earlier date and has been updated with new information.
