There’s a mini energy transition going on within the much broader societal move away from fossil fuels.
Hydrogen derived from natural gas or coal in factories powered by fossil-fuel-generated electricity is slowly giving way to “green” hydrogen made with renewably produced electricity.
Carbon capture is also an option for greening the hydrogen supply, which is currently used in the refining and chemical sectors but holds promise for decarbonizing hard-to-abate sectors like steelmaking and shipping.
[Sign up for stock news with our Invested newsletter.]
“The momentum behind hydrogen is strong,” the International Energy Agency states. “However, faster action is required to create demand for low-emission hydrogen and unlock investment that can accelerate production scale-up and bring down the costs of technologies for producing and using clean hydrogen, such as electrolyzers, fuel cells and hydrogen production with carbon capture.”
With demand increasing for decarbonizing the world’s economy, this leaves the door open for green hydrogen investments like these seven stocks and exchange-traded funds, or ETFs:
— Fortescue Metals Group Ltd. (ticker: FSUGY)
— Bloom Energy Corp. (BE)
— Fusion Fuel Green PLC (HTOO)
— Plug Power Inc. (PLUG)
— Direxion Hydrogen ETF (HJEN)
— Global X Hydrogen ETF (HYDR)
— Defiance Next Gen H2 ETF (HDRO)
Fortescue Metals Group Ltd. (FSUGY)
This Australian company is first and foremost an iron ore producer. Getting the raw material out of the ground and shipping it to markets around the world is a carbon-intensive process.
So Fortescue might not be the first to come to mind as a renewable energy stock, but it is transforming itself into a company that will produce enough green hydrogen and other resources to decarbonize its operations by 2030. The transition will also enable Fortescue to begin selling green hydrogen, providing another source of revenue that could serve as a cushion against volatile iron ore prices.
“By the end of the decade, low-carbon hydrogen could account for around 25% of total hydrogen production, a significant increase from a less than 1% share in recent years.” – Madeline Ruid, analyst with Global X
The changes will cost the company billions of dollars, but in the long run, they could end up saving it money on fuel and differentiating it among mining competitors
for environmental, social and governance, or ESG, investors. And if the company ever decides to spin off its green hydrogen business, Fortescue Future Industries, that could benefit shareholders as well.
Bloom Energy Corp. (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.
It also makes electrolyzers that use electricity to separate water into hydrogen and oxygen. Its technology can take extra heat from heavy industries, such as steel and cement manufacturing, and use it to produce hydrogen with less electricity.
“The stock price has dropped off its highs, and we see this as an opportunity with a company that has cutting-edge solutions to decarbonizing the economy as well as an expansion into the green-friendly European markets,” says Peter Krull, director of sustainable investing at Earth Equity Advisors.
Fusion Fuel Green PLC (HTOO)
Europe is trying to free itself from Russian energy and plans to make green hydrogen part of that solution. With projects in Spain, Portugal and Morocco, Fusion Fuel Green is positioned particularly well for future increasing demand.
The company sells its solar-powered electrolyzer technology to customers who want to produce their own green hydrogen. It also develops its own green hydrogen plants and sells the fuel through long-term purchase agreements.
Plug Power Inc. (PLUG)
This company makes electrolyzers and hydrogen fuel cells and is set to take advantage of the growth in demand for hydrogen-powered vehicles as alternatives to lithium-powered electric vehicles.
With demand increasing for electric vehicles, lithium is expected to be in short supply in coming years, meaning that higher prices and scarcity could make hydrogen-based transportation more appealing.
Because hydrogen is a good way to store electric energy over long periods, it can also serve as a competitor to lithium-based batteries for grid-scale energy storage.
Direxion Hydrogen ETF (HJEN)
One way to hedge against risks, especially in a niche market like green hydrogen that is populated by small companies, is to own multiple companies packaged in an ETF.
HJEN contains companies involved in hydrogen generation and production, storage and supply, batteries and fuel cells, systems and solutions, and membranes and catalysts.
While major players in the legacy hydrogen business such as Linde PLC (LIN) and L’Air Liquide SA (AIQUY) — both of which are in the top 10 holdings in this ETF — aren’t pure-play green hydrogen stocks, they are expanding in the green hydrogen space.
With their deep expertise in the hydrogen business, those holdings help add to the diversification of the fund and may also provide a cushion against volatility. Plug Power and Bloom Energy are also in this ETF’s top four holdings.
HJEN also has a modest expense ratio of 0.45%, or $45 per year for every $10,000 invested.
Global X Hydrogen ETF (HYDR)
The Global X Hydrogen ETF is diversified by jurisdiction and industry, with the fund’s literature noting that the shift to renewable energy isn’t just happening in a single sector or region.
“Low-carbon hydrogen … can be used to decarbonize a range of hard-to-electrify activities, such as heating, refining, fertilizer production and transport,” Madeline Ruid, an analyst with Global X, said in a March posting on the company’s website.
“With such versatility, by the end of the decade, low-carbon hydrogen could account for around 25% of total hydrogen production, a significant increase from a less than 1% share in recent years,” she said.
Plug Power and Bloom Energy make up more than 30% of HYDR’s holdings. It has an expense ratio of 0.5%.
Defiance Next Gen H2 ETF (HDRO)
This fund tracks the BlueStar Global Hydrogen & NextGen Fuel Cell index, which includes a group of globally listed companies that generate at least half of their revenue from hydrogen-based energy sources, fuel cell technologies and industrial gases.
Defiance says its fund “provides diversified access to this disruptive and innovative space, which has the potential to transform energy production and use toward a more sustainable, decarbonized, greener future.”
This ETF has an expense ratio of 0.3%.
More from U.S. News
7 Green Mutual Funds to Buy Now
7 Clean Energy ETFs to Buy Now
7 Best Renewable Energy Stocks to Buy
7 Best Green Hydrogen Stocks and ETFs to Buy Now originally appeared on usnews.com
Update 07/21/23: This story was published at an earlier date and has been updated with new information.
