Green hydrogen stocks have not been doing well, perhaps creating buying opportunities for buy-and-hold bargain hunters with renewable energy companies on their watchlists.
Relatively low oil and gas prices have made more-expensive green hydrogen less attractive. Higher interest rates have weighed on project financing, while supply chain disruptions and inflation have also made renewable energy developments more expensive.
Although more than 40 nations have hydrogen policies, time lags between policy announcements and implementation have caused developers to delay projects, according to the International Energy Agency.
And the requirements for qualifying for one of the biggest potential boons to green hydrogen, a tax credit within the Inflation Reduction Act, or IRA, have proven stricter than the industry was hoping for.
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Still, as these kinks work themselves out, hydrogen made without fossil fuels is expected to become an increasingly important part of the energy mix as nations transition away from coal, oil and, eventually, natural gas.
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.
“As electricity demand rapidly increases due to penetration of electric vehicles, onshoring of manufacturing and expansion of data centers, fuel cells stand to benefit as the electric grid becomes increasingly strained,” says Dean Pernas, co-founder of investment research firm Pernas Research.
Here are six of the best green hydrogen stocks and ETFs to buy now:
— KBR Inc. (ticker: KBR)
— Bloom Energy Corp. (BE)
— Plug Power Inc. (PLUG)
— Ballard Power Systems Inc. (BLDP)
— Global X Hydrogen ETF (HYDR)
— Direxion Hydrogen ETF (HJEN)
KBR Inc. (KBR)
Let’s start off with a company that’s in the green so far this year, unlike the other stocks on this list.
This $8.8 billion dollar company isn’t a pure-play hydrogen stock. But it is a huge player in ammonia, which through chemistry offers a relatively easy way to transport hydrogen over long distances.
Ammonia is already widely used in the fertilizer industry. It is the world’s second-most heavily traded chemical, so there is already a global supply chain in place.
“KBR has a 50% market share of the process technology that cracks ammonia into hydrogen and back,” says Sharo Atmeh, chief operating officer at Montauk Climate.
“Ammonia is key because it allows hydrogen to be stored and transported significantly more efficiently,” he says. “As regional hydrogen hubs come online, backed by the IRA, look for KBR’s technology to be a key component.”
Bloom Energy Corp. (BE)
Among green hydrogen stocks, Bloom is one of the blue chips. The company makes both fuel cells and electrolyzers, so it’s involved in the twin pillars of the green hydrogen space.
Bloom’s fuel cell systems can run on hydrogen, biogas and natural gas, giving the company a larger market until green hydrogen becomes more widely adopted. The company’s technology can be used by utilities and the transportation industry, giving it an edge in two sectors that are facing pressure to decarbonize.
“Bloom Energy is underappreciated for solving the time-to-power problem for data centers,” Atmeh says.
“Right now the interconnection queue for power to a new high-energy user can stretch over five years,” he says. “Their hydrogen fuel cells can help get these data centers online more quickly while power interconnection is made.”
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Plug Power Inc. (PLUG)
This company is another blue chip in the green hydrogen world.
It makes hydrogen fuel cells for fuel cell electric vehicles, positioning it well if green hydrogen eventually becomes a serious competitor for battery-powered EVs.
That’s a distinct possibility because hydrogen-powered vehicles can cover longer distances than automobiles powered by lithium-based batteries, an advantage given that range-anxiety has been a hurdle to EV adoption.
“They have a robust customer base that includes major warehouse operations, such as those run by Amazon, Walmart and Home Depot, which use their fuel cells to power electric forklifts,” Pernas says.
Ballard Power Systems Inc. (BLDP)
Ballard makes fuel cells that can power buses, commercial trucks, trains, ships, passenger cars and forklifts, making it a similarly attractive play on decarbonized transportation as Plug Power.
“Ballard is focused on the development and manufacturing of proton exchange membrane fuel cells, which are renowned for their high power density and versatility in various applications,” Pernas says.
“PEM fuel cells operate at relatively low temperatures compared to other types of fuel cells,” he says. “This allows for quicker startup times and less thermal management, which is particularly beneficial for automotive and portable applications.”
Global X Hydrogen ETF (HYDR)
Investors who want to put some money into the green hydrogen industry — but who may be leery of picking individual stocks given their past performance and the nascent nature of the industry — can consider exchange-traded funds, which offer instant diversification.
These funds package multiple stocks under a single ticker symbol, allowing investors a way to hedge against company-specific risks, especially in a niche market like green hydrogen, which is populated by small companies.
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.
Most of its holdings are in the industrials sector, but it also has holdings in the consumer discretionary and materials sectors.
The common denominator is that the companies “stand to benefit from the advancement of the global hydrogen industry,” the fund’s literature says.
That includes companies involved in hydrogen production, integrating hydrogen into energy systems, and making fuel cells, electrolyzers and other technologies related to using hydrogen as an energy source.
Bloom, Plug Power and Ballard are in its top five holdings. The fund has an expense ratio of 0.5%, or $50 per year for every $10,000 invested.
Direxion Hydrogen ETF (HJEN)
This fund contains companies involved in hydrogen generation and production, storage and supply, batteries and fuel cells, systems and solutions, and membranes and catalysts.
The fund’s top holdings include legacy hydrogen business L’Air Liquide SA (OTC: AIQUY) and major fossil fuel producers Shell PLC (SHEL) and BP PLC (BP), so it may not be for every investor who’s looking for exposure to greener energy companies.
But these firms are taking steps in the green hydrogen economy, and their size may help cushion the fund against volatility.
Like the Global X ETF, Direxion’s includes Bloom, Plug Power and Ballard in its top five holdings. It also offers geographic diversification with holdings from 12 countries.
The fund has an expense ratio of 0.45%.
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6 Best Green Hydrogen Stocks and ETFs to Watch originally appeared on usnews.com
Update 04/26/24: This story was previously published at an earlier date and has been updated with new information.
