Amid the energy transition, some industries have been found to be easier to decarbonize than others. Technology companies, for instance, can readily buy power from solar and wind farms to run data centers.
But other industries, such as steel or cement making, or heavy transportation, are much harder to decarbonize. Steelmaking, for example, can have a much higher electricity demand than data centers, and it uses coal as a carbon input for the steel itself.
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Green hydrogen — made with renewably generated electricity used to separate water into hydrogen and oxygen using a device called an electrolyzer — offers hope for hard-to-decarbonize sectors. But, the industry has faced challenges with developing technologies cheaply enough at commercial scale.
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.
Time lags between policy announcements and implementation have caused developers to delay projects. And the requirements for qualifying for one of the biggest potential boons to green hydrogen, a tax credit within the Inflation Reduction Act, have proven stricter than the industry was hoping for.
“The Inflation Reduction Act was a major boost for the energy transition, and has unlocked billions in clean energy investments,” says Gabriel Martinez, spokesperson for carbon emissions-reduction technology company Topsoe, which is planning an electrolyzer cell manufacturing facility in Virginia. “However, we are still not seeing the number of projects reaching a financial investment decision that we need to reach climate goals.”
With many projects waiting on tax credit guidelines from the U.S. Treasury Department, increased regulatory clarity is perhaps the biggest factor in helping projects get over the finish line, Martinez says.
“Green hydrogen remains a nascent market: Less than 1% of the world’s hydrogen supply is in the green category,” says Raymond James analyst Pavel Molchanov. “At the same time, there is so much project development taking place, which is exciting to watch. Of course, we know that all infrastructure development is prone to delays and cost overruns — green hydrogen is no exception.”
Here are some of the top green hydrogen stocks and ETFs to watch now:
| Stock/ETF | Focus areas |
| FuelCell Energy Inc. (ticker: FCEL) | Fuel cell energy platforms, carbon capture tech |
| Bloom Energy Corp. (BE) | Electrolyzers; fuel cell systems for utilities, vehicles |
| Plug Power Inc. (PLUG) | Electrolyzers, hydrogen fuel cells for electric vehicles |
| Ballard Power Systems Inc. (BLDP) | Decarbonized heavy-duty transportation |
| Global X Hydrogen ETF (HYDR) | Industrial, consumer discretionary, materials sectors |
| Defiance Next Gen H2 ETF (HDRO) | Hydrogen energy sources, fuel cells, industrial gases |
FuelCell Energy Inc. (FCEL)
Fuel cells essentially perform the reverse operation of electrolyzers to convert hydrogen into electricity to power vehicles or the grid.
As a manufacturer of fuel cell energy platforms for decarbonizing power and producing hydrogen, FuelCell is right in the middle of the green hydrogen trend.
In May, the company announced that South Korean company Gyeonggi Green Energy Co. agreed to purchase 42 1.4-megawatt fuel cell modules from FuelCell Energy to replace existing fuel cell modules at the world’s largest fuel cell power platform. FuelCell Energy also has an agreement with Exxon Mobil Corp. (XOM) to develop carbon capture technology jointly.
If FuelCell can get that carbon capture technology to a commercial state, that would help diversify its business.
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.
When the company recently reported its second-quarter results, Bloom said its Q2 revenue rose 11.5% year over year while its non-GAAP operating loss narrowed from $25.9 million to $3.2 million.
The company has also announced an agreement to power a high-performance data center in Illinois. And Silicon Valley Power recently received municipal approval for an agreement using Bloom fuel cells to power data centers in California.
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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 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.
During the second quarter, Plug Power deployed more than $70 million worth of electrolyzer systems. The company plans to deploy an additional 100 MW of electrolyzers by the end of the year.
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, compared with Plug Power.
In May, Ballard launched the latest generation of a fuel cell engine for heavy-duty vehicles. Ballard plans to initially manufacture the engine at an Oregon facility starting next year, with future high-volume manufacturing at a planned factory in Texas.
During the first quarter, the company grew revenue by 9% and booked $64.5 million in new orders, which boosted its order backlog by 38%.
Global X Hydrogen ETF (HYDR)
There aren’t that many publicly traded pure-play green hydrogen companies, and the ones that exist are relatively new, which may make the diversification offered by green hydrogen exchange-traded funds, or ETFs, more attractive.
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 fund 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.
The fund has a net expense ratio of 0.5%, or $50 per year for every $10,000 invested.
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 revenues 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%.
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6 Best Green Hydrogen Stocks and ETFs to Buy originally appeared on usnews.com
Update 08/09/24: This story was previously published at an earlier date and has been updated with new information.
