Hydrogen stocks
Are these the best hydrogen stocks to watch in 2022?
Published
September 4, 2024
In eight years time, you won’t be able to buy a new petrol or diesel car in the UK. Legislation will naturally give electric vehicle (EV) sales a helping hand. They do seem the likely answer to humming and hawing the status quo could possibly be outlawed.
Global EV sales more than doubled last year, up to 6.6m. EVs now make up 9% of the world’s auto market. It’s no laughable amount, especially compared to the mere 130,000 EVs sold 10 years ago.
But we’ve got a long way to go to hit those net-zero ambitions everyone’s talking about.
Especially because, at the same time as EV sales going up, so too is the demand for SUVs.
SUVs also had a record-breaking 2021, revving up annual CO2 emissions by 120m tonnes.
To compensate for that pollution, we’d need to switch 4.5bn incandescent lamps to LED bulbs, or plant 1.9bn trees.
One reason EVs and SUVs aren’t one and the same right now is the batteries that would have to power them. Such large, long-range batteries would have to be driven tens of thousands of miles before compensating for the emissions required to make the batteries in the first place.
Enter: hydrogen-fuelled vehicles. Bigger, longer-range vehicles are where hydrogen cars could thrive.
Hydrogen fuel is a clean alternative to oil or gas. The technology behind it can offer a longer driving range without refuelling as well. Not everything can be electrified. Some industrial, massive transport systems will continue to run on gas. But that gas can be made from hydrogen, making it both clean and renewable.
Refuelling takes about five minutes, compared to the typical charging time of eight hours for an EV from empty to full. A hydrogen tank, on the other hand, can take minutes to go from empty to full.
The materials needed to build these cars are much more readily available too. Hydrogen’s all around you right now. Whereas EV makers source 80% of their parts from China. Massive reliance on a single country can lead to bottlenecks at the best of times. Lockdowns, supply chain hiccups and mineral shortages (especially lithium, cobalt and nickel) are just a few of the hurdles they have faced.
Green hydrogen is usually made by splitting water into hydrogen and oxygen. For it to be carbon neutral, renewable electricity is used in the process. That hydrogen is then used in a hydrogen fuel cell, which is essentially the machine that converts the energy stored by hydrogen fuel into electricity. The fuel cell is similar to the battery, and the hydrogen’s what powers it up.
It all sounds pretty great, right?
So why aren’t we all travelling around in hydrogen-powered planes, trains and automobiles?
For now, making hydrogen from low-carbon energy is pricey. And the most likely way to bring that cost down is by turning production up.
That’s why most green hydrogen stocks are unprofitable. A lot more infrastructure needs to be built before creation costs can actually be flattened across the board.
The same goes for hydrogen refuelling stations. Once the price required to make them can be split across hundreds of vehicles, they become a better alternative.
In the meantime, long-haul vehicles like buses have been the usual beneficiaries of developments in hydrogen tech as opposed to personal-use vehicles.
That’s been changing over the years though. And the shift’s likely to get an extra skip in its step with more countries adopting hydrogen plans.
The EU recently outlined its ‘hydrogen accelerator’ vision, which includes producing 10m tonnes of hydrogen and importing another 10m tonnes by 2030.
All that hydrogen has to be financed, produced, sold and used somehow.
That’s where many of the hydrogen fuel cell stocks listed here come into play. They’re involved in the production of, investment in, or use of hydrogen fuel cells.
But before we dive in, remember that if you’re considering investing in hydrogen, when you invest, your capital is at risk.
This means the value of your investments can fall as well as rise, so you might get back less than you originally invested.
Everyone has their own goals and unique financial circumstances. These, along with your tolerance for investment risk and time horizon, should inform the mix of assets you choose and whether or not renewable energy investments belong in your portfolio.
Our resource hub for investing in the stock market might be able to help make that blend a bit clearer for you and our guide on how to invest in stocks is a great start for a first-timer's investment decisions.
And if you are still unsure of how to pick investments, speak to a qualified financial advisor to develop your own investment strategy.
These are not necessarily the top hydrogen stocks or the best hydrogen stocks. They’re just a collection of some of the most popular hydrogen investments on Freetrade. If you’re considering investing in these companies, the level of risk varies.
Some are massive blue-chip stocks just dabbling in hydrogen investment. Others are new to the market, small-cap companies. While investing for the long run is always your best bet at achieving growth and a return on your investment, if you're investing in hydrogen company stocks, you are likely to require an even longer-term mindset.
That’s because many are in their infancy, just beginning to get their hydrogen fuel cell technology off the ground. It’ll be years until they’re developing and selling that technology. Meanwhile, some of the oil behemoths like Shell are already working away on hydrogen fuel.
Big Oil will probably be a crucial component in transforming hydrogen into a viable solution for getting highly polluting vehicles off the road and gas-guzzling planes out of the sky.
That doesn’t mean you have to invest in the ones polluting now though, with hopes they’ll transform the industry in the future. Many of the investments listed here are entirely focused on clean energy. While that might mean they’ve yet to achieve the scale needed for profitability, it might also be the type of long-term, sustainable investment you’re looking for.
This Canadian hydrogen fuel cell company makes fuel cells for vehicles. But not just any ol’ cars, we’re talking about trucks, buses, trains and ships.
Ballard’s fuel cell products are for heavy-duty transport. Its technology combines hydrogen fuel with oxygen to produce electricity. Not only does it create the energy, Ballard invests in hydrogen funds too, committing £25m to HyCap and €30m to H2, to date.
Ballard’s Q1 revenues grew 19% to $21m, mostly driven by European orders for its fuel cells. At the same time, Ballard fell into a deeper loss, tumbling 16% to $40.5m in the red. The firm blamed costlier overhead, higher wages and soaring freight costs.
In the short term, Ballard could struggle to recoup those losses. But the firm recently earned approval to use its fuel cell technology across an array of applications in the marine industry, which could mean its market expands.
This firm uses a green hydrogen production process to make nuclear power. Bloom Energy earned $201m in its first quarter revenue while its net loss widened 213.6% to $78.4m.
It’s trying to crack a tough-to-disrupt industry. There’s a reason OPEC’s dubbed an oil cartel, after all.
It’s not to say Bloom will never be profitable. But for now, it isn’t. If you’re investing your hard-earned money in a firm yet to prove how it plans to reach profitability, you’re taking on a bigger risk. When you’re investing, you’d hope that bigger risk is ultimately rewarded with a bigger return.
That won’t always be the case. So be sure to look for the hydrogen firms that have clear plans on how they’ll expand their technology at a cash-positive scale.
Bloom’s current nuclear reactor partnerships are a small start. It’ll likely need to achieve broad commercial use to achieve profitable scale with its hydrogen technology.
Plus Power is an end-to-end green hydrogen provider. Basically, it produces carbon-free hydrogen, while also selling its electrolysers (which separate the hydrogen from oxygen in water), and offering the transport solutions needed to mobilise the hydrogen safely.
Its main revenue source is the sale of fuel cell systems and their related infrastructure. In its first quarter, that segment’s revenue was $108.8m, compared to its total net revenue of $140.8m.
But the development of the infrastructure required to build out those systems and to transport its hydrogen is costly. Plug’s operating loss is $139m, over 3x that of last year. And Plug Power’s stock has fallen in response.
In the meantime, Plug Power is expanding existing operations big time. The firm’s building a 100mw plant in Belgium, set to produce up to 12,500 tonnes of hydrogen liquid and gas every year. Theoretically, that’s enough to power 110,000 homes.
Production won’t be online until 2025, so Plug Power is currently spending a lot to get all systems go. So if you’re looking to invest in Plug stock, be aware it might continue to take some hits until it proves it can make hydrogen profitable.
This UK industrial group is also ramping up its hydrogen production investment. It plans to build a gigafactory (à-la-Elon) to build hydrogen fuel cell components.
It’s a shift for Johnson Matthey, given it jumped ship on plans to develop EV batteries last year. So it’s still in the business of green vehicles, but it’s looking at different power sources.
The firm’s not only interested in fuel cell tech for vehicles. It wants to broaden the reach and capability of the technology to ultimately power forklifts and trains.
The initial plan for the gigafactory is to power Johnson Matthey’s own fleet of heavy goods vehicles (HGVs). It’ll then branch out to power HGVs used by the Port of Shoreham on behalf of other firms.
So it’ll be a while until the firm is directly making money from the gigafactory. Currently, it’s an ancillary revenue stream. Hydrogen fuel is one of its “new markets”, which saw sales tumble by £25m to £37m for Q1 this year.
Problems in scaling up manufacturing meant it had a tough time amping up sales. The firm says it needs “increased investment” to support that growth.
Hydrogen isn’t Johnson Matthey’s bread and butter though. To see the declining performance in its hydrogen business units isn’t the be-all-and-end-all.
Its platinum group metals (PGM) division is the real revenue driver, with sales up by 13% to £587m in that same quarter. PGM helps keep the firm profitable, with Q1 after-tax profit shooting up by 25% to £407m.
HydrogenOne was the first clean-hydrogen investment fund to become a publicly traded stock.
Though, the London-listed penny stock has seen its share price fall since IPO’ing last July.
Investment trusts can be a good way to let experts in the field do the heavy lifting for you. That’s particularly useful in a burgeoning industry like hydrogen fuel.
For starters, they do the research, analysis and stock-picking on your behalf. And they also allow you to invest in private companies which you otherwise probably couldn’t access as a retail investor.
In its latest quarter, the trust invested £21m into three clean hydrogen energy firms. It also invested in UK passenger flight manufacturer, Cranfield Aerospace, which aims to build the first hydrogen-powered plane in the next two years.
As of its Q1 earnings, HydrogenOne’s shares were trading at a 12% premium to its net asset value. Looking ahead, it’s targeting annual net asset value growth of 10% to 15%. While its current position certainly doesn’t provide a massive amount of optimism it’ll meet those aspirations, if it does, its share price could get a bump too.
Past performance is not a reliable indicator of future returns.
Source: FE, as at 25 July 2022. Basis: bid-bid in local currency terms with income reinvested.
This firm also holds a “first UK hydrogen” claim to fame. Atome Energy was the first publicly traded UK green hydrogen company. Similarly to HydrogenOne, it’s a penny stock. But unlike HydrogenOne which is listed on the London Stock Exchange’s main market, Atome Energy is an AIM-listed firm.
Having only IPO’d in December 2021, Atome Energy’s share price has been on a fairly volatile ride ever since.
Past performance is not a reliable indicator of future returns.
Source: FE, as at 25 July 2022. Basis: bid-bid in local currency terms with income reinvested.
That’s often the case with AIM-listed companies because they are less liquid than main-market listed companies. That essentially means there are fewer people in the market for the stock, so it’s traded less often. And with fewer buyers and sellers, it can be harder to get the price you’re looking for on your investment.
It’s not yet generating any revenue, but Atome Energy hopes 2023 will be its first money-making year in the books. That’s when it plans to be producing and selling green hydrogen and ammonia.
While it’s still another year off, Atome Energy claims it’s ahead of schedule. For now, the firm’s $2.2m in the red, after forking out $0.7m in listing-related expenses and $1.2m for transferring ownership from its former owner, President Energy. Basically, that’s the price it paid for emerging as a separate, clean energy entity from the UK-listed oil and gas firm.
The aerospace firm recently announced it’s giving hydrogen-powered planes a go. Or at least, it’s trialling the technology out. Rolls-Royce is testing whether hydrogen fuel can power its small to mid-size aircraft, which it hopes to bring to market in the mid-2030s.
The firm’s very much at the beginning stages of investing in hydrogen fuel-powered technology. So it’s an example of a way investors can invest in the future hydrogen energy without investing in a pureplay hydrogen stock.
Rolls-Royce could provide a buffer for investors just looking to dabble in hydrogen for now. It might be a better alternative for a more risk-averse investor than one that’s willing to invest in firms without any revenue just yet.
But as always, there are risks involved in any stock. And Rolls-Royce is definitely no exception, especially given how hard it was hit by massively declining demand for its planes and parts during the pandemic.
The American manufacturer of flying things from planes to rockets is also beginning its foray into hydrogen. Earlier this year, Boeing revealed it had already launched five hydrogen demonstration flight test programs.
The firm’s not profiting off hydrogen fuel cell tech yet, but Boeing is a member of the aerospace industry’s commitment to achieving net zero emissions by 2050.
The key to that will be developing new environmentally efficient ways to fuel transit. Hydrogen-powered aircraft would be a non-CO2-emitting way of getting lift-off with just that.
The firm’s already successfully produced cryotanks (storage for liquid hydrogen and oxygen) which it thinks will be integral to the green energy transition. Cryotanks will be vital for storing the massive amounts of hydrogen fuel needed to power any hydrogen-powered planes down the line.
Back in 2014, the Japanese automaker built the world’s first entirely hydrogen-powered car, the Mirai. It’s powered by the reaction between hydrogen fuel and oxygen in a fuel cell stack (essentially, lots of fuel cells stacked together to build higher voltage and power).
With a starting cost of £49,995, Toyota’s Mirai has a much loftier price tag than its non-hydrogen cars. And for now, there are only 15 public hydrogen fuel stations across the UK compared to the nation’s 8,385 petrol stations in 2019.
So it’s not exactly the most convenient way to get around. This may be why it sold just 5,918 last year. Hydrogen cars are some pretty small fish in a very big pond, given Toyota sold a total of 9.6m vehicles in 2021.
Still, cars aren’t actually Toyota’s biggest moneymaker, let alone hydrogen-powered ones. Materials handling equipment, like forklifts and pallet trucks, made up over 66% of Toyota’s 2021 revenue. Similarly to Boeing or Rolls-Royce, investing in Toyota would be a fairly indirect way of taking part in what might be the future of green vehicle technology.
ITM Power designs and manufactures electrolysers, which make green hydrogen power using renewable electricity and tap water.
Electrolysers convert renewable energy into a clean fuel source. They supply the electricity needed for the chemical reaction in the fuel cell to occur. So fuel cells are the objects that use the electricity generated through electrolysis.
ITM Power’s sales revenue grew by 30% last year to £4.3m, mostly from selling electrolysers, conducting consulting services and performing maintenance support on its systems.
But operating costs, particularly in production and engineering, ate away at any chance of profitability. ITM’s 2021 loss was £27.8m, as it still struggles to scale up its hydrogen fuel technology.
It’ll likely be a while until the firm turns profitable. And as another one of the hydrogen penny stocks on the list, it’s important to remember that the volatility in this firm’s share price will render its unprofitability an even riskier investment.
If you decide you’re ready to invest in hydrogen stocks, you can find any of the hydrogen stocks listed on the Freetrade app.
Some of the smaller, newer to market listings here are on the London Stock Exchange’s AIM market. Some of the larger firms, which are mostly just starting out with hydrogen, for now, are listed on both the US and UK’s largest stock exchanges.
Once you find the hydrogen fuel cell stocks you’re after, you’re ready to figure out how much you want to buy. For some of the larger, costlier stocks, you may prefer to buy a fractional share as opposed to the whole thing.
You can think of these as just a slice of the full pie. They let you buy a bite-sized piece of the entire stock, which not only helps you access stocks that might seem out of reach, but it can also decrease your risk if you want hydrogen to be a smaller part of your portfolio.
Remember that new technology can take a while to turn profitable or to earn you a return on your investment. So you should be prepared to tuck that money away for the long-term (we say at least five years or more) if you’re going to make an investment.
Hydrogen has huge potential to decarbonise a lot of industries. While nobody’s certain of how big of a part it’ll play in the transition from fossil fuels to investing in renewable energy, the International Energy Agency says it’s the only way of reaching net-zero emissions
17 governments have already revealed massive hydrogen power strategies, with over 20 more now engaging in planning too. So these hydrogen power stocks could be a lucrative opportunity, but it’ll be a while until many are profitable, and some will likely never even get there.
That’s why a lot of the smaller firms could go up in smoke, while the established names could use their existing operations to bolster this type of riskier investment. It’s all about separating the good from the bad.
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