27th Apr 2021
The hydrogen fuel market has been attracting a lot of investment attention recently, especially among ESG investors. Catastrophic weather events, a rising awareness of the public health impact of pollution from fossil fuels, increasing power failures from conventional fuels, and growing public support for clean energy in general has led many people to see the investment potential of clean energy and green hydrogen stocks.
Public opinion is now firmly in favor of initiatives to reduce fossil fuel emissions and decrease pollution, as the damage they cause is impossible to ignore. Hurricanes, floods, avalanches, wildfires, heatwaves, and air pollution kill millions each year, as natural disasters caused by climate change become more frequent. In the US alone, 2020 brought 22 weather-related incidents that wreaked over $1 billion in damage, compared with an average of 6 such incidents per year between 2002 and 2010.1
Around the world, governments and non-profit organizations are signaling their willingness to support the rollout of green hydrogen fuel. Dozens of countries signed up to the Paris climate agreement, promising to limit global warming to under 2℃ by 2030; over 100 have pledged to reach net zero carbon emissions by 20502; and many more municipal and local governments have set similar carbon-neutral targets. Analysts widely believe that the only way to meet these commitments is to significantly increase the use of fuel from clean and green sources.
Solar power, biomass energy, and wind turbines all play a role in reducing carbon emissions, but they can’t produce enough consistent, cost-effective, and sufficient energy to fully replace fossil fuels. Hydrogen, however, is energy-dense, abundantly available, and has a long-duration discharge cycle that allows it to store excess energy and distribute later at times of peak demand. As a molecule-based fuel, it can replace fossil fuels in certain highly-polluting industry use cases that aren’t suitable for electrification.
Hydrogen is typically found as a compound, requiring electrolysis to release the hydrogen molecules, which are stored in pressurized containers until they are compressed into a fuel cell to transfer the energy as electricity. Currently, hydrogen fuel production is mostly powered by fossil fuels, but “green hydrogen,” produced using power from renewable sources, is becoming more accessible and affordable as the costs of renewable energy and hydrogen electrolyzers fall. Prices for the latter are 50% lower than they were 5 years ago and are expected to drop by another 40-60% by 2030, while renewable energy capacity may grow ten-fold by 20503. Green hydrogen costs around $3-7.5/kg today, but costs could decrease to around $1-2/kg by 2050.
Global leadership is supporting green hydrogen fuel through both capital investment and policy development, blazing a trail for private investors to turn to hydro stocks. The US has invested $150 million in hydrogen fuel infrastructure and development every year since 2017, and the Biden administration set aside $400 billion for clean energy development over the next 10 years4. Governmental bodies in the EU and Asia are investing more than $2 billion annually in hydrogen fuel production, while China committed over $217 billion of investment in hydrogen-powered transportation until 20235. The European Hydrogen Strategy is offering subsidies for hydrogen-powered Fuel Cell Elective Vehicles (FCEVs) and incentivizing hydrogen fuel R&D6. Leading private investors who manage almost $7 trillion of assets between them recently announced their intention to raise their investment in renewable energy infrastructure by close to 200% over the next 5 years, while lowering their exposure to fossil fuel stocks7.
High levels of support for clean energy in general, and green hydrogen in particular, from both policy-makers and the wider public makes this an excellent time for ESG and traditional investors to invest in hydrogen. Here are 7 of the best hydrogen stocks to consider in 2021.
- Defiance Hydrogen ETF (HDRO)
HDRO, issued by Defiance ETFs, is an ETF rather than a single hydrogen stock. ETF stands for an exchange-traded fund, and it effectively allows you to invest in a number of hydrogen companies stock instead of a single company. ETFs are similar to mutual funds, but ETFs can be traded at any time like a stock itself.
HDRO’s holdings are all companies involved in some aspect of green hydrogen, including Plug Power (PLUG), FuelCell (FUEL), and Bloom Energy (BE). HDRO tracks the rules-based BlueStar Global Hydrogen & Next Gen Fuel Cell Index, which tracks the performance of equities and companies that derive 50% or more of their revenue from hydrogen-based energy sources, fuel cell technologies, and industrial gases. It’s the first US-issued green hydrogen ETF, with an expense ratio of 0.30%.
A hydrogen ETF like HDRO enables investors to spread their investment across multiple promising green hydro stocks, thereby helping mitigate the risk of over-exposure in a new market. HDRO’s share price is currently $27.63, up 1.20%.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s share when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance narrative quoted. Performance current to the most recent month-end can be obtained by calling (833.333.9383). Short term performance, in particular, is not a good indicator of the fund’s future performance, and an investment should not be made based solely on returns. Market price is the price at which shares in the ETF can be bought or sold on the exchanges during trading hours, while the Net Asset Value (NAV) represents the value of each share’s portion of the funds underlying assets and cash at the end of the trading day. Click here for standardized performance
- Bloom Energy (BE)
Bloom Energy is one of the leading green hydrogen stocks, and features on many “best stocks” lists for 2021. Bloom Energy was originally a clean energy provider, but in 2019 it moved into the hydrogen fuel space. Its stock price rose 350% since it began producing hydrogen electrolyzers, and profits and revenue are all pointing up.
Bloom Energy focuses on developing hydrogen fuel infrastructure, such as fuel cells, electrolyzers, and microgrids, benefiting from the growing demand for reliable, clean, renewable energy. Bloom recently announced a $1 billion sale of fuel cells with SK Engineering & Construction in South Korea, and has plans to establish a 100% hydrogen-based system in that country by 2022. Bloom Energy’s stock price is currently $26.20, down 0.76%,
- Ballard Power Systems (BLDP)
Ballard Power Systems produces hydrogen fuel cells for vehicle engines, with special focus on heavy-motive vehicles such as buses, trains, and heavy trucks. 2020 saw Ballard’s stock triple in price, thanks to important partnership announcements, and a strong sales performance which has continued into 2021.
Thousands of Ballard-powered trucks, buses, indoor forklifts, and other vehicles are operational worldwide, and clients have made it clear that they want to expand their fuel cell electric vehicles (FCEV) fleets. Ballard is also expanding in a slightly new direction with a new collaboration with Eltek Nordic, to deliver a fuel cell backup power system for Eltek’s telecommunication networks. Ballard’s stock price is currently $24.77, up 0.62%,
- Plug Power (PLUG)
Plug Power is one of the leading developers and vendors of hydrogen fuel cell technology, and among the first to produce a commercially-viable hydrogen power solution. It sells hydrogen fuel cell engines and generators, and is also building hydrogen fuel infrastructure.
Although the company is still not turning a profit, it’s a favorite hydrogen companies stock among many investors. Stock prices were up 950% at the end of 2020, it delivered a cumulative return of 1560% that year, and 2021 began with JP Morgan’s head analyst Paul Coster upgrading the company’s rating from Neutral to Overweight.
Plug Power shows a lot of promise for 2021, with a recent MOU with French carmakers Renault for FCEVs, plans to build 5 regional green hydrogen facilities across the US, and approval for a state-of-the-art green hydrogen plant in New York. Plug Power’s stock price is currently $33.44, down 1.82%.
- FuelCell Energy (FUEL)
FuelCell Energy are global leaders in the development of fuel cell technology, building SureSource™ fuel cell platforms that deliver reliable, renewable power to clients that include hospitals, municipalities, utilities companies, large-scale microgrids, and industrial applications. FuelCell power plants have been built on 3 continents, and the company recently passed the milestone of the production and delivery of over 10 million megawatt hours (MWH).
Although FuelCell’s stock prices were fairly static for most of 2020, the Biden administration’s stimulus bill, with specific investment in clean energy, drove stock prices to spike 420% by the end of the year and continue rising into 2021. FuelCell’s stock price is currently $13.56, down 5.76%,
- Cummins Inc (CMI)
Cummins is a long-established fuel company which has stakes in a number of different energy fields, including diesel, natural gas, electric, and hybrid powertrains. It purchased Hydrogenics, a leader in hydrogen fuel cell production, in 2019, and has seen a significant rise of around 55% in stock price since then.
Cummins outperformed every analyst projection for 2020, beating forecasts by 129% in the first 3 quarters of that year. Although it’s not a pure hydrogen stock, the company’s sizeable holding and focus on hydrogen fuel makes it an appealing investment option for investors in the hydrogen market. Cummins’ stock price is currently $261.52, up 1.47%.
- ITM Power PLC (ITM)
ITM produces hydrogen energy solutions and was the first UK-based hydrogen fuel cell company to go public. It builds and runs hydrogen refueling stations and hydrogen electrolyzers, offering a turkey hydrogen power solution for utilities, enterprise, and municipalities. ITM has 7 refueling stations in the UK and plans to expand to 100 stations across the country, and recently signed a contract with Linde for the world’s tallest hydrogen electrolyzer.
ITM’s stock price suffered somewhat in early 2020 due to COVID-19, but since then it bounced back to rise over 550%. Recent partnerships and sales agreements make ITM one of the best hydrogen stocks for investment for 2021, with shares projected to close to double in price over the next 12 months. ITM’s current share price is £4.74, up 2.24%.
Stock prices and figures as of April 5, 2021.
Click here for the HDRO Fund prospectus.
1 “Record number of billion-dollar disasters struck U.S. in 2020” NOAA, January 8, 2021 https://www.noaa.gov/stories/record-number-of-billion-dollar-disasters-struck-us-in-2020
2 Climate Ambition Alliance: Net Zero 2050, Global Climate Action. https://climateaction.unfccc.int/views/cooperative-initiative-details.html?id=94
3 “Thematic Investing: The Special 1 – Hydrogen primer,” Bank of America Securities, Global Research, 23 September 2020, p.5.
4 “9 Key Elements Of Joe Biden’s Plan Fof A Clean Energy Revolution” https://joebiden.com/9-key-elements-of-joe-bidens-plan-for-a-clean-energy-revolution/
5 “Roadmap to a US hydrogen Economy,” Fuel Cell & Hydrogen Energy Association, 2020, p.4. https://static1.squarespace.com/static/53ab1feee4b0bef0179a1563/t/5e7ca9d6c8fb3629d399fe0c/1585228263363/Road+Map+to+a+US+Hydrogen+Economy+Full+Report.pdf
6 “Hydrogen Roadmap Europe,” Fuel Cells and Hydrogen 2 Joint Undertaking 2019, https://www.fch.europa.eu/sites/default/files/Hydrogen%20Roadmap%20Europe_Report.pdf
7 “Investors plan major move into renewable energy infrastructure” November 23, 2020, The Guardian https://www.theguardian.com/environment/2020/nov/23/investors-plan-major-move-into-renewable-energy-infrastructure