Hydrogen energy investment outlook for 2023

Green hydrogen stocks attract interest, but investors aren’t always sure if it’s a good place to put their money. However, the global green hydrogen market is estimated to be worth $223 million this year and to grow at a CAGR of 11.1% to $419.3 million by 20281, making this a good time to reconsider investing in hydrogen stocks or a hydrogen ETF.

2022 saw hydrogen take big strides 

For hydrogen fuel cell stocks investors, 2022 was encouraging. 680 large-scale projects were announced, reflecting $240 billion worth of investment, a jump of 50% since November 2021, and 10% of those have reached final investment decision, and are under construction, or already operational2. Stationery fuel cell capacity is estimated to have increased from under 200 Mega Watts in 2015 to over 500 MW in 20223.

Global stock of fuel cell electric vehicles (FCEVs) grew by 15% from the end of 2021 to June 2022, and key infrastructure increased, with many countries in Europe growing investment in hydrogen hubs. The global number of hydrogen refueling stations rose from 700 at the end of 2021 to 975 by June 20224.

We also saw initial steps towards a global hydrogen market when the first shipment of liquified hydrogen traveled from Australia to Japan in February 20225. The Hydrogen Council predicted a potential annual trade market of 140 million metric tons (Mt) by 2030, and Germany launched a tender to import green ammonia, beginning in 20246.

In good news for hydrogen power stocks, 2022 saw demand rise too. The EU set a target of 10 million metric tonnes per year of local renewable hydrogen production, and the equivalent again in imports, by 20307. This inevitably requires more investment, with one report concluding that spending on hydrogen projects needs to triple to $700 billion by 20308

Green hydrogen is becoming more competitive

One unexpected fallout from the invasion of Ukraine is that high energy prices have made green hydrogen production, which relies on renewable energy, more competitive in comparison with gray hydrogen, which uses fossil fuels9. At the same time, electrolyzer costs are falling. The International Energy Agency predicts that costs for electrolyzers could drop by 70% by 2030, if manufacturing capacities scale successfully. 

Together with lower prices for renewable energy, green hydrogen prices could drop by 60-64% by 2025, and by up to 72% by 2030. “Our analysis suggests that with today’s fossil energy prices, renewable hydrogen could already compete with hydrogen from fossil fuels in many regions,” observed the IEA10.

As the price drops, hydrogen production is rising, making it increasingly viable as an alternative fuel. The IEA estimates that global production of low-emission hydrogen from electrolysis could reach 240 GW by 203011

2022 renewed drivers for renewable energy

2022 set trends into motion which are likely to push up prices for hydrogen stocks. Deloitte assesses new drivers for renewable energy as “some of the strongest the industry has seen.12” As well as falling costs for green hydrogen, mentioned above, the invasion of Ukraine and global policy-making are key players.

Hydrogen-friendly policies are adding to the momentum

2022 saw the US adopt the Inflation Reduction Act (IRA), acclaimed as “the single largest investment in climate and energy in American history13. Under IRA, green hydrogen is now eligible for up to $3 per kg of tax credits, with some experts predicting that this alone will halve the cost of green hydrogen and make it a competitive energy source14. Projects to develop green hydrogen will enjoy tax breaks until 2032, as will domestic production of components for solar and wind energy, which are used in many green hydrogen projects. There are additional investment tax credits of up to 30% for qualified projects for domestic manufacturing facilities for renewable energy production, plus even more for those using certain components produced in the US15

Taken together, the IRA promises the creation of a serious renewable energy ecosystem in the US. Interest is already growing in hydrogen hubs, with private investment in renewables hitting a record high of $10 billion in the past year16. Deloitte declared that “the incentives will likely bring significant new manufacturing of clean energy components to the United States.17

Nor is the impact of IRA limited to the US. David Brown, director of Energy Transition at energy intelligence group Wood Mackenzie, forecasts that “other countries will need to introduce incentives that are closer in value to what is now available in the U.S. to remain competitive,” which he predicts will “unlock new business opportunities for the entire globe.18” 

In the UK, the British Energy Security Strategy aims to double the country’s hydrogen production from 5GW to 10GW by 2030, with at least half to be achieved through green hydrogen19, and it recently announced plans to attract another $4.64 billion of investment for its hydrogen economy. China revealed a five-year plan to make hydrogen one of the country’s six industries of the future20. The UAE’s investment in low-carbon energy production is expected to prod other oil producers in the Middle East into a rush of green energy adoption. “The UAE and the Middle East more widely could have a similar eureka moment to the Inflation Reduction Act in the U.S.,” noted Kavita Jadhav, Wood Mackenzie’s Research Director, Corporate Research21.

Green hydrogen found the silver lining in the energy crisis

The other driver for renewable energy is the global energy crisis sparked by the Russian invasion of Ukraine. Many governments, particularly in Europe, are looking at low-emission hydrogen as a way to reduce dependency on fossil fuels22. Caroline Justet, VP of Europe for supply chain company Strohm, observes that “with the global energy sector in flux, the versatility of hydrogen is attracting stronger interest from a diverse group of governments and companies.23

The need to transition the global energy mix also requires more energy storage production. This could offer a boost to lithium stocks, but with Russia accounting for almost 20% of global lithium supply, companies are facing a shortage of vital metals. Hydrogen fuel cells have proven a viable alternative for green energy storage24.

Challenges remain

Green hydrogen stocks still face obstacles. Analysts at investment fund ING pointed out that “the energy crisis has worsened the business case for hydrogen, so the economics of this transition are far from easy,25” while hydrogen producers relying on electricity from the grid will see production costs soar26.

In Europe, hydrogen investment paused after a vote in the European Parliament effectively scrapped a key policy framework setting out rules on renewable hydrogen, leading to uncertainty around projects27. In general, a lack of clear communication between governments and investors could discourage developers from pushing the boundaries for alternative energy28

Additionally, supply chain disruptions and rising energy costs have pushed up the price for green hydrogen projects in Europe, and high interest rates could make it hard for some operators to secure funds29. Finally, green hydrogen stocks need to allocate resources to the growing threat of cyber attacks, which are expected to rise in 202330

This could be a good time to invest in hydrogen stocks

Despite the challenges, this could be a good time to invest in hydrogen stocks. US hydrogen stocks have risen by 8% year-to-date, outperforming the S&P 50031. Ian Cooper, analyst with independent financial research firm InvestorPlace, says “Hydrogen stocks could be some of the most explosive investments of 2023.” Goldman Sachs predicts a $12 million market value for hydrogen by 2030, and analysts at both Bank of America and Morgan Stanley forecast that green hydrogen could be worth over $11 trillion by 205032

If you’re considering which hydrogen power stocks to buy, analysts are particularly fond of Bloom Energy (NYSE: BE), Ballard (NASDAQ: BLDP), FuelCell Energy (NASDAQ: FCEL), and Plug Power (NASDAQ: PLUG). Bloom saw revenue rise by 41% in Q3 2022, beating estimates, and predicts Q4 revenue of up to $1.15 billion33. FuelCell’s stock is down by roughly 50%34, but in Q3 2022, it reported its strongest revenue growth in five years with revenue of $43.1 million, and as a US company it stands to benefit from the IRA, so low stock prices could mean it’s time to buy35. Plug Power is making progress on its US hydrogen plants and signing new deals with companies like Walmart, Nike, and FedEx, which encourages analysts enough to overlook recent losses36. Finally, Ballard Power recently announced a purchase order for 25 FCEV engines from Solaris Bus & Coach in Poland, a contract for fuel cell engines for the US’ first hydrogen train, and an order from Siemens Mobility for fuel cell modules.37 

However, choosing the best hydrogen stocks is no easy task, which is why many investors prefer a hydrogen or fuel cell ETF like HDRO from Defiance. As a hydrogen stock ETF, HDRO has holdings in some of the companies involved in the latest breakthroughs and ongoing development of hydrogen energy. HDRO seeks to track the BlueStar Hydrogen & NextGen Fuel Cell Index.  This Index is predominantly comprised of “pure-play” companies, i.e., those that generate at least 50% of their revenues from products that facilitate hydrogen-based energy production, including fuel cells capable of using hydrogen as a fuel source (collectively, “H2 Companies”).

A hydro ETF like HDRO allows you to spread your investment across a number of hydrogen stocks and to potentially benefit from growth in this disruptive sector while mitigating exposure to risk that comes from investing in just one or two stocks. It’s important to remember that diversification does not assure profit, nor does it protect against a loss.

As of this writing the following stocks mentioned are current holdings of Defiance’s ETF, HDRO:

PLUG POWER INC (NASDAQ: PLUG), BLOOM ENERGY CORP (NYSE: BE), BALLARD POWER SYSTEMS INC (NASDAQ: BLDP), FUELCELL ENERGY INC (NASDAQ: FCEL)

For current performance and holdings, please visit defianceetfs.com/HDRO


1 “Green Hydrogen Market 2023 Size, Share, Demand with Top Key Players in Report and Business Forecast till 2028” November 15, 2022 https://www.marketwatch.com/press-release/green-hydrogen-market-2023-size-share-demand-with-top-key-players-in-report-and-business-forecast-till-2028-2022-11-15

2 “New hydrogen projects achieve record numbers globally with even greater urgency for final investment decisions to attain net zero” September 20, 2022 https://hydrogencouncil.com/en/new-hydrogen-projects-achieve-record-numbers-globally-with-even-greater-urgency-for-final-investment-decisions-to-attain-net-zero/

3 “Global Hydrogen Review 2022” https://iea.blob.core.windows.net/assets/c5bc75b1-9e4d-460d-9056-6e8e626a11c4/GlobalHydrogenReview2022.pdf 

4 “Global Hydrogen Review 2022” https://iea.blob.core.windows.net/assets/c5bc75b1-9e4d-460d-9056-6e8e626a11c4/GlobalHydrogenReview2022.pdf

5 “Global Hydrogen Review 2022” https://iea.blob.core.windows.net/assets/c5bc75b1-9e4d-460d-9056-6e8e626a11c4/GlobalHydrogenReview2022.pdf

6 “Commodities 2023: Europe struggles to maintain hydrogen momentum” December 31, 2022 https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/electric-power/122322-europe-struggles-to-maintain-hydrogen-momentum-into-2023

7 “Commodities 2023: Europe struggles to maintain hydrogen momentum” December 31, 2022 https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/electric-power/122322-europe-struggles-to-maintain-hydrogen-momentum-into-2023

8 “New hydrogen projects achieve record numbers globally with even greater urgency for final investment decisions to attain net zero” September 20, 2022 https://hydrogencouncil.com/en/new-hydrogen-projects-achieve-record-numbers-globally-with-even-greater-urgency-for-final-investment-decisions-to-attain-net-zero/ 

9 “Outlook 2023: Can hydrogen pass the energy trilemma test?” December 14, 2022 https://pemedianetwork.com/hydrogen-economist/articles/strategies-trends/2022/outlook-2023-can-hydrogen-pass-the-energy-trilemma-test/

10 “Global Hydrogen Review 2022” https://iea.blob.core.windows.net/assets/c5bc75b1-9e4d-460d-9056-6e8e626a11c4/GlobalHydrogenReview2022.pdf

11 “Global Hydrogen Review 2022” https://iea.blob.core.windows.net/assets/c5bc75b1-9e4d-460d-9056-6e8e626a11c4/GlobalHydrogenReview2022.pdf

12 “2023 renewable energy industry outlook”  https://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-eri-renewable-energy-outlook-2023.pdf

13 “Clean Energy Outlook 2023” January 2, 2023 https://www.tomorrowsworldtoday.com/2023/01/02/clean-energy-outlook-2023/

14 “Clean Energy Outlook 2023” January 2, 2023 https://www.tomorrowsworldtoday.com/2023/01/02/clean-energy-outlook-2023/

15 “2023 renewable energy industry outlook”  https://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-eri-renewable-energy-outlook-2023.pdf

16  “2023 renewable energy industry outlook”  https://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-eri-renewable-energy-outlook-2023.pdf 

17 “2023 renewable energy industry outlook”  https://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-eri-renewable-energy-outlook-2023.pdf 

18 “Energy outlook: Oil making a comeback in 2023, says WoodMac” January 3, 2023 https://www.offshore-energy.biz/energy-outlook-oil-making-a-comeback-in-2023-says-woodmac/

19 “The UK Hydrogen Economy: Policy Announcements Support a 10GW Ambition” June 24, 2022 https://www.fticonsulting.com/insights/articles/uk-hydrogen-economy-policy-announcements-support-10gw-ambition

20 “Outlook 2023: Predicting tomorrow’s decarbonisation agenda” December 27, 2022 https://pemedianetwork.com/hydrogen-economist/articles/green-hydrogen/2022/outlook-2023-predicting-tomorrow-s-decarbonisation-agenda/ 

21 “Energy outlook: Oil making a comeback in 2023, says WoodMac” January 3, 2023 https://www.offshore-energy.biz/energy-outlook-oil-making-a-comeback-in-2023-says-woodmac/ 

22 “Global Hydrogen Review 2022” https://iea.blob.core.windows.net/assets/c5bc75b1-9e4d-460d-9056-6e8e626a11c4/GlobalHydrogenReview2022.pdf 

23 “Outlook 2023: Predicting tomorrow’s decarbonisation agenda” December 27, 2022 https://pemedianetwork.com/hydrogen-economist/articles/green-hydrogen/2022/outlook-2023-predicting-tomorrow-s-decarbonisation-agenda/ 

24 “Energy outlook 2023: The growth in renewables, batteries, CCS and hydrogen infrastructure” December 20, 2022 https://think.ing.com/articles/new-energy-technologies-growth-in-renewables-batteries-ccs-and-hydrogen-infrastructure 

25 “Energy outlook 2023: The growth in renewables, batteries, CCS and hydrogen infrastructure” December 20, 2022  https://think.ing.com/articles/new-energy-technologies-growth-in-renewables-batteries-ccs-and-hydrogen-infrastructure 

26  “Outlook 2023: Can hydrogen pass the energy trilemma test?” December 14, 2022 https://pemedianetwork.com/hydrogen-economist/articles/strategies-trends/2022/outlook-2023-can-hydrogen-pass-the-energy-trilemma-test/ 

27 “Commodities 2023: Europe struggles to maintain hydrogen momentum” December 31, 2022 https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/electric-power/122322-europe-struggles-to-maintain-hydrogen-momentum-into-2023

28 “Outlook 2023: Predicting tomorrow’s decarbonisation agenda” December 27, 2022 https://pemedianetwork.com/hydrogen-economist/articles/green-hydrogen/2022/outlook-2023-predicting-tomorrow-s-decarbonisation-agenda/ 

29 “Commodities 2023: Europe struggles to maintain hydrogen momentum” December 31, 2022 https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/electric-power/122322-europe-struggles-to-maintain-hydrogen-momentum-into-2023 

30  “2023 renewable energy industry outlook”  https://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-eri-renewable-energy-outlook-2023.pdf 

31 “What Does 2023 Hold For The Hydrogen Theme?” December 28, 2022 https://www.forbes.com/sites/greatspeculations/2022/12/28/what-does-2023-hold-for-the-hydrogen-theme/?sh=4fb5241233ea 

32 “7 Hot Hydrogen Stocks With Room to Run in 2023” November 18, 2022 https://www.nasdaq.com/articles/7-hot-hydrogen-stocks-with-room-to-run-in-2023

33 “7 Hot Hydrogen Stocks With Room to Run in 2023” November 18, 2022 https://www.nasdaq.com/articles/7-hot-hydrogen-stocks-with-room-to-run-in-2023 

34 “What Does 2023 Hold For The Hydrogen Theme?” December 28, 2022 https://www.forbes.com/sites/greatspeculations/2022/12/28/what-does-2023-hold-for-the-hydrogen-theme/?sh=4fb5241233ea 

35 “7 Hot Hydrogen Stocks With Room to Run in 2023” November 18, 2022 https://www.nasdaq.com/articles/7-hot-hydrogen-stocks-with-room-to-run-in-2023 

36 “7 Hot Hydrogen Stocks With Room to Run in 2023” November 18, 2022 https://www.nasdaq.com/articles/7-hot-hydrogen-stocks-with-room-to-run-in-2023

37  “7 Hot Hydrogen Stocks With Room to Run in 2023” November 18, 2022 https://www.nasdaq.com/articles/7-hot-hydrogen-stocks-with-room-to-run-in-2023