23rd Mar 2022
- With the Russia-Ukraine conflict underway, the United States and other Western nations imposed economic sanctions on Russia
- European countries are seeking new sources of energy in an effort to curb their reliance on Russian fossil fuels
- Hydrogen stocks such as Ballard Power Systems, Bloom Energy, and Plug Power have surged as Europe’s focus shifts to clean energy solutions
As the Russian invasion of Ukraine continues to unfold, its ramifications go far beyond the socio-political realm. Russia is currently the world’s largest oil exporter to global markets and the third largest oil producer overall1, meaning that political sanctions against the oil superpower could have far-reaching effects on the oil market.
With Western governments seeking new means of restoring their own energy production and energy security, what implications does the Russia-Ukraine crisis have for green energy stocks?
Pressure from the West
Since the start of the invasion of Ukraine, the United States and its Western allies have placed a range of sanctions on Russia. Special precautions have been used to avoid hitting the nation’s oil and gas supplies, however, as European and global nations continue to rely on Russia for such resources. Currently, Russia supplies close to 40% of Europe’s natural gas and 25% of its oil2.
The avoidance of direct sanctions has not curbed the potential harm that could be inflicted on oil and gas supplies as a result of the conflict, however. Numerous major oil companies have pulled out of Russia, including BP, ExxonMobil, and Shell, while TotalEnergies has decided to halt new investments3. At the same time, Germany has halted the Nord Stream 2 gas pipeline, capable of delivering more than 50% of Germany’s annual consumption4.
With fears of the impact that Western sanctions on Russia could have on oil supplies, the price of oil surged to near an eight-year high, with Brent crude hitting a price of $113.94 a barrel5. JPMorgan wrote in a note that, with 66% of Russian oil struggling to find buyers, Brent crude prices could race towards $185 per barrel6.
While market skepticism has so far had a detrimental effect on oil, we see the opposite effect when it comes to hydrogen stocks and other green energy sources.
A green energy uptick
As the Russia-Ukraine conflict intensified at the start of March, green hydrogen stocks surged in value. Ballard Power Systems and Bloom Energy stocks spiked by 13.7% and 14.3% respectively, while fuel cell stock Plug Power rose by 12.2% in the same period7.
It’s not only hydrogen power stocks that have experienced significant gains since the start of the invasion. Solar energy company Sunrun soared by 33%, while fellow solar stocks Sunnova Energy International and Sunlight Financial surged by 32% and 26% respectively8.
In addition to individual stocks, hydrogen fuel cell ETFs experienced multi-year highs in the midst of the armed conflict9. The Energy Select Sector SPDR Fund (XLE) reached its highest peak since 2018 while the SPDR S&P Oil & Gas Exploration and Production ETF (XOP) reached a three-year high10.
The rise of green energy stocks is not just a result of a loss in confidence in oil, but also the global drive to transition to cleaner energy sources; an undertaking that has been accelerated by the ongoing conflict.
Accelerating the green transition
The latest crisis serves to highlight the unsustainable and strategically problematic dependence on fossil fuels, boosting several of the recent standout hydrogen fuel cell stocks in their pursuit of new energy sources.
Plug Power CEO Andy Marsh expressed his belief that the Russian invasion of Ukraine will accelerate the transition to green energy, stating that in addition to concerns surrounding CO2 emissions, renewable energy presents itself as a mechanism for national security, particularly as nations look to curb their dependence on Russian oil supply11.
Plug Power’s goal for 2022 is a 90 percent year-on-year revenue growth, with its targeted earnings within the range of $900 million and $925 million12.
Just days before the Russian invasion of Ukraine, Ballard Power Systems announced two new ventures aimed at expanding their green energy push. The company received an approval in principle (AiP) for a jointly-developed fuel cell concept to power vessels such as cruise ships13 while also signing a Memorandum of Understanding with the Adani Group for an investigation of the applicability of fuel cells in several industry applications in India14.
Danbury, Connecticut-based company FuelCell Energy secured a $6.8 million investment through a competition organized by Canada’s Clean Resource Innovation Network to be used in a carbon capture project in Alberta, Canada15.
It isn’t just the hydrogen fuel cell stocks themselves that are facilitating the clean energy transition at this time. Several governments and regulatory bodies as well as other energy companies have promoted a shift towards green energy in the public space, sensing the risks associated with continuing their reliance on Russian oil and gas during this period of uncertainty.
Major energy corporation Chevron has decided to take the plunge into the clean energy space by purchasing biofuels producer Renewable Energy Group for $3.15 billion16.
The International Energy Agency (IEA) has formulated a 10-step plan to enable Europe to decrease its reliance on Russian gas and oil imports. The IEA intends to reduce European dependency on Russia within a year through a combination of green energy applications, an increase in solar and wind energy, and the refusal to sign any further contracts for gas deliveries with Russia17.
In response to Russia’s onslaught in Ukraine, Germany has decided to ramp up its renewable energy efforts by launching new wind and solar energy projects. The nation’s Economy Ministry is now looking to push through the Renewable Energy Sources Act (EEG) through parliament, which would see Germany suspend cuts to solar panel subsidies, ensuring that the country can work towards becoming completely green by 203518.
The future is green
As Europe pushes to end its dependence on Russia for fossil fuel exports, it’s becoming clear that the transition to clean energy sources is emerging as a widely accepted solution. This notion has instilled a confidence in investors that has consequently spurred an upward surge in the value of hydrogen stocks.
If you’re unsure of how to determine which hydrogen stocks to invest in, consider diversifying your risk by investing in a hydrogen stock ETF that consists of an array of clean energy stocks. The HDRO ETF offered by Defiance ETFs is one example of a hydrogen ETF that will provide you with diverse portfolio exposure to green hydrogen stocks.
For current performance and holdings, please visit defianceetfs.com/HDRO
1 “Oil Market and Russian Supply”, Accessed 06 March 2022, https://www.iea.org/reports/russian-supplies-to-global-energy-markets/oil-market-and-russian-supply-2
2 “Food and energy prices ‘likely to surge further’ due to Russia sanctions: ING”, 03 March 2022, https://finance.yahoo.com/news/food-and-energy-prices-likely-to-surge-further-due-to-russia-sanctions-ing-150822165.html
3 “Russia’s War In Ukraine: The Beginning Of The End Of An Energy Superpower?”, 05 March 2022, https://www.rferl.org/a/russia-end-energy-superpower-/31737861.html
4 “Germany halts Nord Stream 2 and Russia responds with a stark warning”, 06 March 2022, https://edition.cnn.com/2022/02/22/business/nord-stream-2-germany-russia/index.html
5 “Oil price jumps to nearly $114; natural gas prices reach record highs – as it happened”, 02 March 2022, https://www.theguardian.com/business/live/2022/mar/02/oil-price-blasts-111-opec-meeting-sberbank-european-arm-closed-business-live
6 “JPMorgan Says $185 Oil Is in View If Russian Supply Hit Persists”, 03 March 2022, https://www.bloomberg.com/news/articles/2022-03-03/jpmorgan-says-185-oil-in-view-if-russian-supply-hit-persists
7“Why Shares of Plug Power, Ballard Power Systems, and Bloom Energy Are Soaring Today”, 28 February 2022, https://www.fool.com/investing/2022/02/28/why-shares-of-plug-power-ballard-power-systems-and/
8 ”Russia Invasion Sparks Renewable Energy Stock Surge”, 28 February 2022, https://www.morningstar.com/articles/1081300/russia-invasion-sparks-renewable-energy-stock-surge
9 Energy ETFs hit multiyear highs amid Russia-Ukraine conflict. How to trade them”, 04 March 2022, https://www.cnbc.com/2022/03/04/energy-etfs-jump-amid-russia-ukraine-conflict-how-to-trade-them.html
10 “Energy ETFs hit multiyear highs amid Russia-Ukraine conflict. How to trade them”, 04 March 2022, https://www.cnbc.com/2022/03/04/energy-etfs-jump-amid-russia-ukraine-conflict-how-to-trade-them.html
11 “Russia-Ukraine war ‘will accelerate’ move to green hydrogen, renewable energy: Plug Power CEO”, 03 March 2022, https://finance.yahoo.com/video/russia-ukraine-war-accelerate-move-174509368.html
12 “Plug Power’s Outlook Remains Strong. The Stock Is Up Despite Mixed Earnings.”, 02 March 2022, https://www.barrons.com/articles/plug-power-stock-price-earnings-51646172487?tesla=y
13 “Ballard & ABB Receive Approval in Principle for High-Power Fuel Cell Concept to Power Ships”, 23 February 2022, https://www.ballard.com/about-ballard/newsroom/news-releases/2022/02/23/ballard-abb-receive-approval-in-principle-for-high-power-fuel-cell-concept-to-power-ships
14 “Ballard announces MOU with Adani for hydrogen fuel cells in India”, 22 February 2022, https://www.ballard.com/about-ballard/newsroom/news-releases/2022/02/22/ballard-announces-mou-with-adani-for-hydrogen-fuel-cells-in-india
15 “FuelCell Energy wins funding for Canadian carbon capture project”, 24 February 2022, https://www.hartfordbusiness.com/article/fuelcell-energy-wins-funding-for-canadian-carbon-capture-project
16 “Chevron sees ‘bright future’ for Ames-based Renewable Energy Group as its biofuels headquarters”, 03 March 2022, https://www.desmoinesregister.com/story/news/2022/03/03/chevron-exec-promises-bright-future-ames-reg-3-billion-purchase/9340892002/
17 “IEA’s 10-Step Plan For Europe: Diversified Gas Imports And Clean Energy”, 04 March 2022, https://oilprice.com/Alternative-Energy/Renewable-Energy/IEAs-10-Step-Plan-For-Europe-Diversified-Gas-Imports-And-Clean-Energy.html
18 “Germany speeds up renewable energy push due to Ukraine invasion”, 28 February 2022, https://www.euronews.com/green/2022/02/28/germany-to-speed-up-renewable-energy-push-amid-ukraine-invasion