How to Invest in Hydrogen - Top Companies, Stocks, Investment Funds (2024)

Would you like to invest in hydrogen? If you want to know the best green hydrogen investments currently available, this blog will tell you everything you need to know. We discuss the risks and the potential return to enable you to decide whether investing in hydrogen energy is right for you.

Hydrogen – the basics

Hydrogen is a chemical element. It heads the periodic table of elements. It does so because it has the lowest atomic number of one. It is ranked thus because one atom of hydrogen has only one electron. The chemical symbol for hydrogen is “H.”

Hydrogen is the most common and abundant element in the known universe. Stars, like our sun, are composed primarily of hydrogen with the help of Helium. Here on planet Earth, hydrogen only exists naturally in compounds such as gases, liquids, and solids. Most of us are familiar with it in water, whose chemical symbol is H2O. This chemical symbol indicates that water is made up of 2 atoms of hydrogen for every 1 atom of oxygen.

Although it is there in most molecules of living things, as a gas, it is pretty scarce – under one part per million in terms of volume. The extraction process is costly and, as yet, not widely available. But that is likely to change – indeed, plans are already underway. If you want to invest in hydrogen, it will be in the form of equities. You cannot own hydrogen as a commodity.

When natural gas is burned (for example, to provide heat), it releases carbon dioxide, Whereas when hydrogen is burned, it only releases water. So, if you invest in hydrogen, you will be helping to combat climate change.

Another reason that hydrogen gas is currently of so much interest has to do with the Ukraine crisis. The EU was getting 30% of its natural gas supplies from Russia. That source is no longer as freely available. The EU and the UK are now developing long-term strategies for alternative energy sources, one of which is hydrogen.

How to invest in hydrogen

You can use hydrogen to generate electricity, heat homes and business premises, power vehicles and industry. The UK is committed to achieving “net zero” emissions by 2050. So hydrogen can play a crucial role, making it potentially very interesting as an addition to your investment portfolio.

In the next few paragraphs, we will explain how to invest in hydrogen via hydrogen fuel cell stocks, investing in hydrogen technology, and investing in hydrogen companies’ stocks and shares. As stocks and shares are one of the more readily understood investment options, let’s start with them.

Strategies for investing in hydrogen stocks

Currently, most of the hydrogen the world uses is produced by burning large-scale fossil fuels. This process creates what is referred to as grey hydrogen. From an environmental point of view, it is not a very desirable way of producing hydrogen gas. However, when the production method is electrically powered, and the CO2 is captured, the hydrogen produced is called blue hydrogen.

The best option is green hydrogen. Green hydrogen is made by using renewably generated electricity, which separates water into hydrogen and oxygen through a tool known as an electrolyser.

If you invest in green hydrogen, you are, in effect, killing two birds with one stone. Buying green hydrogen stocks as part of your investment strategy is not only a way of growing the value of your investment, but it is also environmentally friendly.

ITM Power is a manufacturer of PEM electrolysers – one of the hydrogen technology products we mentioned earlier that are instrumental in producing green hydrogen.

The recent performance of ITM Power’s shares has followed a downward trend. So when talking about your short vs long financial needs, investing in hydrogen fuel stocks is an example that might fit into the long-term category. This is because green hydrogen could become a significant energy source as the green revolution continues apace. However, as with any investment, risk will always be involved.

One way of helping to minimise risk is through diversification, and this is where a hydrogen ETF (Exchange Traded Fund) comes into the picture. According to justetf.com, the following four are worth considering:

• Global X Hydrogen UCITS ETF Acc USD – ISIN IE0002RPS3K2, Ticker HYGG
• Invesco Hydrogen Economy UCITS ETF Acc – ISIN IE00053WDH64, Ticker HYDN
• L&G Hydrogen Economy UCITS ETF USD Acc – ISIN IE00BMYDM794, Ticker HTWG
• VanEck Hydrogen Economy UCITS ETF – ISIN IE00BMDH1538, Ticker HDGB

Invest in smaller hydrogen stocks

Another option when you invest in hydrogen is to invest in smaller stocks. Typically, this means investing in smaller businesses concentrating singularly on developing the transition to a hydrogen-powered economy.

However, you ought to be aware that this can involve increased risk. When progress is slow, the smaller companies often fare the worst.

Like many small businesses in this sector, after a rise in stock prices on the back of increased interest in hydrogen-based clean energy, the price subsequently dropped back.

Three examples of smaller company hydrogen stocks listed on the Nasdaq website are

• Ballard Power – manufacturer of hydrogen fuel cells.
• FuelCell Energy – involved in the manufacture of fuel cells.
• Plug Power – supplier of hydrogen-based emergency power supplies for data centres.

In addition to the hydrogen fuel stocks mentioned above, according to Yahoo Finance, other hydrogen fuel stocks include Bloom Energy Corporation (NYSE:BE) and Westport Fuel Systems Inc (NASDAQ:WPRT).

Hydrogen fuel cell investment

Hydrogen-powered vehicles are already in existence. According to the UK National Grid website, Japan is leading the race with 96 public hydrogen refuelling stations. You can use them to fill up with hydrogen fuel as quickly and as easily as with diesel or petrol. Germany is in second place with 80 hydrogen fuel stations, and the US is in third with 42.

So, the investment race has begun. The question is, will the pace increase, and do you want to risk getting in on the ground floor?

Learning how to invest money

Learning how to invest money is a challenging task. Investing in the hydrogen economy, whether via hydrogen fuel cell energy stocks or a hydrogen investment fund, is potentially risky – but so is an investment in general. Therefore, it would be best if you were guided by your investor profile.

Protecting your investments from the taxman is something you must consider. To that end, putting money into a tax wrapper, like a stocks and shares ISA, is a wise move. But you are limited to how much you can invest in any given tax year. At present, the personal ISA annual allowance is £20,000 – a problem if you are looking to invest £100,000 or more.

Once you’ve used your annual allowance, one possible solution is to put the balance into a general investment account. There is no limit to how much you can invest in one of these, but you will have to pay tax. The silver lining is that each year you can transfer a sum (within your ISA allowance) into the tax wrapper of your choice.

Seeking professional financial advice

If you would like to invest in green hydrogen stocks or any other savings or investment vehicle, it’s best to seek advice from a professional, independent financial adviser. But, before you do so, ensure that the Financial Conduct Authority authorised the adviser you approach.

Share investing with Moneyfarm

Moneyfarm’s Share Investing platform provides a direct and easy way to invest in Hydrogen through the stock market. The platform is accessible through web and mobile interfaces, enabling the direct trading of shares. The platform includes a broad array of UK stocks, ETFs, and mutual funds, allowing for participation in various market sectors and investment styles.

Moreover, it offers the option to invest in a globally diversified, professionally managed portfolio, ensuring a variety of choices to align with your investment strategy and financial objectives. Our service is designed with a long-term investment focus, ensuring you benefit from our technology and the guidance of our investment consultants. This approach helps you align your portfolio with your values and financial goals, providing a detailed view of your investments for effective decision-making.

Moneyfarm’s Share Investing platform supports your investment journey, whether you’re investing in familiar companies, exploring various sectors, engaging with ETFs, or expanding your scope with our UK Mutual Funds, ensuring a personalized and insightful investment experience.

FAQ

Why should I invest in hydrogen?

Hydrogen plays a vital role in future renewable energy development as countries such as the UK, Japan, and Canada try/pledge to achieve net zero emissions to combat climate change. With an upcoming ban on fossil fuel energy sources, low-carbon hydrogen may be the solution to eradicate carbon emissions. Also, hydrogen is used in several sectors, such as industry (steel production and feedstock), transportation (road, rail, and shipping), power (renewable, storage, and production), and heat (residential, industrial, and commercial).

Is hydrogen in high demand?

There is a growing demand for hydrogen as the fuel cell EV sector is thriving. Also, hydrogen is now being applied in new areas such as steelmaking, power generation, and high-temperature heat production.​​ According to IEA statistics, hydrogen demand increased by 5% in 2021 compared to 2020, mainly due to an uptick in refinery activity and chemical production. In 2021, the global demand for hydrogen was 94.3 million tonnes, and it is expected to reach 179.9 million tonnes by 2030.

What are some of the challenges to a clean hydrogen economy?

There are several barriers that affect hydrogen production, such as high production, transportation, storage, and delivery costs. There is a need for a new clean hydrogen value chain as hydrogen production has different pathways in terms of production, transportation, storage, distribution, and demand. There are no international standards and regulations on hydrogen. So, an international framework, production and safety standard, and operation rules are needed to develop the global hydrogen market.

*Capital at risk. Tax treatment depends on your individual circ*mstances and may be subject to change in the future.