What are the best hydrogen stocks to watch?

Investing in hydrogen: what you need to know

Hydrogen is everywhere: hydrogen is the most abundant gas in the universe – approximately 75% of all baryonic matter is hydrogen. This abundance of hydrogen makes it one of the most renewable sources of energy on the planet.

There are many ways to extract hydrogen: traditionally, hydrogen is produced through the electrolysis of water. However, several energy companies have now developed more efficient techniques to create hydrogen energy with minimal waste. These include the use of solid oxide fuel cells, alkaline fuel cells, and proton exchange membrane technology.

It’s a cheap source of clean fuel: when used in a fuel cell, hydrogen energy leaves minimal waste, with water being the main by-product.

It’s attracting investment: hydrogen company stocks have been on an upward trend as investors start to spot the potential of hydrogen energy. The UK government’s Ten Point Plan for a Green Industrial Revolution report has predicted that hydrogen power could deliver more than £4 billion in private investment over the next decade.

As environmental, social and governance (ESG) becomes more of a priority for investors and corporates, investing in hydrogen fuel is likely to rise.

How to trade in hydrogen stocks

You can trade in hydrogen energy stocks quickly and easily with us.

Trading hydrogen shares lets you take a speculative position on their price rising or falling, without having to own the shares directly. You’ll ‘buy’ the shares (go long) if you think their price will rise, and you’ll ‘sell’ the shares (go short) if you think it’ll fall.

With us, you’ll be trading hydrogen shares with leveraged derivatives like CFDs. Leverage enables you to receive full market exposure for an initial deposit, known as margin. But, bear in mind that while leverage can increase your profits, it can also increase your losses – so it’s important to take steps to manage your risk.

Top 3 hydrogen stocks

The best hydrogen stocks are those stocks which offer direct access to the hydrogen market. There are three dedicated hydrogen technology stocks on the Alternative Investment Market (AIM), which houses smaller-capped companies with growth potential. The stocks are:

1. Ceres Power
2. AFC Energy
3. ITM Power

Ceres Power

Ceres Power is a pioneer in solid oxide fuel cell manufacturing – a low energy, low cost way to make hydrogen. The West Sussex-based company has been listed on the AIM since 2004 and has a market cap of more than £2 billion.

It has specifically increased its focus on hydrogen manufacturing in recent years, and has partnered with a number of international brands to secure funding and distribution channels as it scales up production.

Trade Ceres Power shares

AFC Energy

AFC Energy is one of the UK’s leading providers of alkaline fuel cell (or AFC) systems. Alkaline fuel cells are known to be incredibly efficient, and are used in everything from electric vehicles to space shuttles. In its annual report for 2020, AFC outlined plans to scale up its manufacturing plant in Surrey to meet growing demand for its fuel cells.

In July 2020, the company successfully completed an oversubscribed fundraiser of £31.6 million to support its growth. This huge growth potential has been noted by investors, who have sent demand for AFC’s shares soaring since the start of 2021.

Trade AFC Energy shares

ITM Power

ITM Power is a producer of electrolysers, which are a low-carbon way to generate hydrogen gas, based on proton exchange membrane (PEM) technology. The 20-year old company is about to have a growth spurt – it has recently completed the construction of its ‘gigafactory’ in Sheffield, and once the facility reaches 60% capacity, it plans to build another one.

Between 3 April 2020 and 3 April 2021, ITM’s share price more than quadrupled in value, as investors responded to these growth plans and the increasing awareness of the benefits of hydrogen power.

Trade ITM Power shares

Where next for hydrogen?

The domestic and global markets for hydrogen power are growing, for several reasons.

1. The rise of environmental, social, and corporate governance (ESG) investing

On a global scale, the popularity of ESG investing is set to draw new attention to clean energy markets such as hydrogen, as more and more corporates and investors carve out ESG allocations in their investment portfolios.

2. The UK government has set ambitious new green energy targets

In the UK, hydrogen power has been specifically highlighted as a future growth industry and a way to help meet the country’s target of net zero carbon emissions by 2050. The publication of the UK’s upcoming hydrogen strategy report will outline the opportunities and limitations of using hydrogen power as an alternative to fossil fuels.

The UK government’s Ten Point Plan for a Green Industrial Revolution has set a target of developing five gigawatts of low carbon hydrogen production capacity by 2030. By 2023, the government will work with the clean energy industry to allow up to a 20% blending of hydrogen into the gas distribution grid for all homes on the gas grid.

3. More private and public investment is expected in the hydrogen space

The Green Industrial Revolution report concluded that 'driving the growth of low carbon hydrogen could deliver…over £4 billion of private investment in the period up to 2030' as well as 'savings of 41 MtCO2e between 2023 and 2032, or 9% of 2018 UK emissions'. These plans will be supported by a £240 million ‘Net Zero Hydrogen Fund’.

This suggests that there could be a robust future for hydrogen stocks in the UK as the government’s clean energy plan takes shape.

4. Energy giants are diversifying into clean energy

Energy giants BP, Enegix and Siemens Energy have already begun exploring hydrogen development, with BP eyeing a new hydrogen production hub on England’s northeast coast which could grow to a production capacity of 1 gigawatt by 2030.

5. Emerging opportunities for hydrogen fuel

The electric vehicle (EV) boom is set to boost the popularity of hydrogen power. Hydrogen fuel cells are incredibly energy efficient, and unlike battery-powered EVs, they don’t require lengthy periods of charging.Toyota Mirai is an early example of hydrogen fuel cell technology in electric vehicles.

Best hydrogen stocks summed up

• Ceres Power, AFC Energy and ITM Power are just three UK companies that are focusing on hydrogen power manufacturing at the moment
• As the manufacturing process becomes cheaper and more energy efficient, other companies could join them
• Meanwhile, the world’s leading energy providers have been paying closer attention to hydrogen power, and the UK government has committed to increasing the country’s reliance on hydrogen power in the coming years
• This makes hydrogen an exciting segment of the clean energy market, with plenty of room for growth in the medium and long term