Hydrogen stocks soar as countries reach for net zero


Edison Group’s new report The Hydrogen Economy – Decarbonising the Final 20%, explores hydrogen’s role in limiting global warming to 1.5C. With ever-cheaper electricity from other alternatives set to address large swathes of the transition, hydrogen is essential – but more limited than currently realised.

Whilst its high energy-to-mass ratio makes it ideal to replace coal and gas industrial processes and gaps in the power sector – as well as heavy-duty, long-distance road freight, maritime and aviation applications – hydrogen is less likely to power cars and other mass markets products.

Yet even in the most promising industries, success is not yet guaranteed. Whilst falling production costs are driving down the cost of green hydrogen, many potentially viable parts of the market will not reach self-sufficiency unless governments provide investment and implement policies that explicitly encourage hydrogen adoption.

Without this support the industry will not scale sufficiently – and costs will not reduce to the point below which point subsidies become unnecessary. This would stall market growth and some companies may fail to live up to investors’ current expectations. Some may even fail entirely.

With the share prices of many hydrogen stocks having doubled or quadrupled during 2020, there are potentially many which are highly sensitive to any set-backs. Hydrogen’s history of false dawns should also be borne in mind.

Given these sensitivities, Edison’s report profiles 18 listed companies which are better-positioned.

The report identifies three key opportunities where lack of government support will have less impact. Applications such as materials handling and heavy duty transport where fuel cells are a better fit than batteries; Applications and fuel cell technologies that don’t rely on widespread availability of pure hydrogen and applications such as steelmaking where hydrogen is used as a chemical reagent rather than just an energy source.

Based on these selection criteria, Edison concludes that Ballard Power Systems, Ceres Power, ITM Power, NEL Hydrogen, McPhy, and Plug Power appear particularly well positioned.

Neil Shah, Director of Research, Edison Group said: “It is difficult to imagine net zero being achieved without significant growth in green hydrogen. Yet governments must lead from the front through prolonged investment and the right policy frameworks, and this level of support will go a long way to dictating how the next decade will look from an investor viewpoint. Of course, hydrogen shares have been buoyant this year and all eyes will be on whether 2021 can sustain these levels, but we think this report identifies some of the key areas where setbacks will be less likely.”

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