Is Hydrogen Energy a Good Investment?

We're all looking for cleaner energy sources for a better future. Many options are competing to be the best. Out of these, hydrogen power stands out and promises to be both green and good for the environment.

This guide looks into how hydrogen energy works, what we can use it for, and asks an important question: Is Hydrogen Energy a Good Investment?

Green hydrogen is exciting because it comes from renewable sources and doesn't pollute. As you explore hydrogen-powered cars, factory uses, and home heating options, you'll see a growing industry around it. Leading companies like Plug Power (NASDAQ: PLUG) and NEL ASA (OSE: NEL) are trailblazing new technologies and solutions that, if successful, could reshape our energy landscape.

Take a look, learn about its potential, think about the risks, and decide: Is investing in hydrogen energy a good idea for the future?

What is Hydrogen Power?

Hydrogen power refers to using hydrogen (H₂) to create energy. While hydrogen is abundant in the universe, it isn't naturally found as a gas on Earth and must be extracted from sources like water or hydrocarbons. The common method for this is steam methane reforming (SMR), which heats natural gas with steam. Another method is electrolysis, using electricity to split water into hydrogen and oxygen.

Once produced, hydrogen can power fuel cells, be burned for energy, or fuel certain vehicles.

A major benefit of hydrogen power is its environmental friendliness, especially when produced using renewable sources (green hydrogen), making it a sustainable, emission-free energy choice. However, challenges such as production costs, storage issues due to its low energy density, and the need for new distribution infrastructure remain.

Hydrogen power holds significant promise for a cleaner energy future, and much research and advancements are underway to ensure it can compete with other energy sources. For instance, at the University of Tulsa's Petroleum Engineering Department, professors are researching methods to utilize hydrogen for eco-friendly energy, particularly emphasizing Carbon Capture-Sequestration and storing hydrogen underground.

How Does Hydrogen Power Work?

Hydrogen power operates based on the principle of converting the chemical energy found in hydrogen into electricity or mechanical energy (movement).

• Fuel Cells: Hydrogen power is mainly harnessed using a device called a fuel cell. In this cell, hydrogen gas enters one side and oxygen enters the other. The hydrogen atoms split, sending electrons through a circuit, which generates electricity. When these electrons return to the other side, they combine with oxygen to produce water, the sole byproduct when using pure hydrogen.

• Combustion: Hydrogen can be burned similarly to gasoline in engines. When it burns with oxygen, it creates water vapor and releases heat. This heat can power engine parts like pistons. Some vehicles are made to run on hydrogen.

• Generation: Hydrogen is an energy carrier, not a direct energy source, meaning it stores and provides energy once produced. Today, much of our hydrogen is made from natural gas through a process that releases carbon dioxide called steam methane reforming (SMR). A cleaner way to produce hydrogen is by using electricity to split water into hydrogen and oxygen, called electrolysis. If this electricity is from green sources, no carbon is emitted in the process so this is considered green hydrogen.

Ultimately, hydrogen power works by utilizing the energy stored in hydrogen, either by converting it directly to electricity in a fuel cell or by burning it to produce heat. The key advantage is that when hydrogen is used as fuel, the primary byproduct is water, making it a clean energy source, especially when considering the challenges of greenhouse gas emissions and climate change.

What is Green Hydrogen Used For?

Green hydrogen, produced through electrolysis using renewable energy sources, has several applications:

Energy Storage and Power Generation: Green hydrogen can be stored and then used in fuel cells to produce electricity on demand, offering a solution for intermittent renewable energy sources like solar and wind.

Transportation: Green hydrogen can fuel hydrogen-powered vehicles, including cars, buses, trains, and even ships. These vehicles either burn the hydrogen in combustion engines or use it in fuel cells to generate electricity for electric motors.

Industrial Processes: Green hydrogen can serve as a clean alternative to hydrogen produced from fossil fuels in various industries. For instance, it can be used in the production of ammonia for fertilizers, in oil refining, or in the production of methanol.

Heating: It has potential applications in residential and industrial heating, either by direct combustion or through fuel cells.

Energy Export: Countries with abundant renewable energy resources can produce green hydrogen and export it to nations with higher energy demands, providing a renewable energy carrier.

Blending in Natural Gas Networks: Green hydrogen can be blended with natural gas to reduce the carbon footprint of the existing natural gas infrastructure.

Notably, green hydrogen is exclusively through clean renewable sources, positioning it as a competitively priced energy option. The adoption of green hydrogen aims to decrease the carbon footprint of sectors that are hard to decarbonize with current technologies and support the broader transition to a sustainable energy system.

Green Hydrogen Stocks

Green hydrogen stocks refer to shares of companies that are involved in the production, distribution, or application of green hydrogen. As the push for cleaner energy alternatives grows, interest in green hydrogen as a sustainable energy carrier has surged, leading to increased attention on companies operating in this sector.

Indeed, there has been growing interest from investors in green hydrogen companies due to the potential of hydrogen to play a significant role in a decarbonized future.

• Volatility: Like many emerging markets, green hydrogen stocks can be volatile. Their valuation often reflects future potential rather than current earnings.
  

• Regional Developments: Various governments worldwide have started supporting green hydrogen initiatives, leading to regional growth opportunities for companies. For instance, the European Union has set ambitious goals for green hydrogen as part of its Green Deal.
  

• Diversified Approaches: Some larger energy and industrial firms, such as Siemens, Toshiba, and Shell, are diversifying their portfolios and investing in green hydrogen projects alongside their primary operations.
  

• Risks: As with all investments, there are risks associated with green hydrogen stocks. These can include technological changes, regulatory shifts, and market competition. It's crucial for investors to research and possibly consult with financial professionals when considering investments in this sector.

Leading companies operating in the green hydrogen space include:

Plug Power (NASDAQ: PLUG)

Plug, the US-based frontrunner in constructing a comprehensive green hydrogen ecosystem, provides its clientele with affordable green hydrogen, an increasingly preferred energy molecule for diverse customer bases. With leadership boasting close to fifty years of expertise, Plug utilizes its PEM electrolyzer solutions to generate carbon-neutral green hydrogen from renewable electricity and water. These solutions cater to multiple sectors, including mobility, power, and chemical industries.

NEL ASA (OSE: NEL)

Norwegian company Nel stands as a worldwide leader in hydrogen solutions, offering premier technologies to produce and distribute hydrogen derived from renewable sources. Serving a diverse clientele, including industrial sectors and energy and gas enterprises, Nel boasts an illustrious lineage that began in 1927. Over the decades, it has consistently enhanced its hydrogen technologies.

Presently, Nel provides comprehensive hydrogen solutions, spanning from production technologies to fueling stations. These innovations facilitate industries in shifting to green hydrogen and equip fuel cell electric vehicles with rapid refueling capabilities and extended range, matching conventional vehicles but devoid of emissions.

ITM Power (LON: ITM)

ITM Power PLC, established in 2000 and listed on the London Stock Exchange's AIM market in 2004, is based in Sheffield, England. The company specializes in designing and producing electrolyzers using proton exchange membrane (PEM) technology. These electrolyzers generate green hydrogen from renewable electricity and water, making it a net-zero energy gas.

Ballard Power Systems (NASDAQ: BLDP) (TSX: BLDP)

Ballard Power Systems aims to provide fuel cell power for a sustainable planet. Located in Vancouver, Canada, its headquarters embody inspiration from the pristine local environment and the community's dedication to environmental protection. Ballard produces zero-emission PEM fuel cells that power diverse mobility forms, such as buses, trucks, trains, marine vessels, and stationary units.

At its Canadian facilities in Burnaby, Ballard specializes in producing membrane electrode assemblies, integrating and testing fuel cell stacks, and assembling and testing motive modules. Additionally, it offers support for products under its engineering services contracts. The company actively invests in enhancing its manufacturing capabilities, prioritizing automated processes to support anticipated growth.

If you want a comprehensive look at companies investing in hydrogen technology, read our article on hydrogen companies to invest in.

Green hydrogen stocks offer potential growth opportunities in the renewable energy sector. However, as with any emerging market, it's essential to understand the associated risks and conduct thorough research before investing.

As the world shifts to clean energy, hydrogen is becoming a big deal. Many experts believe it's the future of green power. Want to know why and how you can be a part of it? Read our detailed guide on investing in hydrogen to get all the facts and be ahead in the world of clean energy.