Hydrogen energy may have an important role to play in the world’s energy needs. Russia’s invasion of Ukraine in early 2022 helped to increase commodities prices across the board and prompted many EU member states to rethink their reliance on natural gas and crude from Russia. This has led to the rise of top hydrogen stocks to invest in.
Unfortunately, the newfound demand for cleaner energy has not reinvigorated investment into hydrogen energy when compared to solar or wind energy. A lot of this has to do with costs. “Grey hydrogen,” which is derived primarily from natural gas and coal represents 98% of all hydrogen while “green hydrogen” remains considerably more expensive. However, the Inflation Reduction Act passed by the Biden Administration in 2022, which provides numerous tax incentives and subsidies to clean energy projects, is causing investors to give hydrogen another detailed look.
Equity investors interested in benefitting from the potential upside of hydrogen energy, are perhaps better off investing not only in pure-play hydrogen businesses but also in more established energy companies with enough cash flow and infrastructure to generate hydrogen energy. In this article, we will explore three stocks with promising hydrogen businesses that equity investors will not regret buying.
A leader in industrial gases and chemicals, Linde (NYSE:LIN) has become heavily involved in various aspects of the hydrogen value chain, from production to distribution to end-use applications. Hydrogen atoms are required in large quantities in the chemical industry for the clean production of ammonia, plastics, synthetic jet fuel, and metals. Currently, most hydrogen atoms for chemicals are derived from gases like methane.
Early this year, Linde’s management team announced the company would invest anywhere between $7 to $9 billion in clean energy projects over the next few years. As a part of this massive package of capital investment, Linde also said it would be shifting 11 of 13 existing assets to clean hydrogen.
Thus far, Linde operates 80 hydrogen plants worldwide and has installed almost 200 hydrogen refueling stations. The industrial gas giant reported an adjusted EBITDA of $10.8 billion for 2022, up from $10.1 billion in 2021. Linde’s adjusted earnings per share increased by 12% year-on-year to $8.23 in 2022. Linde’s shares have appreciated nearly 16% year-to-date. Investments in clean energy could potentially reinvigorate top-line growth for Linde in the near term while continuing to benefit equity investors in the long run.
Plug Power (PLUG)
Plug Power (NASDAQ: PLUG) is a leading provider of hydrogen fuel cell solutions for mobility applications, such as forklifts, trucks, and buses. Hydrogen fuel cells intend to replace conventional batteries in equipment and vehicles powered by electricity. The mobility applications of Plug Power’s hydrogen fuel cells mainly service supply chain and logistics industries.
By the end of 2022, Plug had deployed over 60,000 fuel cell systems for forklifts and operated 180 refueling stations. Plug Power also offers turnkey solutions for hydrogen generation, storage, and dispensing. These include selling proton exchange membrane (“PEM”) electrolyzers and liquid hydrogen tankers. This makes it one of those top hydrogen stocks to invest in.
The hydrogen fuel cell developer has formed strategic partnerships with major players in the mobility and logistics sector, such as Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), Renault (OTCPK:RNLSY), and Airbus (OTCPK:EADSY); and these partnerships can help to propel Plug Power to record levels of revenue growth. Plug Power reported revenue of $701 million for the fiscal year 2022 (ended December 31), up 40% year-over-year. However, Plug Power expects to reach $1.4 billion in revenue by the end of 2023, implying this year’s growth could be spectacular. Shares in Plug Power have not performed so well against the broader market, but the aforementioned achievements could make PLUG a good buying opportunity for investors betting on pure-play hydrogen companies.
BP (NYSE:BP) is perhaps a household name in both the United States and the United Kingdom at this point due to its petroleum products. The global energy company is, however, aiming to be a net zero company by 2050 or sooner and to advance the hydrogen industry across the UK, Europe, Australia, and the U.S. As mentioned prior, oil and gas businesses can generate hydrogen by heating natural gas, thus forming grey hydrogen. Blue hydrogen forms when the carbon pollutants emitted from creating grey hydrogen are captured. BP has plans to develop its blue hydrogen business by creating carbon capture and storage facilities. All in all, it’s one of those top hydrogen stocks to invest in.
The energy behemoth has also begun the development of one of the UK’s largest blue hydrogen production facilities: H2Teesside, which could supply 10% of the UK government’s ambition for 10GW of hydrogen by 2030. Furthermore, BP has partnered with Ørsted to build a 50MW electrolyzer at its Lingen Refinery in Germany, which will produce green hydrogen from renewable power. In 2022, BP reported revenues of $240 billion, up almost 53% from 2021. This growth was mostly due to higher commodity prices, but BP’s investments in renewable energy should provide a number of growth opportunities for the company in the future. BP’s shares have lifted more than 5% YTD and the company offers an attractive dividend yield of 4%.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.