Without a doubt, the originally celebrated savior hydrogen is not exactly a success story on the stock exchange. But take a look at this chart (as of 05.03.2024):

Source: JustETF (https://www.justetf.com/de/etf-profile.html?isin=IE00BMDH1538#chart)

This is a hydrogen ETF that includes the most important titles in the sector: starting with smaller stocks like Plug Power, Nel ASA, Ballard Power and Bloom Energy, up to the larger gas companies like Linde and Air Liquide. The ETF has depreciated by a whopping -65.57% since April 2021. For comparison: The broad US index S&P 500 has gained +21.3% in the same period, despite the weak phase in 2022.

Green hydrogen actually extremely promising In short, hydrogen has not been performing well on the stock exchange in recent years. The green variant, produced via eco-friendly electricity, is particularly promising. This energy carrier can make important industrial sectors such as the steel industry, the chemical industry, or refineries more climate-friendly. In addition, green hydrogen can decarbonize heavy-duty transport – for example, through fuel cells that power ships, trains, or trucks. However, other applications such as heating buildings or operating smaller vehicles are seen as having less potential.

Overall, according to most experts, green hydrogen remains an important lever for the success of the energy transition. However, the industry has been struggling with significant problems for years – partly with high losses and disappointing growth. The reasons for this are diverse. Simplified, it can be said that the breakthrough of green hydrogen is progressing much slower than originally thought, also due to macroeconomic resistance (e.g. high interest rates, high investment costs, and economic problems).

Hydrogen stocks: between fear and hope Therefore, there is a fear on the stock exchange that the savior could still turn out to be a disappointment. Is it a pretty vision that cannot withstand the harsh economic reality? The patience of the capital market is known to be limited. Shareholders want to see sustainable success, not a deferral of future potential that seems to be moving further and further away.

On the other hand, there are always signals from the hydrogen industry that fuel investors‘ hopes. This results in extremely high volatility of individual stocks and the sector as a whole. A few days ago, there was once again such a positive signal – from Germany.

Dresden-based company Sunfire is showered with money The focus is on the Dresden-based start-up Sunfire. The company, founded in 2010, specializes in technologies for the production of green hydrogen (and synthesis gases), i.e. electrolyzers. In these plants, water is split into its components hydrogen and oxygen using eco-friendly electricity. Sunfire’s technologies are considered highly advanced and efficient in the industry – resulting in a relatively high efficiency and ultimately relatively low hydrogen costs.

This fundamental strength is also evident in the support of investors: As Sunfire announced a few days ago, the non-listed company raised 215 million euros from old and new investors as part of a financing round. In addition, the European Investment Bank (EIB) is providing a loan of up to 100 million euros. The company also has access to around 200 million euros from already approved funding. According to its own information, Sunfire is one of the most well-funded companies in the electrolysis industry.

The catch: Since Sunfire is not listed on the stock exchange, the company is not subject to the volatile turmoil of the capital market in this sector. In any case, the company is also excellently financed without a public placement. This is a significant advantage for the growth potential of Sunfire. In fact, the company could still go public later – i.e. when it is already operationally established – and then also provide returns to you as a private investor.

My conclusion for you The news is not only interesting for Sunfire itself. The successful financing round and state aid clearly show that confidence in green hydrogen is generally present – even in the current high interest rate environment and not least in the midst of the budget crisis in Germany.

Clearly: Overall, green hydrogen is currently running with the handbrake on. However, the strong news from Dresden could now, in the best case, signal the beginning of a possible turnaround. As an investor, you should not underestimate this important energy source of the future. If the climate targets remain relevant – i.e. if there is no major political upheaval – sustainable hydrogen will be the key to success.

Important for you: Investments in the sector currently involve a very high risk – also because some of the smaller hydrogen companies are far from being established on a large scale and can still fail economically. If you want to reduce your investment risk, you can invest in larger gas companies like Linde, Air Liquide, or Air Products. While their hydrogen lever is relatively small, they offer better diversification and more security.