Hydrogen ETFs look set for upswing

Subsidies planned for 2024 and emergence of hydrogen-blended fuels could lift these ETFs

Sean Daly

a person holding a camera

Hydrogen ETFs hit bottom with a drop of 60%-80% from their November 2021 highs, however, there is good news on the horizon.

Massive subsidies planned for 2024 affirm a viable earnings path for the industry, and the promise of green hydrogen is gaining traction in Europe and potentially offering a cheaper transition to a "zero-ish" emissions future compared to electric vehicles.

Additionally, the technology is finding new applications, including green hydrogen and carbon dioxide blended fuel, which is technically carbon-neutral and can go into existing car engines.

Investing in hydrogen with ETFs can become appealing, as the cost of e-fuel continues to drop and the technology is finding new applications, including powering trains and construction equipment. 

Peak pessimism 

The peak pessimism of hydrogen ETFs seems to have hit a low. Europe, particularly Germany, is pushing for hydrogen use, and US government subsidies are making hydrogen more viable as an industry. The eFuels produced in Chile and Texas also present a promising opportunity for carbon-neutral fuel that can be used in existing car engines. 

Last December, an HIF Global facility in southern Chile began the production of eFuels, a green hydrogen and carbon dioxide blended fuel that is technically carbon-neutral and can go straight into existing car engines. The company, working with Porsche, Exxon and Siemens, got a permit for a Texas facility just last week.

A new estimation for this type of e-fuel is occurring in Europe. Germany is pushing back on a new EU law on carbon dioxide emissions, demanding that Brussels provide a path for e-fuels that can be used in existing internal combustion engines after 2035.

Hydrogen may be a more inexpensive way to transition to zero emissions than electric vehicles. The development of a hydrogen-powered jet engine by Rolls Royce, the use of hydrogen-powered backhoes by JCB, and the operation of diesel-less trains by Alstom in Lower Saxony prove that hydrogen power is gaining traction. 

The US buildout is quickening as well: The Inflation Reduction Act’s $13bn in tax credits drop green hydrogen’s price from $4 per kilogram to $1 per kg.

In addition, the Department of Energy, via the IIJA’s $9.5bn, is subsidising hydrogen hubs nationwide, with seven to 10 locations to be chosen this fall. The primary market will be utilities, heavy transport and industry.

And the EU approved €5.2bn in subsidies for green hydrogen projects in September. There are now 300 green hydrogen projects under construction worldwide.

Investing in hydrogen with ETFs

There are currently five hydrogen ETFs listed in Europe:

Benefitting from first mover advantage, LGIM’s HTWO launched in February 2021 and has gathered $522m assets under management (AUM), the most across all the ETFs in this theme.

VanEck’s HDRO is the only other ETF offering pure-play exposure to hydrogen with over $100m AUM.

Chart 1: Hydrogen ETFs listed in Europe



Year-to-date performance


Solactive Hydrogen Economy



MVIS Global Hydrogen Economy ESG



Solactive Global Hydrogen v2



WilderHill Hydrogen Economy Net Return



ECPI Global ESG Hydrogen Economy


Data as at 3 May

The “pure play” firms held by these ETFs typically create these electrolysers as well as the fuel cells, e-fuels, H2 distributions systems, or the vehicles that use the technology.

The global fuel cell market is steadily moving from natural gas to hydrogen and biomass sources. It is dominated by a few established players such as Bloom Energy (US), Doosan Fuel Cell (South Korea), Kyocera Corp. (Japan), SFC Energy (Germany), Ballard (Canada) and Plug Power (US).

It grew from $4bn in 2022 to $5.2 billion in 2023 and is expected to grow to $13.6bn by 2027, according to a fuel cell global market report published in February 2023. 

For most investors, the face of the hydrogen market has been Bloom Energy and Plug Power. At present, both companies are money losers. Each saw recent analyst downgrades in March and the kind of capitulation in sentiment in April that marks the end stage of every frenzy.

The companies have distinct differences, though. An older company, San Jose-based Bloom Energy, dominates the stationary fuel cell market in the US, with an 80% market share, helping businesses diversify from unreliable local electrical grids (for example, that freak Texas ice storm).

Most of its legacy servers used natural gas, but new models (and older models via an upgrade) convert hydrogen, into electricity without combustion. The company has managed a 10-year trailing revenue CAGR of 28% and even had a technical revenue and earnings beat for Q4 2022.

Bloom Energy had a $135.7m gross profit on $462.6m in revenue in Q4 2022, though money did not reach the bottom line.

Full-year profitability should only come in late 2024 when analysts project FY earnings per share of .39 on $1.9bn of revenue. Projections are always speculative, but with $348.5m in cash and another $311m soon expected via its SK ecoplant tranche, Bloom Energy’s liquidity will be sufficient for the foreseeable future.

On the other hand, Albany-based Plug Power is the proverbial bad boy of the hydrogen scene. Like Tesla in 2017, it is a media darling that appears too ambitious in too many segments and often has analysts exasperated. Despite excellent revenue growth of 39%, its gross profit margin is -23%.

Plug Power operates in many segments of the industry, from H2 plants to fuel cells to forklifts. It is building five plants throughout the country, producing 500 tons of green hydrogen by 2025. It uses hydropower from Niagara Falls and creates hydrogen fuel cell systems for customers like Amazon and Walmart.

The company received a lot of early hype from its H2-powered forklifts, though its new H2 van, a collaboration with Renault, is also impressive, carrying a payload of up to one ton and that can reach nearly 250 miles per tank.

Plug Power had an ugly $62m gross loss on its Q4 2022 $219m in revenue. It missed by 0.14 on EPS estimates. It is down 58% for the year and has recently seen litigation over that plummet.

It has a cash burn issue that Bloom Energy does not have. It hit a three-year low on 18 April after an analyst sees the risk-off atmosphere for project financing via bank failures becoming a problem, just as PLUG wades into the capital-intensive part of its growth cycle. Analysts don’t see profitability until late 2025.

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