How to Invest in the Growing Green Hydrogen Sector
The green hydrogen economy is key to our ability to move away from fossil fuels.
And the market potential here is huge.
It’s estimated that by 2050, the world will need 322 million tons of green hydrogen a year.
There’s just one problem: Producing green hydrogen is too expensive as things currently stand.
Thankfully, there’s a solution that could make affordable and clean hydrogen a reality in the near future.
Renewables to the Rescue
Currently, green hydrogen costs $4 to $5 to produce per kilogram. Compare that with the cost of producing blue hydrogen at $1.50 to $2 per kilogram. But blue hydrogen is made using polluting fossil fuels.
However, the green hydrogen market is in its infancy. Its costs will come down as volume increases.
The industry is aiming for the price of producing 1 kilogram to drop to $1 or less in the next decade.
It’s an ambitious target, but there’s a solution.
About 80% of the cost of making green hydrogen comes from the energy that powers electrolyzers. So the industry needs to use cheap, excess renewable energy as a power source.
During the daytime, many utilities have to shut down wind or solar farms because there’s no place for the excess energy they produce to go.
So it makes sense to turn that energy into green hydrogen. That hydrogen can be stored and used later.
Investing in the Green Hydrogen Value Chain
There are a number of ways to invest in the green hydrogen sector. But one of my favorites is with ITM Power Plc (OTC: ITMPF), one of the world’s biggest electrolyzer-makers.
Back in January 2019, its stock was trading for $0.23 per share. Today, its stock is trading for $4.99 per share, an increase of 2,069%.
So clearly ITM’s business is booming. It makes electrolyzers in its gigafactory in Bessemer Park, England, which has a capacity of 1 gigawatt a year.
It has a record backlog of 499 megawatts of electrolyzers and 62 megawatts worth of electrolyzers in progress. And it has quotes out for another 909 megawatts.
And demand for its electrolyzers continues to grow.
In response, ITM recently announced plans for a second gigafactory. Production will start in the fourth quarter of 2023.
But the company isn’t stopping there.
It’s planning to expand its annual capacity to 5 gigawatts by the end of 2024. That means building an additional 2.5-gigawatt plant at a yet-to-be-named international location.
Making electrolyzers is a critical part of the green hydrogen value chain. ITM is just one of the companies making them.
Regardless of which electrolyzer-maker you choose, you could be richly rewarded over the next several years. Electrolyzer growth has no end in sight.
I like investing in these types of businesses. And we’re in the early days of the green hydrogen sector.