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Why Hydrogen Stocks Are Lagging In 2023

  • Leading hydrogen and fuel cell makers have returned mixed Q2 2023 results but with one common theme: all remain unprofitable despite posting mostly robust topline growth.
  • Limited adoption and high costs remain a major challenge for hydrogen tech companies
  • For hydrogen projects to become financeable, they must have a bankable offtake scheme.
Hydrogen car

Last week, we reported that the clean energy sector was outperforming its fossil fuel brethren with many companies in the space posting impressive top-and bottom-line growth. Unfortunately, there’s one corner of the sector that has failed to impress: hydrogen tech companies. 

After a string showing in 2022 courtesy of ample backing by the Biden administration, hydrogen stocks have badly lagged in the current year as investors scrutinize their fundamentals. Leading hydrogen and fuel cell makers have returned mixed Q2 2023 results but with one common theme: all remain unprofitable despite posting mostly robust topline growth. 

Here are the latest quarterly results by top hydrogen companies.

  • Plug Power Inc. (NASDAQ:PLUG): Revenue of $260.18M (+72.0% Y/Y) beat by $21.73M while Q2 GAAP EPS of -$0.40 missed by $0.14
  • Bloom Energy Corp. (NYSE:BE): Revenue of $301.1M (+23.8% Y/Y) missed by $10.26M while Q2 Non-GAAP EPS of -$0.17 missed by $0.03
  • FuelCell Energy Inc. (NASDAQ:FCEL): Revenue of $38.3M (+133.8% Y/Y) beat by $11.52M while Q2 GAAP EPS of -$0.09 missed by $0.01
  • Ballard Power Systems Inc. (NASDAQ:BLDP): Revenue of $15.3M (-26.8% Y/Y) missed by $0.63M while Q2 GAAP EPS of -$0.10 beat by $0.03

Limited adoption and high costs remain a major challenge for hydrogen tech companies. First off, these companies have to contend with high research and development costs as they innovate and improve their fuel cell technologies. Further, additional expenses like manufacturing and production costs are high as they scale up their manufacturing capabilities.

Further, the economics of green hydrogen--the type favored by most governments--are not in its favor. Green hydrogen--i.e. Hydrogen made through the electrolysis of water using renewable energy--costs about $5 per kilogram compared to $1.50 per kilogram for gray hydrogen, which is created from natural gas, or methane, using steam methane reformation (SMR). Currently, 99% of U.S. hydrogen production is sourced from fossil fuels, with 95% from natural gas by SMR. Although the DOE is sponsoring a “moonshot” project to reach $1 per kilogram within a decade, it would require a huge scale-up of renewable electricity for green hydrogen costs to fall to such levels. For instance, meeting the EU green hydrogen target would require ~1,000 terawatt-hours of new solar and wind installations, nearly double the bloc’s installed capacity.

Varying Expectations

The hydrogen sector is facing major marketing challenges. Currently, there is no merchant market for hydrogen. For hydrogen projects to become financeable, they must have a bankable offtake scheme. But expectations around how financing and offtake deals will be structured vary widely, adding complexity to the contracting process, as Frank O’Sullivan, managing director at venture capital firm S2G Ventures, told the ACORE Finance Forum last year. Although there’s no shortage of investors interested in the hydrogen sector, many are sitting on the sidelines and watching to see how the first round of deals will pan out. Related: Aramco’s Earnings: It May Get Worse

There isn’t a single model that defines, this is how the hydrogen play works. There will be several models, and those models have not emerged yet,” O’Sullivan has said.

It’s a viewpoint reiterated by Greg Cameron, executive vice president and chief financial officer of hydrogen fuel cell maker Bloom Energy. According to Cameron, on one end, there’s the acquisition of energy needed to drive electrolysis. On the other end, there are the offtakers, who may come from diverse industries with different expectations for how a contract should be structured.

Luckily, O’Sullivan says that the path to getting actual hydrogen infrastructure off the ground is relatively clear. The capital costs associated with electrolysis are declining, while access to renewable energy that’s cheap enough to generate hydrogen from water and still sell a cost-competitive fuel are on the horizon.

Rachel Crouch, a senior associate at Norton Rose Fulbright, has proposed that existing use cases for hydrogen--which today rely almost exclusively on gray hydrogen--may be among the first green or blue hydrogen opportunities to be financeable, because the offtake picture is already clear and is likely easier to model. Crouch suggests ammonia is one such area because a market already exists for ammonia, and several green ammonia projects have been proposed or are in early stages of development. She sees petroleum refining as another area where bankable early green or blue hydrogen projects are likely to emerge because refineries are among the largest users of hydrogen as a fuel stock. In this case, early-stage hydrogen projects may contract with refineries as offtakers, and notes that several pilot projects are already being developed in this sector.

Crouch adds that specialty vehicles are also showing early promise where hydrogen is already being used to power fuel cells. Fuel cells are used in specialty vehicles such as forklifts and by energy consumers to complement electricity from the grid, to smooth energy costs and ensure reliability.

The Hydrogen Economy

But these challenges have not stopped many experts from touting the hydrogen economyWestern governments in particular are increasingly embracing hydrogen as the fuel of the future as nations rush to decarbonize. When burned as fuel, hydrogen produces only water vapor as a byproduct, making it a low-carbon energy carrier. Hydrogen also addresses the main challenges of renewable energy--curtailment and intermittency. 


In 2021, President Joe Biden signed the more than $1 trillion bipartisan infrastructure bill into law, unlocking funds for transportation, broadband and utilities. Buried deep into the historic plan was a provision for $9.5 billion funding to build at least four hydrogen hubs--places where the gas can be produced and used in a self-reinforcing cycle. In May 2022, the European Union set a target to produce 20 million tons a year of green hydrogen--half imported, half domestic--by 2030.  In September 2022, the U.S. Department of Energy (DOE) announced it would spend $7 billion on at least half a dozen hydrogen “hubs” that will produce green or blue hydrogen. Then in June 2023, the Biden administration announced a goal to produce 50 million metric tons of green hydrogen by 2050--enough to cut ~10% of the country’s greenhouse gas emissions.

By Alex Kimani for Oilprice.com

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