Renewables and other fossil alternatives, even though they have been around for decades, are finally getting the limelight they deserve.
That’s partly because of the global state of awareness about the environmental issues and partly because major stakeholders (both governmental and corporate) are finally taking the steps necessary to reverse some of the damage we have already done.
But whether you want to improve the ESG profile of your portfolio or you simply want to look at asset classes that are overlooked now but have a bright future, the best hydrogen stocks in Canada (and in the US) should be on your radar.
Hydrogen As An Investment
Before you start looking into hydrogen stocks as viable (ideally profitable) investment options, it’s important to understand hydrogen as an asset. hydrogen as a fuel is not a new concept.
Airships, one of the most dangerous variations of lighter than air travel, used hydrogen at one time as the “lifting gas.” But the dangers of using fuel as volatile and highly combustible as Hydrogen proved quite dangerous.
Hydrogen is a very flexible fuel for a combustion engine, but that’s not exactly the “green” way to use it. But hydrogen is making a comeback as a green and clean fuel source used to power “Hydrogen Fuel Cells,” which are a very attractive alternative to traditional EVs.
If you are planning on investing in some of the best hydrogen stocks in Canada, hoping for it to be the dark horse asset that can transform your portfolio in the future, it’s important that you understand the basics of a hydrogen economy.
You also need to understand how hydrogen is different from the more prevalent battery-powered vehicles and power sources.
Hydrogen Fuel Cell Vehicles vs. EVs
An EV is charged directly using electricity. It’s a major point in favour of EVs because electricity is practically everywhere. There is no “supply” and infrastructure problem for EVs, but they have certain limitations:
- Lithium-ion batteries (the best we have now) take a lot of time to charge
- Batteries make EVs heavy and are costly to replace
Hydrogen fuel cells use hydrogen to generate electricity for the vehicle and drive the power train.
The lack of batteries makes the vehicle much lighter, and the combination of the hydrogen fuel tank and fuel cells offer a much better “power density” than Lithium-ion batteries. And it only takes a few minutes to fill a hydrogen tank instead of the hours it takes to charge an EV fully.
There are three weaknesses that hydrogen as a fuel source is currently facing:
Safety Stigma: Even though hydrogen is lighter than air which means even if a hydrogen tank is set on fire, the fire is going to go up and not around (like gasoline), people have a fear of driving around with few kilograms of highly combustible gas.
Lack Of Infrastructure: Right now, most of the hydrogen is produced using fossil fuel (also called brown hydrogen) which defeats the purpose.
Few major players are producing enough hydrogen to meet the demand (if it arises), and transporting hydrogen is another issue coupled with safety. On-site hydrogen generation for hydrogen fuel stations is an option being explored.
Cost: The hydrogen produced from water requires a lot of electricity, with the cost of Hydrogen produced directly proportional to the cost of electricity being used. That’s like paying a significant premium on the cost of electricity.
But many stakeholders around the globe are seriously considering hydrogen as an alternative or an additive to the world of green power, and not just for vehicles.
Hydrogen is considered a backup energy source to augment wind farms when the air is not blowing. Cheap electricity, like the one produced in Quebec, can give Canada an advantage few countries have, making it a hub for hydrogen production.
Which Companies Produce Hydrogen In Canada?
- Air Products is of the largest hydrogen producers in the world.
- Nu:Ionic produces, rather than the solution it offers, produces from a different source.
- Enbridge produces about 1,000 kg hydrogen (from renewable sources) daily, at maximum capacity.
- Suncor and ATCO are planning to create Canada’s largest hydrogen production facility by 2028.
Best Hydrogen Stocks In Canada (And The US)
There are relatively few hydrogen stocks in Canada, but many large-scale players, especially among the energy players, are well-positioned to start generating hydrogen at a large scale.
1. Ballard Power Systems Stock (TSX)
Market Capitalization: $6.5 billion
5-Year CAGR: 53.4%
Ballard Power Systems is one of the best hydrogen stocks in Canada, even though it doesn’t generate hydrogen per se. But it’s one of the largest PEM fuel cell producers in the world.
The company has already shipped about 850 MW fuel cell products since its inception. And even more impressive is the company’s clientele, which includes bus manufacturers, light rail companies, Audi, a truck manufacturer, and more.
Ironically, the stock, which grew almost 1800% from crest to peak in the last five years, is still a fraction of its valuation in the glory days (2000).
However, the company is well-positioned in the international market to meet the demand, even if it surges. And as a global leader in fuel cell technology and production, it can benefit from an active hydrogen market.
And it’s poised to take advantage of hydrogens’ multi-faceted demand, thanks to its mature product line that’s capable of meeting the demands of not just the transit/automotive industry but also as a backup energy source for renewable-powered industries/applications.
2. Xebec Adsorption Stock (TSX)
Market Capitalization: $541.5 million
5-Year CAGR: 99.5%
Xebec Adsorption is a relatively unique hydrogen stock among other, more fuel-cell-focused hydrogen stocks. It offers two different hydrogen solutions:
- H2X Solutions: It’s a world-renowned, economical, and according to Xebec, one of the most compact PSA (Pressure Swing Adsorption) systems available today, i.e., between 5 to 15 times smaller than the conventional PSA systems currently available in the market. This system allows industries to get ultrapure Hydrogen from hydrogen-containing “reformate,” making it ideal for energy companies.
- HyGear: It’s a subsidiary of Xebec that offers on-site hydrogen production solutions to a variety of industries.
Xebec has already made 250 hydrogen installations around the globe, making it a powerful player as the other cog in the chain containing fuel cells, i.e., providing the Hydrogen that will be consumed by those fuel cells.
It was a much larger company before the great recession, but in the last few years, the company (and consequently, the stock) has been moving upward quite steadily and at a decent enough pace.
3. Loop Energy Stock (TSX)
Market Capitalization: $196 million
5-Year CAGR: N/A
Loop is the youngest hydrogen stock on the list, as it only started trading in Feb 2021. The company is based in Burnaby and was founded in 2000.
Loop Energy’s ace is its eFlow™ fuel cell, the patented technology that (according to the company’s claim) makes its fuel cells 16% more fuel-efficient and offers up to 90% higher peak power than industry equivalents.
This simply means that it might be able to deliver almost twice the power to the vehicle’s drivetrain with the similar-sized fuel cell stack as the other fuel cells currently available, making them cheaper and more powerful.
With its more powerful fuel cells, the company is targeting a relatively larger range of applications: Not just heavy-duty transit but also construction equipment.
The stock looks quite promising, but its growth prospects are still tied to the demand for hydrogen and fuel cells. If the fuel becomes more commonplace, Loop Energy Stock can potentially explode.
4. Next Hydrogen Solutions Stock (TSXV)
Market Capitalization: $127 million
5-Year CAGR: N/A
Next Hydrogen Solutions is technically another hydrogen fuel-cell company based in Mississauga. However, it focuses on the reverse. While most fuel-cell technologies use hydrogen as a fuel to generate electricity, Next Hydrogen Solutions creates electrolytic cells that generate hydrogen using electricity.
The company spent over a decade improving its electrolyzer technology to make it more efficient and easily scalable. Its on-site hydrogen generation solutions make it an ideal company if the demand for hydrogen fuel stations (that use water to generate hydrogen on-site) increases.
That’s also what makes it different from Xebec. The company allows practically anyone to generate hydrogen using electricity (and water as the primary raw material), and the cost of the hydrogen would be directly proportional to the cost of electricity (and the installation/maintenance cost of the generation unit).
These four can be considered the best hydrogen stocks in Canada. They are early birds poised to become powerful assets if the hydrogen economy is stirred up to the promised level of activity and hydrogen, as a fuel source, reaches its full potential.
However, if you are willing to invest across the border as well, there are three companies that should be on your radar.
5. Air Products & Chemicals Stock (NYSE)
Market Capitalization: $67.2 billion
5-Year CAGR: 19.8%
While hydrogen is just one of the gases in Air Products’ portfolio, it’s one of the largest hydrogen suppliers around the globe (apart from China).
It doesn’t just have production facilities but also infrastructure in place, including pipelines and transportation systems in place. It also offers small to large on-site production solutions.
Air Products is also a powerful stock with reliable and sustainable growth potential and dividends.
6. Cummins Stock (NYSE)
Market Capitalization: $33.7 billion
5-Year CAGR: 14.4%
Cummins is more along the line of the best hydrogen stocks in Canada stated above. Its hydrogen division is mostly about the PEM-based hydrogen fuel cells, and they work both ways as well.
The company offers its fuel cell to consumer hydrogen for electric vehicles and as a portable clean-fuel-based power source as well as to produce hydrogen using electricity.
The company also offers older alkaline-based solutions for hydrogen production. But hydrogen is just one of its relatively small offerings, and the stock relies upon a much larger business model. It also pays dividends.
7. Bloom Energy Stock (NYSE)
Market Capitalization: $5.3 billion
5-Year CAGR: N/A (3-Year CAGR: 25.4%)
Bloom Energy creates Bloom Energy Servers that convert natural gas, biogas, and hydrogen into electrical energy (on-site) without combustion. Its fuel cell technology is a bit different from the PEM cells that are so widely used right now. It also creates and offers electrolyzers to generate hydrogen.
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Hydrogen is a very promising and practical green solution, which has the potential to work alongside renewables and even nuclear power. Very cheap electricity can invigorate the hydrogen economy, and it can offer serious competition to renewables in the EV market as well as a clean power source.
Buying some of the best hydrogen stocks in Canada now and waiting for the demand to spike might be a smart move. But even if you do not intend to buy now, keeping an eye on these stocks and the hydrogen market for any major waves and breakthroughs should definitely be on your to-do list.