As we edge towards a cleaner, greener future, the demand for hydrogen – a zero-emission energy source – is surging. This spike is driven by its versatile applications across various sectors, including transportation, industry, and electricity.
Hydrogen, when produced through renewable methods, is a key player in our journey toward carbon neutrality. As countries globally ramp up their efforts to combat climate change, this demand is only set to rise further, underscoring hydrogen’s pivotal role in a sustainable future.
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 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 could potentially be an attractive alternative to traditional EVs.
Canada’s Position in the Hydrogen Market
Canada has been positioning itself as a significant player in the global hydrogen market. Here’s an overview of Canada’s involvement in the sector:
- Rich in Natural Resources: Canada has abundant natural resources, including freshwater and natural gas, that are needed for hydrogen production.
- Government Support: The “Hydrogen Strategy for Canada” released in 2020 laid out a roadmap for becoming a global hydrogen leader, aligning with Canada’s goal to become carbon-neutral by 2050.
- Export Potential: Canada has been exploring opportunities to export hydrogen, especially to markets like Japan and the European Union, where demand for clean hydrogen is expected to grow.
- Investment in Technology and Infrastructure: Various projects have been undertaken to develop hydrogen infrastructure in Canada, such as refueling stations for fuel-cell vehicles and the production of blue and green hydrogen.
- Blue and Green Hydrogen Focus: Canada’s emphasis has been on blue hydrogen (produced from natural gas with carbon capture and storage) and green hydrogen (produced from water electrolysis using renewable energy). Alberta’s rich natural gas reserves make it a natural hub for blue hydrogen, while provinces with abundant hydropower resources like Quebec and British Columbia are more focused on green hydrogen.
- Corporate Involvement: Several Canadian companies have been actively involved in the hydrogen sector, working on various projects related to hydrogen production, storage, and transportation.
Despite the potential, Canada also faces some challenges, including the need for significant investment in infrastructure, policy alignment across provinces, competitive production costs, and the development of both domestic and international markets for hydrogen.
Best Hydrogen Stocks In Canada
There are relatively few hydrogen stocks in Canada, but many large-scale players, especially the energy players, are well-positioned to start generating hydrogen at a large scale.
1. Ballard Power Systems
If you’re scouting for a hydrogen stock to buy or own, most market analysts highly recommend Ballard Power Systems. The Canadian firm develops and manufactures proton exchange membrane (PEM) fuel cell products and engines that use hydrogen as a fuel.
Ballard’s founder, geophysicist Geoffrey Ballard, was obsessed with getting smoke-belching internal combustion engines off the streets. He believed that hydrogen is the fuel of tomorrow. It is cleaner, non-polluting, and superior to gasoline.
His company introduced hydrogen fuel cell technology and rolled out the first zero-emission bus powered by a PEM fuel cell on June 8, 1993. Mr. Ballard envisioned a hydrogen economy but passed away in August 2008 and didn’t live to see the day. However, his dream lives on.
Today, Ballard Power Systems operates in North America, Europe, and China. The policy landscape and market adoption of fuel cell technology in these three geographic markets is strong.
Also, the focus is on six verticals: buses, commercial trucks, rails, marine vessels, stationary power, and emerging markets (material handling and off-road).
However, you won’t be impressed with the losses over the last eight quarters, including a new multi-year low of negative 42% consolidated gross margin to start 2023. The cash burn of US$169 million in the last 12 months was likewise significant.
But despite the rate of cash burn or sizeable amount, Ballard has zero debt and cash of US$866 million that could fund the business for four years. The silver linings are the growth indicators or catalysts in the core geographic markets.
In the U.S., there’s federal policy support for low-carbon hydrogen production as well as support for domestic fuel cell manufacturing. The downside is the stiff competition from bridge technologies such as biofuels and renewable diesel.
Besides the region’s favourable hydrogen policy landscape, energy security is a top priority in Europe, including the adoption of hydrogen. The drawbacks are EU member states’ conflicting interests regarding power generation and availability of funds for decarbonization, among others.
China is witnessing massive investments in renewables and electrolysers. Also, the country has the most ambitious fuel cell vehicle (1 million by 2030) and hydrogen production targets.
Unfortunately, besides the very high policy uncertainty, the Chinese market is struggling and unlikely to pick up anytime soon.
Still, Ballard Power Systems remains the best hydrogen fuel cell firm in the world following its transformation into a commercialization company.
The positives in the near term are the large amount if not historic, order backlog and growing customer interest. Expect capital allocation in markets with visible fuel cell demand growth.
2. First Hydrogen Corp.
Goldman Sachs sees clean hydrogen as a major emerging commodity that can reduce global greenhouse gas (GHG) emissions by 15%.
Vancouver-based First Hydrogen Corp., a hydrogen specialist, could significantly contribute to GHG emission reduction in the auto manufacturing industry with its zero-emission ecosystem solutions.
The company’s “Hydrogen-as-a-Service” model focuses on clean green hydrogen fuel, refueling technology, and zero-emission commercial cars. Major fleet operators in the U.K. are currently driving and testing First Hydrogen’s hydrogen-fuel cell zero-emission vehicles (FCEV).
The FCEVs utilize hydrogen and fuel cell technology, features quick refueling (less than ten minutes) and can run long-range (over 500 kilometres). First Hydrogen welcomes the proposed Green Deal Industrial Plan in the European Union.
The subsidy program has a simple regulatory framework and supports producing carbon-neutral products like its light-duty vehicles.
First Hydrogen has expanded its Europe operations, and testing of its fleet in France and Germany is due to begin in early 2024. Furthermore, it will pursue market development in Eastern Europe.
In America, the groundwork in America has begun with the establishment of First Hydrogen Energy (USA) Inc. and First Hydrogen Automotive (USA) Inc.
The most recent development is the feasibility study agreement with Sacré-Davey to develop a 35MW green hydrogen production facility and vehicle assembly factory in Shawinigan, Quebec. At full capacity, the projected annual production is 25,000 vehicles.
However, the financial results might turn you off, especially the mounting losses in the last three fiscal years (2020 to 2022). In the first nine months of fiscal 2023, the net loss widened 68.8% to $11.56 million compared to the same period in the previous fiscal year.
Still, expectations are high that the hydrogen-as-a-service (HaaS) model is primed for success if First Hydrogen succeeds in removing adoption barriers for zero- emission fleets. A ten-year roadmap (2022 to 2032) should guide and help the company execute its business strategy.
The three eco-systems are revenue generators and target global fleet operators, renewable energy developers, energy majors, and auto OEMs (original equipment manufacturers).
Also, the direct-to-consumer solutions will generate revenue streams from green hydrogen delivery and supply. Furthermore, vehicle sales ensure demand for hydrogen supply.
You must have patience if you’re investing in First Hydrogen. Its ultimate goal is to create a zero-emissions hydrogen ecosystem.
More importantly, the enormous addressable green hydrogen market could reach US$7.31 billion by 2027. This hydrogen stock could soar along with the high demand from FCEVs and the power industry.
3. DynaCERT Inc.
DynaCERT brings Carbon Emission Reduction Technologies to a global marketplace and envisions a Green Hydrogen World. Its flagship electrolysis unit generates hydrogen and oxygen on demand to reduce emissions and increase fuel economy.
The growing energy company has sunk in millions of dollars conducting research and development in 18 years of its two decades old existence. DynaCERT has created global interest already.
The immediate plan is to enhance product development, add more market platforms, and eventually deliver a return on investment (ROI).
HydraGEN is a patented carbon emission reduction technology for diesel engines, primarily buses, small & class 8 trucks, and refrigerated trailers. The hydrogen-on-demand device also works in power generators and various equipment with internal combustion engines.
Top engine manufacturers such as Caterpillar, Cummins, John Deere, Komatsu, MAN, and Mercedes Benz have allowed HydraGEN installation. Unfortunately, profitability is elusive, given the increasing losses in the last three years.
Anyhow, the nearly 52% revenue growth in 2022 versus 2021 and the upturn in the fourth quarter of 2022 from repeated international sales are encouraging signs.
In the first quarter of 2023, net loss dwindled by 35.4% year-over-year to $1.45 million. DynaCERT needs significant sales volume and more growth drivers and catalysts to entice investors.
The company invested $17.5 million recently and formed a collaborative R&D partnership with Cipher Neutron. The partners will develop green hydrogen and AEM electrolyser technology. The electrolyser will not use precious metals but is highly efficient in producing Green Hydrogen.
The plan for HydraGEN is to capitalize on its vast dealer network (48 qualified dealers in 55 countries) to reach multiple target markets. Meanwhile, green hydrogen and AEM electrolyser technology are for large infrastructure projects. Cipher has received orders from companies in Africa and Taiwan already.
DynaCERT has spent $90 million for R&D thus far but has yet to report profits. Nonetheless, expect orders for its flagship products (HG1 line) and three other variants (HG2, HG4C, and HG6C) to be in the double-digit million range.
Another bright spot is the growing demand for improved fuel efficiency among resource companies in the mining, forestry, and oil & gas sectors. The companies could achieve future carbon credits. There’s also an opportunity for DynaCERT to monetize carbon credits from its patented HydraGEN technology.
The business might seem like a science project to you and other prospective investors.
However, DynaCERT’s market-ready products have four clear competitive advantages (lead time, regulatory, distribution network, and first-to-market) in a potentially profitable mass market with high barriers to entry. The chances of a stock breakout are good.
Related Reading: Best Hydrogen ETFs In Canada
Which Companies Produce Hydrogen In Canada?
Chemical and energy companies are the largest hydrogen producers in Canada. There are several hydrogen plants currently operating in Canada. These plants produce hydrogen for a variety of applications including fuel cell vehicles, industrial processes, and energy storage. Some major names include:
- Air Products is of the largest hydrogen producers in the world.
- Enbridge produces about 1,000 kg of hydrogen daily (from renewable sources) at maximum capacity.
- Suncor and ATCO are planning to create Canada’s largest hydrogen production facility by 2028.
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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.
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.
For other alternative energy picks, see the top uranium stocks in Canada here.