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How to Invest in Green Hydrogen Stocks

The shift to green hydrogen is simply a shift away from depleting finite sources of fossil fuels.

The environment friendly fuel is produced by splitting water into hydrogen and oxygen using an electrolyser. Electricity from renewables, like wind and solar, power the electrolyser.

At present, the country's entire production of hydrogen comes from fossil fuels. However, by 2050, three-fourth of all hydrogen is projected to be green.

Governments all over the world are making the switch. Over 30 countries have released hydrogen roadmaps, 200+ hydrogen projects, and ambitious investment plans.

The hype is real.

India too isn’t far behind.

The space is brimming with opportunities.

So, should you invest in the green hydrogen space? Here are 3 reasons -

  1. Green hydrogen is a sustainable source of energy

    According to data from the Oil Ministry, India's oil import bill nearly doubled to US$ 119 bn in the financial year 2022 from US$ 62.2 bn dollars in 2021.

    This was due to the rise in crude oil prices amid the Russia-Ukraine war.

    In March 2022, when crude-oil prices saw the highest surge in 14 years, was when India spent US$ 13.7 bn dollars in a month alone.

    The continued coal and oil dependency will only increase this amount by 2-3 times.

    To cut down expenses and reduce this dependency, sustainable sources of energy like green hydrogen will become more of a necessity than a choice in the near future.

    This can be a game changer for India, which imports 85% of its oil and 53% of its gas demand.
  2. There is immense support from the government to produce green hydrogen.

    On 15 August 2021, Prime Minister Narendra Modi, flagged the launch of a National Hydrogen Mission and announced his decision to transform India into a global hub for green hydrogen production and export.

    The mission proposed building giga factories to produce green hydrogen.

    Following this, the government announced a draft policy for green hydrogen.

    According to the policy, the government mandated that green hydrogen account for 10% of the overall hydrogen needs of refiners by 2023-24. For the fertiliser sector, the requirement is around 15%.

    Furthermore, firms would be allowed to set up capacity anywhere in the country. They can also buy green power from exchanges.

    This comes at a time when sustainable energy, environmental preservation, and energy transformation have taken centre stage in India's government policy. India has vowed to be carbon neutral by 2070 at the COP26 meeting in Glasgow last year.
  3. Energy giants have already started making the switch.

    Since green hydrogen would replace traditional fuel, some of the biggest companies in India have already started making the shift.

    The Gas Authority of India (GAIL) India's largest state-owned natural gas company, is building the country's largest green hydrogen plant.

    Meanwhile, NTPC is planning to produce green hydrogen on a commercial scale.

    The PSU plans to set up its first green hydrogen fuelling station in Leh, Ladakh. It will ply 5 hydrogen buses, to start with.

    Mukesh Ambani’s Reliance Industries too has announced plans to invest Rs 750 bn in renewable infrastructure including generation plants, solar panels, and electrolysers.

    Some of the other companies that are investing in the hydrogen space are -

    Adani Enterprises

    Indian Oil

    Larsen & Toubro

    Oil India


    Please note, these are not recommendations by any stretch.

  4. Green hydrogen cells could replace li-ion cells in electric vehicles (EVs)

    Lithium-ion (Li-ion) cells are the heart of electric vehicles.

    Since they weigh much less than other rechargeable batteries and hold their charge well, they have become a mainstay of EVs.

    However, these batteries are the most expensive component in EVs, accounting for 40-50% of its cost. They are also unstable in extreme heat and can cause fires.

    Enter green hydrogen cells. These cells are powered by hydrogen, the third-most abundant element on the earth while their emissions are only water.

    They are also known to outperform li-ion cells when it comes to higher range and speeds and refuelling them only takes a few minutes.

    Green hydrogen could really change the EV landscape.

Sounds exciting, doesn’t it?

There are various ways you can cash in on this green hydrogen wave...

  1. Buy stocks of energy companies that produce green hydrogen or have plans to
  2. Buy stocks of companies that produce the equipment for generating green hydrogen such as electrolysers.
  3. Invest in heavy industries like freight, steel, and energy storage that will support the green hydrogen ecosystem.

However, before you do, here’s a list of things you need to keep in mind before taking the leap -

  1. Hydrogen research in the country, in general, is underfunded.

    In the NDA's 2020-21 budget, only Rs 250 m was allocated to the Ministry of New and Renewable Energy for hydrogen-related R&D.

    In comparison, 700 million euros (Rs 61 bn) were offered by the German government to firms working on green hydrogen alone.
  2. Producing green hydrogen is an expensive undertaking

    The biggest cost is the electrolyser. The membrane-electrode unit accounts for 60% to 70% of its cost while precious metals account for the rest.

    Manufacturing at a greater scale could reduce these costs but since demand is limited, production capacities are yet low.

    According to the India Hydrogen Alliance (IH2A), India will require an estimated US$15 bn in public and private funding to set up 15 gigawatts (GW) of green hydrogen electrolyser capacity by 2030.

    This electrolyser capacity is expected to produce 3 million metric tonnes (MMT) of green hydrogen and would need 30 GW of renewable energy.
  3. Hydrogen is also an expensive fuel to move.

    The gas needs to be cooled to -252℃ before transportation. While it can be stored as ammonia, a more stable form, reconversion is expensive.

While policy and power market regulations released by the government are expected to boost green hydrogen development in the country, the truth is that the industry has a number of challenges to overcome.

So, view green hydrogen stocks with the same amount of caution as one would view other stocks. Do your due diligence.

A promising company must have a low debt-equity ratio, a strong track record of profitability, strong cash flows and a high ROE. It must also have solid backing of its promoters.

You are now on a strong wicket to go out and find the right green hydrogen stock for yourself.

If you need some more help, you can check out our article - 5 Indian Companies Leading the Green Hydrogen Revolution

You can also checkout our playlist on Green Hydrogen Stocks on Equitymaster's YouTube channel.


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Which are the best green hydrogen stocks in India right now?

As per Equitymaster's Indian Stock Screener, here is a list of the best green hydrogen stocks in India right now...

These companies have been ranked as per their PE (Price to Earnings) ratio. Generally, speaking, high PE stocks are considered to be expensive. And low PE stocks are said to be cheap.

Of course, there are other parameters you should take into account before forming a hard opinion on the stock valuation.

When should you invest in green hydrogen stocks?

The best time to buy stocks from this sector is when companies with strong fundamentals are trading at attractive valuations. At present, the country's entire production of hydrogen comes from fossil fuels. However, by 2050, three-fourth of all hydrogen is projected to be green. Governments all over the world are making the switch and India isn’t far behind.

The space is brimming with opportunities. There is an immense support from the government via earnest policy reforms. There are several ways to play this massive investment opportunity.

Where can I find a list of green hydrogen stocks?

The details of listed green hydrogen companies can be found on the NSE and BSE website.

For a curated list you can check out our list of green hydrogen stocks.