SocGen says $500 billion is about to pour into hydrogen — and picks the stocks to cash in

Published Tue, Nov 9 20216:30 PM EST

Analysts at Societe Generale have cut through the "serious hype" surrounding clean hydrogen and picked their top stocks in the sector. The French bank said total investment in the hydrogen industry is expected to hit $500 billion by 2030. "The quantity of global hydrogen projects has been accelerating recently," the bank's analysts, led by Roland Kaloyan, wrote this month. "Total announced investment shows increasing momentum across all regions." It comes amid a growing focus on the potential role that hydrogen could play in a global clean energy transition. Hydrogen is produced via a process called electrolysis — which splits water into hydrogen and oxygen — and has been touted as a cleaner alternative to conventional fossil fuels such as diesel or gasoline. Green, or clean, hydrogen uses renewable energy to power electrolysis. Despite its potential, a "hydrogen economy" is a still a long way off, the analysts said, although they stressed that "we are already on a path to scaling up hydrogen." Investors are also waking up to hydrogen's untapped potential. Societe Generale noted that assets under management of hydrogen-related exchange-traded funds have risen from $0 to more than $600 million since the beginning of 2021. Stock picks Societe Generale compiled a list of 115 stocks with exposure to 12 industries related to clean hydrogen. " We aim to build a global equity basket that offers an option to investors on the potential development of a clean (i.e. low-carbon) hydrogen economy," the analysts wrote. "This means identifying companies that would be involved at any stage of the hydrogen value chain: production, distribution and/or utilisation." The bank picked U.S. hydrogen fuel company Plug Power as a " pure player" in the industry, noting that the company's five green hydrogen plants in the U.S. could "substantially increase free cash flow." It also likes industrial giant Honeywell , which it highlighted is working with a partner to produce carbon-neutral aviation fuel that could eliminate lifecycle greenhouse gas emissions. Other capital goods manufacturers that make Societe Generale's list include Airbus , hydrogen train manufacturer Alstom , construction equipment maker Caterpillar , industrial conglomerate General Electric and Japanese trading firm Sumitomo . In the automobiles and components sector, Societe Generale likes Japanese auto giant Toyota . The company is partnering with Japanese refiner Eneos (also one of Societe Generale's picks in the oil and gas sector) to explore the utilization and application of hydrogen energy at Woven City — Toyota's "prototype city of the future." The company is also developing a vehicle outfitted with a hydrogen-fueled combustion engine for release in 2025. Other picks in the oil and gas space include energy giants Royal Dutch Shell , Chevron , BP and Hong Kong-listed China Petroleum . Shell has a leading position in the hydrogen market with more than 50 operating stations globally, the analysts said. Meanwhile, BP expects to have "double-digit" clean hydrogen share in its core markets by 2030, the bank added. China Petroleum, more commonly known as Sinopec, is China's largest hydrogen producer. Korea's largest automaker Hyundai , Japan's Honda , French-headquartered Renault and German automotive manufacturer Daimler are Societe Generale's other picks in the automobiles and components sector. In the chemicals sector, the bank likes French industrial gases company Air Liquide , which it said is aiming to triple its hydrogen-related revenues to more than €6 billion ($7 billion) before 2035. The analysts also noted that Germany's Linde has made "significant progress" in its clean hydrogen drive, with up to 90,000 million tons of carbon dioxide emissions avoided annually as a result of the company's various initiatives. NextEra Energy , the world's largest utility company, is "doubling down" on green hydrogen, according to Societe Generale, and also makes its list. As does Spanish utility giant Iberdrola , which is accelerating investments in the green hydrogen ecosystem, and Germany's RWE , which has a pipeline of 30 projects along the renewables and hydrogen value chain, the analysts said.

A liquid hydrogen tanker truck taking a fuel delivery at the Linde hydrogen plant in Leuna, Germany, on Tuesday, July 14, 2020.

Rolf Schulten | Bloomberg | Getty Images

Analysts at Societe Generale have cut through the "serious hype" surrounding clean hydrogen and picked their top stocks in the sector.