After the excitement surrounding hydrogen as a route to lowering global emissions, a message reinforced at the COP 26 climate summit, the poor performance of hydrogen investments over the last year is something of a surprise.

Research by analysts at Liberum shows that over the 12 months to mid-January, the average return for fuel cell and electrolyser companies has been a loss of around 60% of their market value.

For the largest stocks, such as US company Plug Power, the losses have been immense. Plug Power still has a market cap of $11.9 billion, yet its shares are down 69% meaning shareholders have seen over $25 billion of value wiped out in a year.

To a degree, hydrogen stocks have been a victim of their own success. Most of the quoted names floated in 2020 and were chased up by investors.

Many share prices in the sector raced ahead and that naturally led some investors to take profits while the going was good, particularly as many of these companies aren’t expected to generate positive earnings for several years. The sector then lost momentum and more investors started to lose interest.

This year’s sharp rise in gas and oil prices, which reflects the pressure to meet the global economy’s immediate energy needs, together with a spike in bond yields made investors even more cautious on hydrogen stocks, a big turnaround considering the hype in 2020.

Launched on 10 February 2021, L&G Hydrogen Economy ETF (HTWG) has since fallen by 37% in value. Key holdings include Weichai Power and Hyzon Motors have not had a good time on the stock market over the past year.

Behind the scenes, the hydrogen economy is growing steadily if unspectacularly. UK fuel cell makers AFC Energy (AFC:AIM) and Ceres Power (CWR:AIM) continue to sign commercial agreements and talk of a ‘strong pipeline of opportunities’ with industrial and energy partners both here and abroad.

Hydrogen fuel and energy storage firm ITM Power (ITM:AIM) has a substantial backlog of projects and an even more substantial pipeline of tenders compared with a year ago and is building a second UK factory to meet demand.

The energy giants themselves are stepping up hydrogen production, with Shell (SHEL) building a giant electrolyser at its site in Rotterdam utilising the skills of UK firms such as Pressure Technologies (PRES:AIM).

Moreover, new companies continue to come to market hoping to reap the benefits of the investment boom in hydrogen assets.

In 2021 investment fund HydrogenOne Capital Growth (HGEN) and ‘green’ hydrogen maker Atome Energy (ATOM:AIM) listed in London.

How soon any of them will turn a profit, if ever, must be up for debate, but their flotations show the hydrogen theme hasn’t gone away, it may just be dormant.

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