The global hydrogen market was worth an estimated $120bn in 2020. The market is expected to grow at a compound annual rate of 6% per annum over the next decade as this technology plays a vital part in the green energy revolution.
Considering this projection, I have been searching for high-quality hydrogen stocks to add to my portfolio. I have come across at least two companies that I would invest £5,000 in right now to capitalise on the market opportunity.
Hydrogen stocks for growth
As the hydrogen sector is still in its early stages of development, I am not willing to invest a large percentage of my portfolio in the green energy sector.
Most companies are still at the experimental stage, and many are likely to fail before commercialising their products. Still, I believe some businesses are better positioned than others.
Ceres Power (LSE: CWR) is a great example. Last year, it raised over £200m from investors to fund its growth plans. This should give the firm the resources it needs to push its growth plans forward over the next few years. It also removes the risks of the group running out of cash.
At the same time, Ceres has inked deals with some major manufacturers to licence its hydrogen production technology. Chinese engine specialist Weichai and Ceres are collaborating on a fuel cell for commercial vehicles. German manufacturing giant Bosch has also joined the duo.
As well as this venture, South Korean multinational conglomerate Doosan is building a £90m plant to manufacture Ceres’s technology.
These agreements mean the firm is miles ahead of its competitors and much further along the path of getting its tech to market.
Still, there could be further challenges along the way. This market is incredibly competitive, and there is no guarantee the company’s technology will perform better than peers over the next 10 to 20 years. There is always the chance a cheaper technology could emerge.
Growing green energy publicity
AFC Energy (LSE: AFC) is an expert in alkaline fuel-cell technology, which gives it a competitive edge. More importantly, the company’s technology is already out there, generating publicity and revenue.
Back in November, AFC demonstrated its Extreme E hydrogen fuel cell generator to the Prince of Wales at the COP26 conference. The fuel cell helps Extreme E racing vehicles produce clean, green hydrogen wherever they are in the world.
This is the sort of edge I am looking for in speculative hydrogen stocks. AFC has been building its presence in the market, and while the company is not yet earning much cash, this publicity could be worth its weight in gold.
Nevertheless, just like Ceres, AFC faces risks. These include potential funding issues and completion from peers. Its publicity is not worth much if the firm does not have the funding to keep the lights on.
Despite these challenges, I would invest part of my £5k lump sum in AFC alongside Ceres today, considering its potential over the next few years.