The UK, Europe, and the US have made renewable energy part of their ‘build-back-better’ plans for post-Covid economic recovery. Russia’s invasion of Ukraine has led many countries to rethink their future energy security. And, more broadly, hydrogen is seen as a key element in the global drive to reduce emissions from energy consumption and achieve net zero by 2050. Some analysts estimate the hydrogen economy could be worth more than $10 trillion by that time.

What are hydrogen stocks?

Hydrogen stocks are companies in the renewable energy industry that are primarily focused on the development, manufacture, or sale of hydrogen fuel technology, equipment, or services.

Given the potential size of the market, it’s not surprising to see oil giants, like BP, major utilities, like SSE, and chemical companies, like Johnson Matthey, in the early stages of incorporating hydrogen energy into their business plans. 

However, there are a number of firms focused exclusively, or almost exclusively, on the hydrogen economy. Some have been established for many years.

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Top hydrogen shares in the UK

Here are the UK’s biggest pure-play hydrogen stocks:

ITM Power

Founded in 2001, ITM Power became the first hydrogen company on the London Stock Exchange when it listed in 2004.

It has developed and manufactures proton exchange membrane electrolysers, which create green hydrogen using only renewable electricity and water. It has a partnership with Linde, the world’s largest industrial gas company, which also owns 16% of ITM’s shares. Other partners include oil giant Shell and leading European natural gas transport and storage operator Snam.

City analysts are forecasting a step-change in ITM’s revenue to over £50m in its 2023 financial year.

Key metrics:

• Market cap: £1,305m (as of 13 June 2022)
• Average daily volume: 3.3m
• HQ: Sheffield, UK
• Cash/debt: £364m/no borrowings (as of 30 April 2022)

Ceres Power Holdings

Also founded in 2001, Ceres Power joined the stock market a few months after ITM in 2004. It’s the UK’s other hydrogen stock with a market capitalisation in the £1bn+ category.

The company has developed solid oxide fuel cell technology for hydrogen production. Its strategy is to license its technology to global original equipment manufacturers and generate royalties as those manufacturers achieve full-scale commercialisation. Its partners include China’s Weichai Power and Germany’s Bosch. The former owns 20% of Ceres’s shares and the latter 18%.

Analysts have pencilled-in revenue of around £40m for Ceres in 2023.

Key metrics:

• Market cap: £1,010m (as of 13 June 2022)
• Average daily volume: 1.0m
• HQ: Horsham, UK
• Cash/debt: £245m/no borrowings (as of 31 December 2021)

AFC Energy

Founded in 2006 and listed on the stock market in 2007, AFC Energy is one of a number of UK hydrogen stocks currently capitalised in the £100m-£200m bracket.

The company has developed alkaline fuel cell systems that use hydrogen to produce clean energy. It has inked a number of strategic collaborations including with Swedish/Swiss technology multinational ABB, a leading provider of electric vehicle charge points and electrification and digitalisation technologies. ABB also subscribed for £3.25m AFC shares in a subsequent fundraising.

City analysts are forecasting AFC’s revenue to break through £10m for the first time in 2023.

Key metrics:

• Market cap: £169m (as of 13 June 2022)
• Average daily volume: 3.7m
• HQ: Cranleigh, UK
• Cash/debt: £55m/no borrowings (as of 31 October 2021)

Proton Motor Power Systems

Proton Motor Power Systems was formed and listed on the stock market in 2006 to fund the commercial development of research and pilot fuel cell projects conducted in Germany over the previous decade.

The company has developed a hydrogen fuel cell module integrated with an energy storage system to create an electric fuel cell hybrid system with a zero-carbon footprint. Historical revenue is running below £3m and there are currently no financial forecasts on the company available.

Key metrics:

• Market cap: £147m (as of 13 June 2022)
• Average daily volume: 0.4m
• HQ: Newcastle-upon-Tyne, UK
• Cash/debt: £2m/£84m (as of 31 December 2021)

Hydrogenone Capital Growth

In July 2021, Hydrogenone Capital Growth became the first hydrogen investment company listed on the London stock market. By the end of the year, it had deployed almost half the £105m funds it had raised at its flotation.

Around 9% of the capital (£10m) was invested in 19 international hydrogen stocks. It expects these companies to be the eventual leaders in the listed hydrogen market. Its UK picks were ITM Power, Ceres Power, and AFC Energy.

However, Hydrogenone’s performance will rest more on its larger investments in a smaller number of unlisted firms in the sector. For example, it’s invested £10m in Bramble Energy, which has pioneered a printed circuit board fuel cell solution.

Key metrics:

• Market cap: £122m (as of 13 June 2022)
• Average daily volume: 0.2m
• HQ: London, UK
• Cash/debt: £34m/no borrowings (as of 31 December 2021)

Clean Power Hydrogen

As mentioned, ITM is London’s largest and first-listed hydrogen stock, and a leader in proton exchange membrane electrolysers. By contrast, newly listed (February 2022) Clean Power Hydrogen is aiming to ramp-up commercialisation of membrane-free electrolyser technology. It says this technology, in combination with cryogenic gas separation, delivers very high purity hydrogen and medical-grade oxygen.

One analyst suggests the company could see revenue of close to £30m by 2023.

Key metrics:

• Market cap: £110m (as of 13 June 2022)
• Average daily volume: 0.1m
• HQ: Doncaster, UK
• Cash/debt: £0.5m/£0.4m (as of 31 December 2021)

Investing in US hydrogen shares

Despite a fair range of hydrogen stocks on the UK market, there are some larger enterprises in this sector on foreign exchanges. Here are the leading US players in order of market capitalisation:

• Plug Power
• Bloom Energy
• Ballard Power Systems
• FuelCell Energy

Are hydrogen stocks right for you?

There’s little doubt the hydrogen economy will increase to many multiples of its current size in the coming decades. With such a strong structural backdrop for growth, investing in hydrogen shares could be highly rewarding.

Having said that, stocks in the sector also come with higher risk. The businesses are at an earlier stage of development than some in other areas of the renewable energy market. All of the six UK hydrogen companies and four US names featured are currently loss-making businesses. In addition, they’re not forecast to generate positive cash flows any time soon, far less pay dividends. As such, these won’t be the right stocks if your primary focus is on income.

As the hydrogen market grows, and rival technologies are put to the test when the full competitive dynamics of the industry emerge, there are likely to be winners and losers. If you’re prepared to accept above-average risk in exchange for potential high capital returns from the long-term winners, investing in green hydrogen stocks might be right for you.

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Proton Motor Power Systems

The news flow coming out of Proton Motor Power Systems (LSE: PPS) has been highly encouraging in recent weeks. Yet this hasn’t prompted an improvement in the company’s share price so far (it remains 63% cheaper than at this time last year). I think the market has missed a trick here and would consider buying Proton today.

This penny stock manufactures stationary power units and fuel cells for cars, boats, and trains that utilise hydrogen technology. And earlier this month it announced it had made “a promising start to 2022” with €1.3m worth of orders booked so far. This adds to the €3.2m worth of orders Proton booked last year.

I think Proton Motor Power System’s profits could soar as the climate emergency drives demand for cleaner energy systems. Competition from alternative power sources remains a threat, of course, but I think the potential size of the hydrogen market still makes it a top stock for me to own. 

Creightons

Beauty and personal care product maker Creightons (LSE: CRL) remains 3% more expensive that it was 12 months ago. But the share price has plummeted around 50% from September’s record peaks as investors fear the impact of rising inflation on consumer spending.

This is a risk I need to consider, along with the possibility that demand for Creightons’ hand sanitiser could sink as the pandemic recedes. However, on balance I believe the penny stock is still an attractive investment target. I think demand for its skincare and healthcare products could rise strongly as people get out and about again following Covid-19 lockdowns.

I’m also encouraged by Creightons’ acquisition of the Emma Hardie and Brodie & Stone brands last year to strengthen its branded product ranges. The business has a cash-rich balance sheet which could help it hunt for more takeover targets as well.

Triple Point Social Housing REIT

The Triple Point Social Housing REIT (LSE: SOHO) share price has fallen 16% in value over the past year. This has consequently taken the company firmly into penny stock territory. As a long-term investor I think this weakness makes it an attractive dip buy.

Triple Point provides accommodation for individuals with special needs. This is a market which is tipped for strong growth — the London School of Economics has previously said that 200,000 new specialised supported housing units will be needed between 2015 and 2030. The business is highly active on the acquisition front to fully capitalise on this opportunity too.

Changing government policy regarding social housing funding could hit Triple Point’s profits hard. But as things stand today I believe the business remains a great stock to buy for solid long-term returns in my portfolio.

Gas giant

The hydrogen fuel cell market could be set for spectacular growth as demand for low-carbon energy rises. I’m thinking of buying shares in Proton Motor Power Systems (LSE: PPS), the manufacturer of stationary power units as well as fuel cells for cars, boats and trains, to realise these opportunities.

Analysts at Researchandmarkets.com have estimated that the global hydrogen fuel cell market could be worth $16.5bn by 2025. That’s up considerably from the $3.9bn it’s currently valued at. Promisingly, Proton continues to rack up contract wins and last month announced that a subsidiary of German rail operator Deutsche Bahn had ordered one of its modular fuel cell systems.

I think Proton could be a top buy for 2022 and beyond. Though I am mindful that the business still faces colossal competition from manufacturers of familiar power technologies like internal combustion engines and wind turbines.

Brogue trader

Soaring inflation means that value for money will become increasingly important to shoppers in 2022. This is why I’m thinking of buying Shoe Zone (LSE: SHOE) for my investment portfolio. This retailer sells a wide range of footwear at cheaper prices than much of the high street (an average of £10 a pair).

Shoe Zone already has a head of steam heading into the new year as inflation pressures consumer confidence. Last month it hiked its profits forecasts for the financial year to September 2022. I don’t just think the low-cost retailer is simply a good buy for the near term however. Studies show that the importance of value to shoppers has grown strongly even before recent economic downturns.

My main concern for Shoe Zone is the prospect of Covid-19 lockdowns that could shutter its 400-odd stores. The retailer sources just a quarter of group revenues from its website. Shoe Zone trades just outside penny stock territory at around 105p per share.

Ground control

I think Van Elle Holdings (LSE: VANL) is set to ride the construction boom in Britain. As a provider of ground engineering services for housebuilders, it’s in pole position to benefit from the residential building boom. The UK needs to build 345,000 new homes a year, according to estimates, and Britain’s housebuilders are ramping up production to ease the shortfall.

Furthermore, Van Elle offers geotechnical expertise in rail, utilities, roads, airports and power generation projects (including renewable energy assets), as well as other types of essential infrastructure. Its knowledge in critical projects like these provides a layer of security to investors. It can expect demand for its services to remain stable, regardless of broader economic conditions.

A high-profile service failure is a constant operational risk facing Van Elle. It could have serious implications for profits and cause severe damage to the company’s business. Having said that, it’s my opinion that this penny stock remains highly attractive from a risk/reward perspective.

Here are some top dirt-cheap stocks that are on my radar following recent price weakness.

Say cheese

Strong trading has brought Arabian Food Industries Company Domty (LSE: DOMT) into my crosshairs. This London-quoted share supplies a broad range of cheeses in the Egyptian food market under the Domty brand. And sales here have been going much stronger than anticipated (turnover jumped 32% year-on-year in the third quarter).

I’m confident Domty could experience strong and sustained sales growth too. Certainly as population levels in Egypt rise strongly and personal wealth levels increase. The country’s population grew almost 2% in 2020, for instance, World Bank statistics show. Despite the threat of rising raw material prices, I think the food producer could prove an excellent long-term buy.

A penny stock to ride the EV boom

Getting exposure to the green vehicle revolution is another great idea in my opinion. I’ve sought to do so by buying shares in TI Fluid Systems, a UK share which builds fluid-carrying components for automobiles. And I think investing in penny stock Proton Motor Power Systems (LSE: PPS) could be another good way to play this theme. The hydrogen fuel cells it produces can be used for a variety of purposes, including powering cars.

Tesla’s Model 3 was the best-selling car in Europe in September, a landmark moment in the history of low-carbon vehicles. It’s the first time a battery-powered car has sat at the top of the charts, and illustrates how strongly demand for reduced emissions vehicles is.

Hydrogen-propelled autos are tipped for strong and sustained growth as part of this revolution. Remember though, a failure by lawmakers to build the required refuelling infrastructure could hit uptake hard and, by extension, profits at companies such as Proton Motor Power Systems.

Primed for take-off

Air Partner (LSE: AIR) is a UK share that’s not without its risks either, as the Covid-19 crisis escalates again in many regions. The business supplies a wide range of aviation services, from chartering large aircraft and private jets through to providing consultancy on safety and security. This means the brakes could be slapped on its operations if rising infection rates prompt fresh waves of travel restrictions.

However, I still like the risk-to-reward profile of Air Partner a lot. I’m encouraged by steady growth in the number of high-wealth individuals and what this means for the private jet market.

I also think demand for charter planes could receive a sustained pandemic-related boost as these people cut back on using standard carriers. Finally, I like the penny stock’s ambitious approach to acquisitions to turbocharge earnings growth.

Hydrogen play motors on

Many UK shares involved in the green revolution can offer investors like me a chance to make some cash. This is where Proton Motor Power Systems (LSE: PPS) comes in, a business which makes hydrogen fuel cells for cars, ships and trains. It also builds stationary units to power homes and businesses, and makes hydrogen-based hybrid engines for automobiles as well.

News coming out of the company has been mightily bright in recent weeks and months. The penny stock inked its first order with Electra Commercial Vehicles last month to power a prototype refuse collection truck. It also signed another contract with E-Trucks Europe to supply seven hydrogen cell systems for a fleet of rubbish trucks.

Demand for Proton Motor Power Systems’ stationary units is also encouraging and last week it reported another order from aerospace and automotive giant GKN to supply more of its ‘S8’ autonomous fuel cell systems. GKN has now taken 25 of these systems off the small-cap’s hands.

The escalating climate crisis is supercharging the need for low-carbon electricity generation. But that’s not to say PPS is nailed on to succeed. Competition from existing power technologies, and particularly those which can be adapted to reduce their emissions, remains a problem. The company also faces intense competition from other operators in the low-carbon-electricity field.

Another cheap UK share I’m considering buying

While Proton Motor Power Systems trades well within penny stock territory, below 40p, Flowtech Fluidpower (LSE: FLO) is another cheap UK share which formerly traded under the £1 benchmark.

And it’s another one I’m thinking of adding to my Stocks and Shares ISA. But recent strength has seen it soar above penny-stock status and given it a chunky forward price-to-earnings (P/E) ratio of 21 times.

A high-ish rating like this could cause Flowtech’s shares to sink in value if market sentiment around the company starts to worsen. Still, for the time being, I think things are looking rosy for the UK firm which manufactures hydraulic and pneumatic systems used by industrial companies to create and control power. I think it can expect sales to steadily get better as the economic recovery clicks through the gears.

However, demand for its high-tech products remains below pre-pandemic levels. Revenues in the first half of 2021 remained 7.2% lower than they were in the first half of 2019. But business is starting to snap back sharply and, for the six months to June, sales were up almost 20% from a year earlier.

Remember however, fresh flare-ups in the global health crisis could derail Flowtech’s recent rebound. They could threaten to damage the bounceback in the UK engineering share’s global end markets, not to mention disrupting its supply chains.

Lakehouse

Shares in asset and energy support services company Lakehouse (LSE: LAKE) have fallen by around 7% today after it released a somewhat mixed trading update. Its Regeneration division continues to create challenges for the business, with Lakehouse now anticipating that there will be further writedowns during the current financial year as it seeks to close out issues with contract settlements. This is expected to have an adverse impact of £4m on its full-year results.

However, Lakehouse is also experiencing strong underling trading elsewhere in its business and today announced a £37m contract win from Scottish Power to install domestic smart meters across Scotland, Wales and North West England. And with Lakehouse expected to return to double-digit bottom-line growth next year, its shares trade on a price-to-earnings growth (PEG) ratio of just 0.4. This indicates that while investor sentiment may be weak at the moment, there’s good value on offer for long-term investors.

Hornby

Despite releasing no significant news today, shares in Hornby (LSE: HRN) have risen by 7%. However, they’re still down by 67% year-to-date as the financial strength of the hobby products producer has been called into question by some investors. However, with Hornby having undertaken a successful placing to raise £8m in recent weeks, its balance sheet is now much stronger than it was previously and this lowers its risk profile considerably.

Furthermore, the placing should allow Hornby to execute its new business strategy. This includes a major cost reduction plan as well as a more focused product range. While Hornby intends to keep its main brands, it will also streamline its European operating model and seek to exit unprofitable concessions. Although this strategy seems sound and could work, Hornby continues to offer a very uncertain outlook and therefore it may be prudent to await evidence of a successful turnaround before buying it.

Proton Power Systems

Rising by 86% today is Clean Tech total power solution provider Proton Power Systems (LSE: PPS). It has today announced a major restructuring due to it seeing major growth ahead in the Clean Tech market, with its business set to be split into three segments. These are Stationary business, Mobile business and Maritime business, with Proton expecting to deliver year-on-year revenue streams as the commercialisation of its core technology is now realised.

Furthermore, Proton is on track to increase its sales by 250% this year and due to it seeing proof that the fuel cell technology it offers is commercially attractive to customers, Proton’s long-term outlook is now much more positive. Certainly, it remains a relatively high-risk play, but with clean energy becoming more in-demand and Proton now having a clear structure through which to take advantage of this, now could be a good time for less risk-averse investors to buy it.