As the global climate warms, governments around the world are committing to a carbon-free future. Hydrogen is seen as part of the solution – as a clean energy source of the future. You can invest in hydrogen stocks and profit from this trend with our Hydrogen ETF, the VanEck Hydrogen Economy UCITS ETF.
Risk Factors of a Hydrogen ETF: Equity Market Risk, Liquidity Risk, Limited Diversification Risk, Risk of Investing in Smaller Companies, Risk of Investing in Energy Sector, Foreign Currency Risk .
Hydrogen is increasingly being hailed as the energy source of the future. There have been 680 major project proposals worth $240 billion, but only about 10% ($22 billion) have reached a final investment decision. Europe leads in proposed projects (~30%), China is slightly ahead in actual deployment of electrolyzers (200 MW), while Japan and South Korea lead in fuel cells (more than half of the 11 GW global production capacity).1
Hydrogen can be produced from water and, if produced with renewable energy, does not contribute to atmospheric CO2. In addition, its high energy density makes it more suitable than electric batteries for powering particularly heavy objects such as aircraft and ships.
Storage of hydrogen is yet another problem that portfolio companies of the Hydrogen ETF are trying to solve. Hydrogen can currently be stored in its pure form as gas or liquid. The former option requires high-pressure tanks, while the latter asks for cryogenic equipment to lower the temperature to below the boiling level of -252.8 degrees Celsius. Both methods are pretty complex and are more suitable for large storage facilities rather than being equipped inside a transport vehicle. Another option is the chemical storage of hydrogen (adsorption or absorption by other materials). Finding more efficient ways of storing hydrogen is essential to broadening application areas.
Looking ahead to 2050 – the date by which many major economies aim to be carbon neutral – leading consultancies predict that hydrogen will play an important role in a wide range of applications. These include: Buses, ships, current buffers, industrial heating, building heating, steel production etc. As wind turbines and solar cells become more widespread, a low-cost renewable energy source will be available to power the electrolysers used to produce hydrogen. Enabling hydrogen use comes with its costs, as the whole ecosystem needs to be reshaped, new fueling stations needs to be built. While many developed countries would not have major issues investing in this transitions, low-income economies might find it hard to bear these expenses.
There are many innovative hydrogen initiatives already live or in development: take a part in them with VanEck's Hydrogen ETF.
Hydrogen-powered planes are already in development. Airbus has developed several concepts for zero-carbon flight, aiming to fly a commercial aircraft by 2035.3 But other companies and start-ups are also working on similar projects. For example, an airplane nicknamed “Lightning McClean” developed by the Universal Hydrogen company made its first flight on hydrogen instead of fossil fuels in March 2023.4
3 Source: Airbus.
4 Source: Euronews.
Alstom has developed a hydrogen-powered train, which is already carrying passengers in several countries.5 The hydrogen train provides an attractive alternative to train run on diesel on lines that have not yet been electrified. Increased popularity of this mode of transport is growing each year. For example, German transport company RMV has ordered the world’s largest fleet of hydrogen trains to connect Frankfurt with several small cities around it. Hydrogen-fueled trains are competing with regular electric trains as the electrification of railways might be considered more optimal comparing with additional costs of building hydrogen infrastructure and taking into account costs of fuel.
5 Source: Alstom.
Trucks are one of the most important means of goods transport in the European Union, accounting for almost a quarter of all tonne-kilometres7. Finding more environmentally friendly solution is necessary, therefore hydrogen truck manufacturing and fuel station construction is underway in Europe. It’s led by companies like Nikola, Iveco and Volvo. The future might come sooner than later, as Volvo tested hydrogen-powered trucks in May 2023 on public roads. The company expects to begin its commercial production in the second half of the decade.8 The main challenge to the hydrogen trucks actually might come from eTrucks, which are also under development by many other companies. They could use already existing charging infrastructure, which is a very important factor for automotive industry. On top of that, the well-to-wheel efficiency of modern electric cars is between 70 and 90 percent, while hydrogen fuel cells allow for 25 to 35 percent9, which presents a significant obstacle.
7 Source: European Commission.
8 Source: Volvo.
9 Source: InsideEVs.
The race is on to decarbonize steel, one of the biggest industrial emitters of CO2. Companies like ArcelorMittal, SSAB and ThyssenKrupp are beginning to use hydrogen gas to reduce iron ore.10 One of the first plants to implement this technology in Europe using hydrogen instead of coal is expected to be H2 Green Steel plant in northern Sweden by 2025.11
10 Source: Financial Times
11 Source: H2 Green Steel
Hydrogen has emerged as a potential alternative for use in houses, offering various benefits and challenges to consider. It can be used for heating, cooking, and powering appliances. However, there are challenges to overcome. Hydrogen has a lower energy density compared to natural gas, which means larger storage and distribution infrastructure would be required. Additionally, hydrogen is highly flammable and requires specific safety measures to be implemented in residential settings. Investments in safety technology and infrastructure will be crucial to ensure the safe use of hydrogen in houses. Given these challenges and the potential modification in the infrastructure needed, the future of hydrogen in our houses is still uncertain. Some of the companies actively exploring this opportunity are SGN and National Green with the pilot project in Scotland.12
12 Source: SGN.
Gain access to the innovative hydrogen equity companies that are making a critical contribution to building the hydrogen economy through the VanEck Hydrogen Economy UCITS ETF. This ETF invests globally in hydrogen stocks that derive at least 50% (25% for current components) of their revenues from hydrogen projects or have the potential to do so. It also invests in key players in the hydrogen ecosystem, including gas and fuel cell manufacturers. The hydrogen index on which the ETF is based is reviewed quarterly so that you can benefit from new hydrogen stocks entering the dynamic hydrogen economy.
The Fund covers the following parts of the ecosystem:
Exists when a particular financial instrument is difficult to purchase or sell. If the relevant market is illiquid, it may not be possible to initiate a transaction or liquidate a position at an advantageous or reasonable price, or at all.
The Fund may invest a relatively high percentage of its assets in a smaller number of issuers or may invest a larger proportion of its assets in a single issuer. As a result, the gains and losses on a single investment may have a greater impact on the Fund's Net Asset Value and may make the Fund more volatile than more diversified funds.
The securities of smaller companies may be more volatile and less liquid than the securities of large companies. Smaller companies, when compared with larger companies, may have a shorter history of operations, fewer financial resources, less competitive strength, may have a less diversified product line, may be more susceptible to market pressure and may have a smaller market for their securities. This is a further risk factor of a Hydrogen ETF.
