Hydrogen Economy

Sector thesis

The hydrogen economy is the shift toward using hydrogen gas as a clean fuel and industrial feedstock, replacing fossil fuels in heavy industry, long-haul transport, and power generation. Right now, most hydrogen comes from natural gas—a process that releases carbon. The sector's growth hinges on scaling "green hydrogen," made by splitting water using renewable electricity. This matters because heavy industries like steel, cement, and chemicals can't easily electrify; they need a fuel that burns hot. As climate regulations tighten and companies commit to net-zero targets, hydrogen becomes one of the few viable paths forward for hard-to-decarbonize sectors. Three sub-categories define the sector: (1) electrolyzer makers—companies building the machines that split water into hydrogen and oxygen; (2) hydrogen producers and infrastructure—firms building plants and pipelines to make and distribute hydrogen; (3) end-user adoption—industrial companies retrofitting factories or vehicles to run on hydrogen. Each faces different timelines and risks. The biggest risk is that hydrogen remains expensive. Green hydrogen costs roughly 2–3 times more than fossil-fuel hydrogen today. Without sustained subsidies or carbon pricing, industrial buyers may not switch. Second, infrastructure barely exists—there's no network of hydrogen stations or pipelines in most regions, creating a chicken-and-egg problem. Third, technological uncertainty: some hydrogen applications work well (ammonia production); others (passenger cars) may lose out to battery electric vehicles. For a retail portfolio, hydrogen is a long-term, volatile bet. It's not a core holding but a satellite position in a climate-tech allocation. Watch for: government hydrogen subsidies (they directly affect demand), electrolyzer cost reductions (a sign the technology is maturing), and corporate commitments from heavy industry. This sector rewards patience and stomach for volatility.