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JP Morgan warns hydrogen investors to be wary of over-optimism

The analysts believe a hydrogen revolution is gathering momentum to drive energy transition across several ‘hard-to-abate’ sectors

Nel hydrogen

Investors in the hydrogen sector should be wary of over-optimism about the progress of this renewable fuel versus other clean energy technologies, JP Morgan has warned.

The investment banking giant has carried out its own proprietary policy and economic analysis into the hydrogen economy, which found that green hydrogen – that which is created by through electrolysis using renewable energy sources – could be cost competitive across most regions by 2030.

What is known as blue hydrogen – where hydrogen is created using fossil fuels but the carbon dioxide emitted during the process is sequestered via carbon capture and storage – could be lower cost in North America.

“We believe a hydrogen revolution is quickly gathering momentum to drive energy transition across several ‘hard-to-abate’ sectors,” the JP Morgan analysts said.

“However, investors should also be wary of over-optimism given H2 adoption for some end-uses appears more challenging and less economic versus other low-CO2 alternatives.”

The analysts said they believe investing in hydrogen is “likely to remain challenging”, both with major corporates and smaller hydrogen-focused companies.

“After the dramatic performance of H2-focused stocks over 2020, we believe investors ought to take a more relative approach to the nascent H2 subsector,” they added.

In Europe, JP Morgan kicked off coverage of Norway's Nel ASA with a ‘neutral’ rating and ITM Power (LON:ITM) at ‘overweight’, adding to an ‘overweight’ rating on Nikola Corporation (NASDAQ:NKLA), ‘neutral’ on Bloom Energy Corp (NYSE:BE) and Plug Power Inc (NASDAQ:PLUG), and ‘under weight’ on FuelCell Energy Inc (NASDAQ:FCEL).

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