Shares in London-listed hydrogen companies were up over 10% on Monday as the market anticipated a major overhaul from the European Union of energy policy to reduce dependence on Russian oil, gas and coal after the invasion of Ukraine and subsequent sanctions illuminated the bloc's over-reliance.
Ceres Power Holdings PLC (AIM:CWR, OTC:CPWHF) and ITM Power were both up around 10%, while ATOME Energy PLC (AIM:ATOM) and AFC Energy PLC (AIM:AFC, OTC:AFGYF, ETR:QC8) were up almost 6% and Powerhouse Energy Group PLC (AIM:PHE, ETR:BT81) up 2%, while wind and solar energy investment trusts were little moved.
Days of talks between EU leaders in Paris have included potentially phasing out the reliance on Russian energy by diversifying sources of supply, increasing investment in renewables and improving interconnections in gas and power markets between other countries, according to reports from Bloomberg and Reuters.
Other improvements potentially to be included in the agreement were investing more in energy efficiency, introducing subsidy mechanisms to promote renewables investment, and improving contingency planning.
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Ahead of the full announcement, Germany's Chancellor Scholz told reporters that diversifying the EU's energy supplies in the near term is "not feasible", though Berlin said it would increase its Energy And Climate Fund to about €200bn by 2026 without the need to raise any additional debt.
A planned new energy strategy would be unveiled by the European Commission on Tuesday, which would also result in the bloc making a faster implementation of its previously stated green reforms.
Analysts at UBS noted that hydrogen-related stocks continue to languish even though renewables and hydrogen "will presumably form part of [the] answer" to the continent's energy shortfall.
Stocks like US fuel cell producers Ballard Power Systems Inc. (NASDAQ:BLDP, TSX:BLDP) and Plug Power (NASDAQ:PLUG) and electrolyser companies such as London-listed ITM and Norway's NEL ASA have fallen by an average of 45% over the last 12 months, UBS noted.
"Of course the appetite for growth stocks has been the main influence here but the irony is not lost on us that, in a recent period when Europe's over-reliance on fossil fuels was illuminated by the Ukraine/Russia situation, hydrogen debates continue to languish," said analyst Andrew Scott.
Germany's Wacker Chemie could be a major beneficiary of solar demand growth, UBS said, with it deriving around 25% and 35% of sales and EBITDA respectively from polysilicon, a key raw material for solar panels.
"Stimulus for European solar could not only increase global capacity utilisation for polysilicon but it could also leave 'buy'-rated Wacker in a strong position to secure favourable long-term contracts for its European production in Germany."
UBS also highlighted France's Air Liquide and Germany's Linde, both 'buy'-rated, "offered significant long-term upside from hydrogen".