Is Hydrogen The Green Dream Or Just Overpriced Hot Air? This Hedge Fund Is Betting On A Burst

The founder and chief investment officer of Argonaut Capital Partners, Barry Norris, is cautioning investors against pursuing hydrogen investments, predicting bleak returns in the near future.

What Happened: Norris recently expressed his skepticism about the sustainability of several business models in the hydrogen industry, terming them a “complete waste of time” in an interview, as reported by Bloomberg.

He’s even gone so far as to place short bets against some of these firms, anticipating their stock prices will tumble, though he remains tight-lipped about which ones.

His comments come at a time when the green technology sector is under scrutiny.

While some stakeholders view hydrogen as a crucial component in curtailing greenhouse gas emissions, others see it as an overpriced distraction. Hydrogen, a potential energy source with minimal CO2 emissions, faces hurdles in production, primarily because the most common and cheapest methods rely on fossil fuels.

See Also: US Energy Department Announces First Funding For Underground Hydrogen Energy

The growing debate around hydrogen investments highlights the challenges and uncertainties that investors face in the green technology sector. While the potential for hydrogen as a clean energy source is undeniable, the practical issues of cost and production methods remain significant obstacles. This divide in opinion underscores the need for more research and development in the sector to make hydrogen a viable and cost-effective energy source.

The Green Energy Conundrum

Unlike its renewable cousins, solar and wind, hydrogen requires extraction. The most prevalent and economical methods currently hinge on fossil fuels.

The purest form, green hydrogen, splits water into hydrogen and oxygen using renewable energy. But the steep price tag of this process has investors, including Norris, raising their eyebrows.

He points to the significant capital costs of building electrolyzers, emphasizing the need for a consistent power source to make the investment worthwhile.

Subsidies And Skepticism

The U.S. Inflation Reduction Act, signed just over a year ago, has spurred a 58% surge in low-carbon hydrogen project announcements, as per BloombergNEF’s analysis. Yet, Norris said only hydrogen produced using fossil fuels, hydro or nuclear energy can compete cost-wise. Weather-dependent power sources, he argues, will inherently have lower capacity utilization.

The staggering $280 billion in subsidies announced globally for the low-carbon hydrogen sector, a fourfold increase since 2021, hasn’t shielded stocks from plummeting.

The Global X Hydrogen ETF HYDR has seen a 40% decline over the last year. Its major players, Bloom Energy Corp. BE, Plug Power Inc. PLUG and Ballard Power Systems Inc. BDLP, have suffered losses of 42%, 73%, and 50%, respectively.

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This content was partially produced with the assistance of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock.