Why I Changed My Mind on Hydrogen

If I am being honest, for the longest time, I was a hydrogen bear. I looked at the physics, and it just didn’t make sense. Why take electricity, turn it into gas, compress it, ship it, and turn it back into electricity? You lose 60% of the energy in that process. Batteries are simply better for cars and homes. I stayed away from Investing in Green Hydrogen, viewing it as a distraction from the solar-battery revolution.

However, a visit to a green steel plant in Sweden in early 2026 changed my mind. I saw massive electrolyzers turning wind power into hydrogen. The plant then used this gas to strip oxygen from iron ore—a process that normally burns coal. No battery on earth could do that job. I realized then that while hydrogen is terrible for passenger cars, it is absolutely essential for heavy industry.

Nobody tells you this, but the investment thesis for hydrogen isn’t about replacing your Tesla. It focuses on decarbonizing the un-electrifyable sectors: shipping, aviation, steel, and fertilizers. My biggest lesson was simple. To make money in this sector, you have to ignore the consumer hype and focus on the industrial grit. In this article, I will break down how to approach Investing in Green Hydrogen without getting burned by the volatility.

The Rainbow of Hydrogen: Why «Green» is the Only Play

To be a smart investor, you must understand the color spectrum.

• Grey Hydrogen: Producers make this from natural gas. It emits massive amounts of CO2. This is the past.
• Blue Hydrogen: Companies use natural gas but capture and store the CO2. It is a transition fuel, but risky due to methane leaks.
• Green Hydrogen: Electrolyzers create this by splitting water with renewable electricity. It produces zero emissions.

In 2026, Investing in Green Hydrogen is the only strategy that makes sense long-term. Why? Because the subsidies—like the $3/kg tax credit in the US Inflation Reduction Act (IRA)—exclusively target low-carbon production. Governments are taxing Grey hydrogen while paying for Green hydrogen. I removed all «Grey» producers from my portfolio because their business model is effectively illegal in a Net Zero 2050 world.

The «Picks and Shovels» Strategy: Electrolyzers

During the gold rush, the miners didn’t make the most money; the shovel sellers did. In the hydrogen economy, the «shovel» is the Electrolyzer—the machine that splits water into hydrogen and oxygen.

Companies manufacturing PEM (Proton Exchange Membrane) and Alkaline electrolyzers represent the industry’s bottleneck. Demand from steel mills and ammonia plants currently outstrips supply by 300%. My strategy for Investing in Green Hydrogen focuses heavily on these manufacturers. I look for companies with:

1. Backlog Transparency: Verified orders, not just «Memorandums of Understanding» (MOUs).
2. Scalable Manufacturing: Factories that can churn out gigawatts of capacity, not hand-built units.
3. Efficiency Ratings: Machines that use less electricity per kilogram of hydrogen produced.

«Si te soy sincero, invertir en fabricantes de electrolizadores es volátil, pero es donde reside el verdadero foso tecnológico (moat).» Once a heavy industry plant commits to a specific electrolyzer ecosystem, they lock themselves in for decades.

The Infrastructure Play: Midstream

Hydrogen is notoriously difficult to move. It cracks steel pipes (embrittlement) and leaks through the tiniest molecules. Therefore, the companies that solve the storage and transport problem create massive value.

I have allocated a portion of my portfolio to «Industrial Gas Majors» (like Linde or Air Liquide). These boring, stable companies have handled industrial gases for a century. They own the pipelines, the cavern storage facilities, and the liquefaction tech. While the startups fight for survival, these giants quietly retrofit their existing infrastructure to handle green hydrogen. It is a safer, lower-beta way of Investing in Green Hydrogen.

The «Hard-to-Abate» End Users

Another way to invest involves buying the users of hydrogen who gain a competitive advantage. Green Steel serves as the prime example. In 2026, automakers pay a premium for «fossil-free steel» to lower the embedded carbon of their vehicles.

Steel companies that successfully transition to hydrogen-based Direct Reduced Iron (DRI) processes command higher margins. By investing in these forward-thinking industrial giants, I effectively bet on the demand side of the hydrogen equation.

The ETF Route: Diversification is Mandatory

If picking individual winners in such a nascent sector feels like gambling, ETFs (Exchange Traded Funds) act as your safety net. In 2026, funds like Global X Hydrogen ETF (HYDR) or Defiance Next Gen H2 (HDRO) offer a basket of companies across the value chain.

However, be warned: these ETFs are volatile. They often swing 30% in a single year. My strategy uses Dollar Cost Averaging (DCA). I buy a small amount every month, regardless of the price. This smooths out the peaks and valleys. I view my hydrogen allocation as «venture capital»—I expect 50% of the companies in the ETF to fail, but the winners to grow 100x.

Risk Analysis: The Efficiency Trap

The biggest risk in Investing in Green Hydrogen involves the laws of thermodynamics. As I mentioned, batteries offer better efficiency. If a company pitches «Hydrogen for Homes» or «Hydrogen for City Cars,» I run away. Batteries and heat pumps will win those use cases because they operate more cheaply.

I only invest in companies focused on:

1. Long-Haul Aviation/Shipping: Batteries weigh too much for planes and ships.
2. Seasonal Storage: Systems that store energy for months (batteries discharge over days).
3. Industrial Feedstock: Processes for fertilizer and chemicals.

If you invest in a company trying to put hydrogen fuel cells in sedans, you bet against physics. And physics always wins.

Comparison: Batteries vs. Hydrogen Investment Profile

My 2026 Strategy Breakdown

Currently, I allocate my «Green Speculation» bucket as follows:

• 50% Electrolyzer Manufacturers: Betting on the tech providers.
• 30% Industrial Gas Giants: Betting on the infrastructure incumbents.
• 20% Fuel Cell Heavy Transport: Betting on trucking/shipping specific tech.

I avoid «Hydrogen Production» startups that lack secured off-take agreements. Making hydrogen is easy; selling it at a profit is hard. I want to see signed contracts with steel mills or fertilizer plants before I invest a dime.

The Long Game

Investing in Green Hydrogen is not for the faint of heart. Massive capital expenditure (CapEx) and long lead times define this sector. But in 2026, the pieces finally fall into place. The government pays for it, the industry needs it, and the technology works.

Are you looking for the next 10x opportunity after the EV boom? Look at the smokestacks that aren’t smoking anymore. That is where the hydrogen revolution happens. It is invisible, it is industrial, and for the patient investor, it is incredibly promising.