Best Hydrogen ETFs for 2025

The Hydrogen Market:

The hydrogen sector is experiencing significant growth, driven by global efforts to transition to cleaner energy sources. In 2023, global hydrogen demand reached over 97 million tonnes and is projected to approach 100 million tonnes in 2024. (afdc.energy.gov) The hydrogen generation market was valued at approximately $170.14 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 9.3% from 2024 to 2030, reaching $317.39 billion by 2030. (afdc.energy.gov) This growth is attributed to increased applications across industrial, transport, energy, and building sectors. (afdc.energy.gov)

In the United States, the government has implemented substantial measures to subsidize hydrogen production. The Inflation Reduction Act of 2022 introduced the Clean Hydrogen Production Tax Credit, offering producers up to $3 per kilogram of clean hydrogen produced, provided the lifecycle greenhouse gas emissions are no greater than 4 kilograms of carbon dioxide equivalents per kilogram of hydrogen. (home.treasury.gov) Additionally, the U.S. Department of Energy has allocated $7 billion for the development of Regional Clean Hydrogen Hubs, aiming to establish a robust domestic hydrogen infrastructure. (nga.org) These initiatives are designed to make clean hydrogen production more economically competitive and accelerate the development of the U.S. clean hydrogen industry.

ETF investors have two options available to them to gain direct exposure to this growing market, the Global X Hydrogen ETF (HYDR) and the Defiance Next Gen H2 ETF (HDRO). Both aim to provide exposure to the emerging hydrogen economy but differ slightly in their approaches and compositions.

Quick Comparison:

HYDR vs HDRO:

The main differentiating factor between these two ETFs is the index they use. HYDR follows the Solactive Global Hydrogen Index while HDRO follows the BlueStar Global Hydrogen & Next Gen Fuel Cell Index. What does this mean for their holdings? It turns out not much. As of writing HYDR has 25 holdings and HDRO has 27. HDRO contains some extra exposure to the French Air Liquide and the Irish Linde plc which are both large, global industrial gas suppliers. These additions make HDRO more diversified from a sector perspective, as well as from a country perspective. For this reason along with the lower expense ration, we believe that HDRO is the better option for most investors. For those who are willing to take on a bit more risk and want a more pure play hydrogen fuel cell ETF, then HYDR is the way to go.

Performance:

HYDR Holdings:

HDRO Holdings: