The Financial Results of Energy Sector Companies in Europe and Their Involvement in Hydrogen Production

Abstract

In response to growing environmental concerns, hydrogen production has emerged as a critical element in the transition to a sustainable global economy. We evaluate the impact of hydrogen production on both the financial performance and market value of energy sector companies, using balanced panel data from 288 European-listed firms over the period of 2018 to 2022. The findings reveal a paradox. While hydrogen production imposes significant financial constraints, it is positively recognized by market participants. Despite short-term financial challenges, companies engaged in hydrogen production experience higher market value, as investors view these activities as a long-term growth opportunity aligned with global sustainability goals. We contribute to the literature by offering empirical evidence on the financial outcomes and market valuation of hydrogen engagement, distinguishing between production and storage activities, and further categorizing production into green, blue, and gray hydrogen. By examining these nuances, we highlight the complex relationship between financial market results. While hydrogen production may negatively impact short-term financial performance, its potential for long-term value creation, driven by decarbonization efforts and sustainability targets, makes it attractive to investors. Ultimately, this study provides valuable insights into how hydrogen engagement shapes corporate strategies within the evolving European energy landscape.

1. Introduction

In the global economy, there is an increasing demand for energy from renewable sources, with a promoted shift from an economy based on fossil fuels to one based on RESs—renewable energy sources (Figure 1). Meeting the energy needs in the transition period is not possible without the use of fossil fuels, which contribute to natural environment degradation [1,2]. To prevent the negative impact of fossil fuel use, actions such as the Paris Agreement, United Nations Sustainable Development Goals, European Green Deal, and many more are introduced. All of these actions coherently point out that the increase in energy production from RESs is a key factor limiting climate change [3].

Due to the instability of RES production, their use is burdened by many technical issues [5]. Increased RES production does not usually coincide with periods of increased energy demand from consumers. Hence, it is necessary to use various energy storage technologies for its later use in periods of shortage [6]. Hydrogen is an energy carrier that may be introduced to alleviate the intermittency of renewable energy supplies. It is characterized by significant storage density, the highest energy content per mass, and the potential of long-term energy storage. In order to reduce energy shortages and to decarbonize energy-intensive industries, hydrogen could be considered as a complementary energy carrier [7,8].

However, engagement in hydrogen-related activities carries well-established risks that merit careful consideration. Regulatory uncertainty is one of these. Many jurisdictions lack cohesive legislation on hydrogen transport and storage standards [9,10] and on defining hydrogen blending thresholds and compliance procedures, resulting in fragmented policy frameworks that impede cross-border projects and investments. Current natural gas infrastructure can typically accommodate hydrogen blends of up to 20% by volume without requiring major modifications [11]. This threshold is considered a practical limit to ensure system integrity, material compatibility, and safety in existing pipelines and appliances. There is a need for standardized gas blending protocols, particularly regarding safe hydrogen concentrations in existing natural gas pipelines [12]. Technical safety challenges also arise from hydrogen embrittlement, a degradation mechanism in metals exposed to hydrogen that compromises mechanical integrity. Recent studies on pipeline steels provide evidence of embrittlement risks under high-pressure hydrogen blending [13,14]. Furthermore, existing natural gas transport infrastructure is often incompatible with hydrogen’s unique properties. The absence of dedicated hydrogen pipelines necessitates reliance on retrofitted networks, which incurs substantial costs and presents operational hazards such as leakage, material degradation, and inefficiencies [15]. In the broader context of energy transition, resolving these challenges is imperative. Only through comprehensive policy harmonization, rigorous material-testing protocols, and strategic investment in infrastructure can hydrogen truly complement RESs, reduce energy deficits, and support decarbonization in high-demand sectors.

Hydrogen is becoming an increasingly viable option for energy transport and storage [16]. In hydrogen production, with the use of the electrolysis process, clean water is split into oxygen and hydrogen using electrolyzers powered by excess renewable energy from solar or wind energy plants [16,17]. It is predicted that by 2050, the levelized cost of hydrogen production using this process will be less than 1.7 USD/kg H2 [18,19]. Hydrogen may therefore play an important role in future energy security, while its storage can meet consumer demands in various capacities and under various conditions. Energy storage systems themselves may additionally stabilize the consumption of surplus renewable energy in the network during periods of reduced energy demand or possibly of fossil fuel-derived energy in expected periods of negative purchase prices for the production of gray hydrogen (produced in the steam reforming of natural gas) [20]. Other innovative hydrogen production routes cover the gasification and co-gasification of various carbonaceous materials, including industrial or municipal waste, hydrogen-rich gas, and sequestration- or utilization-ready carbon dioxide [21,22,23]. What is more, hydrogen can be used as a low-emission fuel in the transport sector and for heating and cooling purposes. It is also possible to use stored hydrogen for transport applications. Hydrogen flexibility is the driving force of the hydrogen economy vision, with its undeniable advantage being how receptive the global market is towards the use of hydrogen. For industrial purposes, hydrogen is mainly used in refineries, e.g., for hydrocracking and desulfurization. In addition, it is widely used in agriculture for the production of fertilizers, as well as in the production of ammonia and methanol and in food processing. The existence of this market is a starting point for its use as a new fuel [24]. The industry is familiar with hydrogen, and some of the required production, storage, delivery, and utility infrastructures are already ready for use or only require adaptations [25]. The safety and reliability of the required infrastructure are prerequisites for the use of hydrogen on a larger scale than currently used to become a reality [26,27].

Hydrogen’s value extends beyond its production. It plays an essential role in seasonal storage and controlled dispatch, thereby shaping infrastructure investments, enhancing system resilience, and underpinning long-term investor confidence [28]. Lackey et al. [10] estimate that existing underground gas storage (UGS) facilities in the United States can hold up to 327 TWh of hydrogen energy, which could meet approximately 24–45% of the projected U.S. hydrogen demand by 2050. Complementarily, Talukdar et al. [29] identify a European underground hydrogen storage (UHS) capacity of around 349 TWh and emphasize that storage cost curves are critical determinants of hydrogen’s viability in the decarbonization portfolio. Furthermore, a recent global assessment suggests tat hydrogen storage in salt caverns could balance 43–66% of electricity demand in key regions, perhaps even up to 85% through cross-border cooperation [30]. Collectively, these results imply that hydrogen’s strategic storage function not only mitigates seasonal mismatches between renewable generation and demand but also drives infrastructure scaling and bolsters economic confidence in the hydrogen transition. Nonetheless, translating this potential into reality necessitates careful attention to site selection, cost reduction through technology learning curves, and robust regulatory frameworks [31] to support investor decisions. The safe and efficient delivery of hydrogen to consumers is essential for its wide availability.

In the face of environmental issues specific to energy sector companies, hydrogen production is one of key elements in the transition to a sustainable global economy. Processes related to hydrogen production are complex and demanding, and current companies’ technological potential for hydrogen production and storage is limited. Hydrogen production and storage requires companies to engage their financial resources in innovative activities of uncertain return levels. This may then limit a company’s ability to generate desired economic outcomes such as profitability and higher market value.

Profitability is a fundamental indicator of a firm’s financial performance, as it demonstrates the company’s capability to generate earnings and utilize its resources efficiently. Sustained profitability is essential for the long-term viability and growth of a business. Consequently, the assessment of profitability is of significant interest not only to the firm’s owners but also to a broader range of stakeholders, including customers, business partners, and investors, regardless of the industry in which it operates [32,33,34]. Engagement in hydrogen-related initiatives can influence profitability in multifaceted ways. For instance, high upfront investment and operational costs reduce net margins [35,36], but in the long-term, it should result in resource efficiency enhancement, new revenue streams, and resilience to regulatory changes.

While profitability refers to a company’s financial standing, market value reflects investor perception on the current value of companies’ future earnings potential and strategic positioning. Hydrogen engagement by energy companies, despite initial cost burdens, can signal innovation and long-term commitment to sustainability, positively influencing investor confidence and, ultimately, market valuation. Proactive environmental investments can increase firm value by enhancing investor expectations regarding future competitiveness and regulatory alignment [37]. Furthermore, capital markets increasingly reward firms that demonstrate alignment with decarbonization goals and clean energy transitions, suggesting that hydrogen strategies may serve as key differentiators in valuation models.

Given the above findings, the answers to the questions of how hydrogen engagement influences a company’s financial performance and its market value are of key importance [38]. The main objective of the study presented in this paper is to assess the impact of European energy sector-listed companies engagement in hydrogen-related activities on their financial and market performance. So as not to oversimplify the technological and economic heterogeneity of hydrogen projects, we differentiate company hydrogen-related activity between hydrogen production and storage and, in terms of hydrogen production, between green, blue, and gray hydrogen.

To achieve the objective, we formulate the following research hypotheses:

H1: 

The impact of hydrogen engagement on a company’s financial performance is negative.

H1.1: 

The impact of hydrogen production on a company’s financial performance is negative.

H1.1.1: 

The impact of green hydrogen production on a company’s financial performance is negative.

H1.1.2: 

The impact of blue hydrogen production on a company’s financial performance is negative.

H1.1.3: 

The impact of gray hydrogen production on a company’s financial performance is negative.

H1.2: 

The impact of hydrogen production on a company’s financial performance is negative.

The widespread use of hydrogen for new applications is in its early stages, and emerging technologies often experience early-stage failures [25,33]. As a result, even minor incidents related to hydrogen systems (e.g., fires at fuel stations or storage facilities) can significantly delay the development, implementation, and social acceptance of hydrogen technologies. Public opinion has a significant impact on national policy, which in turn affects the functioning of a company [38,39]. Hence the negative direction indicated in the first hypothesis is assumed. This also results from the fact that hydrogen production is an activity that still requires the implementation of innovative solutions and is therefore highly cost-intensive, which negatively affects the financial situation of a company, particularly its profitability.

H2: 

The impact of hydrogen engagement on a company’s market value is positive.

H2.1: 

The impact of hydrogen production on a company’s market value is positive.

H2.1.1: 

The impact of green hydrogen production on a company’s market value is positive.

H2.1.2: 

The impact of blue hydrogen production on a company’s market value is positive.

H2.1.3: 

The impact of gray hydrogen production on a company’s market value is positive.

H2.2: 

The impact of hydrogen production on a company’s market value is positive.

In the second research hypothesis we assume a positive direction of the impact of involvement in hydrogen-related activities on the market value of energy sector companies. Although this type of activity is expensive, the main burden rests upon energy sector companies [26], and it is necessary to ensure the continuous, safe, and reliable use of hydrogen in practice and ultimately to achieve a sustainable global economy [39]. What is more, a company’s investment in the development of hydrogen technologies creates a potential for innovation in this area, which then may result in gaining a competitive advantage on the market. Therefore, investors should perceive the involvement of companies in counteracting global environmental issues as a significant determinant for market valuation [40].

From the point of view of local communities, the role and mission of the largest companies wishing to remain on the market or increase their impact is to be open to technological innovations [39]. The use of hydrogen technologies opens up new paths for the energy sector and the pursuit of sustainable development. The strategic readiness and competitiveness of energy companies in facing future challenges determines the prospects for global economic growth, without increasing the inequality between countries in accessing energy at affordable prices [16]. Energy sector companies should consider adapting their operations to fit the transition to a new level of technological development in the energy sector, i.e., based on renewable energy sources. Success in solving non-trivial global issues related to the equal provision of affordable energy with minimal burden on the natural environment in the future means that the business strategies of companies will have to be remodeled [1]. Companies should focus on the technologies necessary to solve and overcome the limitations of the global economy [41,42].

The study presented in this paper fills the research gap on financial outcomes [43] and financial market participant valuations of energy companies’ engagement in hydrogen-related activities [44], especially in the European context [45]. These research gaps hinder a comprehensive understanding of how investments in hydrogen affect the financial health and market value of European energy companies, which in turn is crucial for guiding policy and corporate decision-making. Without company-level financial analysis, stakeholders lack evidence-based insights into the economic viability and strategic benefits of hydrogen engagement in Europe’s energy transition. We also contribute to the literature by differentiating the focus between (i) hydrogen production and storage as well as between (ii) green, blue, and gray hydrogen production. We further enhance the literature by clarifying distinctions in hydrogen technologies.

2. Materials and Methods

A research sample consists of European energy sector companies whose shares were listed on 31 December 2022 on regulated financial markets. The research period spans 5 years from 2018 to 2022. Only the companies with complete data of the primary model variables throughout the whole period studied were analyzed. As a result, 288 companies (1440 firm-year observations) headquartered in 38 different European countries were the subject of the study (

Table 1. Research sample composition by country of company headquarters.

Country of Headquarters	Number of Companies
Austria	2
Belgium	4
Bosnia and Herzegovina	8
Bulgaria	3
Croatia	2
Cyprus	6
Denmark	2
Estonia	1
Faroe Islands	1
Finland	3
France	15
Germany	11
Greece	9
Guernsey	4
Hungary	1
Iceland	2
Ireland	9
Isle of Man	1
Italy	9
Jersey	6
Lithuania	1
Luxembourg	3
Macedonia	2
Monaco	2
Netherlands	5
Norway	33
Poland	15
Portugal	2
Republic of Montenegro	1
Republic of Serbia	1
Romania	14
Russia	13
Slovenia	1
Spain	2
Sweden	16
Switzerland	2
Ukraine	3
United Kingdom	72

Source: Authors’ own research.

).

First, the analysis of the correlation between variables was run, and then the balanced panel regression analysis augmented by country- and year-fixed effects (FEs) was employed [46,47]. The econometric strategy by [48] was applied, and based on two tests’ results—the Breusch–Pagan with Lagrange Multiplier test and the Hausman test—the validity of the FEs rather than the random effects (REs) model was confirmed. Next, the use of multivariate (cross-section and period) FEs on the results of the Redundant Fixed Effects Test was validated. To account for potential issues regarding the homogeneity of residual variance and cross-section dependence, standard errors were adjusted according to White [49,50]. Based on the Kao residual cointegration test [51], the stationarity of the data used was confirmed. Company-related data were consolidated and obtained from Refinitiv EIKON. All ratios were measured at the end of the financial year. To address the issue of outliers, data winsorization at the 1st and 99th percentile levels was employed [52].

Similarly to [53], the return on assets ratio (ROA), computed as EBIT/Year-average total assets, proxies a company’s financial performance. The market-to-book value ratio (MV/BV), computed as Market capitalization/(Total assets − Total debt), measures a company’s market performance [54]. We employ a dummy variable (HYDRO) as an explanatory variable equal to 1 for company engagement in hydrogen-related activities, or otherwise equal to 0. To differentiate between specific hydrogen activities and the technology used, we employ PROD, STOR, GREEN, BLUE, and GRAY dummies as explanatory variables equal to 1 for hydrogen production, hydrogen storage, green hydrogen production, blue hydrogen production, and gray hydrogen production, respectively, and 0 otherwise. To address the omitted variables risk, we include a set of control variables (CONTROL) [55]. The below models are introduced to examine the impact of hydrogen engagement on the following: the financial performance (models 1 to 3) and the market performance (models 4 to 6) of a company.

ROA_i,t = β₁HYDRO_i,t + β_nCONTROL_i,t + ε_i,t

(1)

ROA_i,t = β₁PROD_i,t + β₂STOR_i,t + β_nCONTROL_i,t + ε_i,t

(2)

ROA_i,t = β₁GREEN_,t + β₂BLUE_i,t + β₃GRAY_i,t + β_nCONTROL_i,t + ε_i,t

(3)

MV/BV_i,t = β₁HYDRO_i,t + β_nCONTROL_i,t + ε_i,t

(4)

MV/BV_i,t = β₁PROD_i,t + β₂STOR_i,t + β_nCONTROL_i,t + ε_i,t

(5)

MV/BV_i,t = β₁GREEN_,t + β₂BLUE_i,t + β₃GRAY_i,t + β_nCONTROL_i,t + ε_i,t

(6)

where

i—company,

t—year,

n—variable,

ε—error term.

The description of all variables considered in this study is presented in

Table 2. Description of variables considered in the study.

Variables	Name	Abbreviated Name	Definition
Dependent	Return on assets ratio	ROA	EBIT/Year-average total assets
	Market-to-book value ratio	MV/BV	Market capitalization/(Total assets − Total debt)
Explanatory	Hydrogen production-engaging company	HYDRO	Dummy equals 1 if a company is engaged in hydrogen-related activities and 0 otherwise
	Hydrogen production	PROD	Dummy equals 1 if a company is engaged in hydrogen production and 0 otherwise
	Hydrogen storage	STOR	Dummy equals 1 if a company is engaged in hydrogen storage and 0 otherwise
	Green hydrogen production	GREEN	Dummy equals 1 if a company is engaged in green hydrogen production and 0 otherwise
	Blue hydrogen production	BLUE	Dummy equals 1 if a company is engaged in blue hydrogen production and 0 otherwise
	Gray hydrogen production	GRAY	Dummy equals 1 if a company is engaged in gray hydrogen production and 0 otherwise
Control	Company size	SIZE	ln(Total assets)
	Company growth	GROW	(Sales revenue for the year − Sales revenue of the previous year)/Sales revenue of the previous year
	Current Ratio	CR	Current assets/Current liabilities
	Financial structure	FSTR	Total debt/Total assets

Source: Authors’ own research.

.

The selected descriptive statistics are presented in

Table 3. Summary statistics of variables used.

Variable	Mean	Median	Minimum	Maximum	Std. dev.
ROA	−0.031	0.012	−1.604	0.985	0.282
MV/BV	2.693	1.005	−12.734	47.906	7.151
SIZE	7822.786	131.574	1.225	253,245.800	32,978.859
GROW	0.156	0.063	−0.081	7.212	0.962
CR	4.246	1.371	0.031	93.385	11.602
FSTR	0.605	0.520	0.001	6.282	0.7671

Notes: SIZE is given in nominal values—in EUR millions. Remaining variables are given in relative values. Source: authors’ own research.

.

The sample is composed of companies with different characteristics. Particularly, both loss-making and profitable ones are analyzed. MV/BV deviates from the mean by 7.151. The size of companies ranges from EUR 1.225 to EUR 253,245.800 million total assets. The sales revenue of the first half of companies grows yearly by up to 6.3% and more for the second half. At least half of the analyzed companies have financial liquidity, and they use different strategies in terms of using debt to finance operations, i.e., both low and high involvements of debt in their financial structures.

3. Results and Discussion

We initiate the study with a correlation analysis to examine the autocorrelation issue of independent variables and to assess the nature of the relationship between them and dependent ones. Next, we perform a panel regression analysis using the introduced models to examine the impact of hydrogen-related activities on a company’s financial performance and market value.

The correlation analysis results show no autocorrelation between the independent variables (see

Table 4. Correlation matrix.

Variables	ROA	MV/BV	SIZE	GROW	CR	FSTR
ROA	1.000
MV/BV	−0.086 ***	1.000
SIZE	0.443 ***	−0.170***	1.000
GROW	−0.051 *	0.098 ***	−0.02	1.000
CR	−0.006	−0.016	0.132 ***	0.075 **	1.000
FSTR	−0.335 ***	−0.075 **	0.151 ***	−0.024	−0.201 ***	1.000

***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Source: authors’ own research.

).

The strongest (but still moderate) and statistically significant correlation at the 1% level is reported between SIZE and ROA. For the other variables, the correlation coefficient is equal, at most, to 0.335 (i.e., between FSTR and ROA).

3.1. Hydrogen Engagement Impact on a Company’s Financial Performance

The panel regression analysis results confirm the initial assumption regarding the hydrogen engagement impact on a company’s financial performance (see

Table 5. Hydrogen engagement (HYDRO) impact on a company’s financial performance (ROA).

Model	Baseline Regression				With Control Variables
	(1)				(1)
	β	Std. Err.	t-Stat.	p-Value	β	Std. Err.	t-Stat.	p-Value
HYDRO	−0.151	0.027	−5.511	0.005	−0.150	0.012	−12.194	0.000
SIZE	–	–	–	–	0.044	0.002	26.369	0.000
GROW	–	–	–	–	−0.001	0.001	−0.766	0.086
CR	–	–	–	–	0.0010	0.000	1.240	0.083
FSTR	–	–	–	–	−0.109	0.019	−5.806	0.004
ε	−0.089	0.012	−7.745	0.002	−0.232	0.031	−7.533	0.002
Country FEs	Yes				Yes
Year FEs	Yes				Yes
F-stat. (p-value)	8.539 (0.000)				27.018 (0.000)
Adj. R2	0.180				0.454
N	1440				1440

Source: authors’ own research.

,

Table 6. Hydrogen production (PROD) and storage (STOR) impact on a company’s financial performance (ROA).

Model	Baseline Regression				With Control Variables
	(2)				(2)
	β	Std. Err.	t-Stat.	p-Value	β	Std. Err.	t-Stat.	p-Value
PROD	−0.178	0.026	−5.405	0.006	−0.155	0.011	−14.274	0.000
STOR	−0.141	0.032	−5.527	0.005	−0.137	0.023	−5.997	0.004
SIZE	–	–	–	–	0.044	0.002	26.607	0.000
GROW	–	–	–	–	−0.001	0.001	−0.771	0.084
CR	–	–	–	–	0.000	0.000	1.240	0.083
FSTR	–	–	–	–	−0.109	0.019	−5.803	0.004
ε	−0.089	0.012	−7.739	0.002	−0.232	0.031	−7.578	0.002
Country FEs	Yes				Yes
Year FEs	Yes				Yes
F-stat. (p-value)	8.347 (0.000)				26.431 (0.000)
Adj. R2	0.180				0.454
N	1440				1440

Source: authors’ own study.

and

Table 7. Hydrogen production (GREEN, BLUE, and GRAY) impact on a company’s financial performance (ROA).

Model	Baseline Regression				With Control Variables
	(3)				(3)
	β	Std. Err.	t-Stat.	p-Value	β	Std. Err.	t-Stat.	p-Value
GREEN	−0.193	0.042	−4.602	0.010	−0.168	0.020	−8.195	0.001
BLUE	−0.018	0.022	−0.819	0.059	−0.105	0.028	−3.807	0.019
GRAY	−0.072	0.008	−8.800	0.001	−0.143	0.008	−17.747	0.000
SIZE	–	–	–	–	0.044	0.002	28.275	0.000
GROW	–	–	–	–	−0.001	0.001	−0.870	0.433
CR	–	–	–	–	0.000	0.000	1.251	0.279
FSTR	–	–	–	–	−0.108	0.018	−5.888	0.004
ε	−0.093	0.012	−7.785	0.002	−0.237	0.030	−7.929	0.001
Country FEs	Yes				Yes
Year FEs	Yes				Yes
F-stat. (p-value)	8.018 (0.000)				25.408 (0.000)
Adj. R2	0.177				0.449
N	1440				1440

Source: authors’ own study.

).

The results of both the baseline regression and those with the control variables included prove that the HYDRO variable is statistically significant and negative, indicating worse financial performances of companies involved in hydrogen activities. Companies engaging in hydrogen activities gain lower profits by 15.0% from every 1.00 EUR invested in total assets (ceteris paribus) than other companies in the energy sector. Regarding the control variables, all are statistically significant at the p level by at least less than 10%. The model employing control variables explains 45.4% of changes in the variance of the dependent variable, and the F-statistics confirms the proper variables used in the model.

Of the two, hydrogen production contributes to the worsening of financial standing to a greater extent than hydrogen storage activities. All control variables are statistically significant and similar in nature as in model (1). Model (2) with the control variables explains 45.4% of dependent variable variance, and the independent variables are formulated correctly.

From the different technologies used in hydrogen production, the one using the electrolysis process causes the highest financial burden for the company—the GREEN variable coefficient was consistently negative and higher compared to BLUE and GRAY. The adjusted R² value for model (3) ranged from 17.7% to 44.9% depending on control variable inclusion.

The results confirm the research hypotheses regarding a negative association between each type of hydrogen-related activity engagement and the financial performance of European energy sector companies. Hydrogen production indeed results in higher costs and not enough profits. The negative financial impact of hydrogen engagement, particularly in hydrogen production, can be attributed to several key factors. First, hydrogen production, especially through electrolysis, requires substantial capital investment in infrastructure and technology, leading to high initial costs and prolonged payback periods. These expenses can strain cash flows and hinder profitability, particularly in the absence of a clear, stable demand for hydrogen. Furthermore, the volatility of energy prices and raw material costs (e.g., renewable electricity and electrolyzer components) introduces an additional layer of financial risk, which can exacerbate cost unpredictability. Finally, regulatory uncertainty and the evolving nature of the hydrogen market create an environment where companies face significant challenges in achieving operational and financial stability, leading to a more pronounced negative impact on financial performance when compared to hydrogen storage activities. Addressing the above requires investing financial resources into research and development undertakings to achieve innovative solutions that are not currently available. The above creates costs but the profits are not yet proportionally achievable, thus the impact of hydrogen production indicates financial distress.

3.2. Hydrogen Engagement Impact on a Company’s Market Value

The integration of hydrogen technologies within a company’s operations significantly influences its market value. As demonstrated in

Table 8. Hydrogen production (HYDRO) impact on a company’s market value (MV/BV).

Model	Baseline Regression				With Control Variables
	(4)				(4)
	β	Std. Err.	t-Stat.	p-Value	β	Std. Err.	t-Stat.	p-Value
HYDRO	4.454	0.808	5.515	0.005	3.604	0.841	4.287	0.013
SIZE	–	–	–	–	−0.508	0.064	−7.988	0.001
GROW	–	–	–	–	0.962	0.457	2.105	0.093
CR	–	–	–	–	−0.043	0.005	−7.953	0.001
FSTR	–	–	–	–	−0.903	0.061	−14.875	0.000
ε	1.390	0.230	6.055	0.004	4.274	0.525	8.145	0.001
Country FEs	Yes				Yes
Year FEs	Yes				Yes
F-stat. (p-value)	4.100 (0.000)				5.815 (0.000)
Adjusted R2	0.083				0.133
N	1440				1440

Source: authors’ own research.

,

Table 9. Hydrogen production (PROD) and storage (STOR) impact on a company’s market value (MV/BV).

Model	Baseline Regression				With Control Variables
	(5)				(5)
	β	Std. Err.	t-Stat.	p-Value	β	Std. Err.	t-Stat.	p-Value
PROD	2.984	0.846	3.526	0.024	2.737	0.750	3.648	0.022
STOR	8.352	3.111	2.685	0.055	7.568	3.047	2.484	0.068
SIZE	–	–	–	–	−0.525	0.067	−7.883	0.001
GROW	–	–	–	–	0.042	0.021	1.953	0.093
CR	–	–	–	–	−0.044	0.005	−8.312	0.001
FSTR	–	–	–	–	−1.019	0.098	−10.390	0.001
ε	1.384	0.233	5.930	0.004	4.619	0.401	11.505	0.000
Country FEs	Yes				Yes
Year FEs	Yes				Yes
F-stat. (p-value)	4.336 (0.000)				5.552 (0.000)
Adj. R2	0.091				0.129
N	1440				1440

Source: Authors’ own study.

and

Table 10. Hydrogen production (GREEN, BLUE, and GRAY) impact on a company’s market value (MV/BV).

Model	Baseline Regression				With Control Variables
	(6)				(6)
	β	Std. Err.	t-Stat.	p-Value	β	Std. Err.	t-Stat.	p-Value
GREEN	3.379	1.223	2.763	0.051	2.974	1.114	2.221	0.091
BLUE	1.841	0.543	3.388	0.028	2.455	0.480	6.156	0.004
GRAY	0.968	1.020	0.950	0.396	1.556	0.922	1.688	0.097
SIZE	–	–	–	–	−0.559	0.054	−10.337	0.001
GROW	–	–	–	–	0.044	0.021	2.128	0.100
CR	–	–	–	–	−0.045	0.005	−8.953	0.001
FSTR	–	–	–	–	−1.077	0.097	−11.089	0.000
ε	1.610	0.159	10.125	0.001	5.032	0.228	22.072	0.000
Country FEs	Yes				Yes
Year FEs	Yes				Yes
F-statistics (p-value)	3.187 (0.000)				4.510 (0.000)
Adj. R2	0.063				0.105
N	1440				1440

Source: authors’ own study.

, the impact of hydrogen engagement on market performance reveals a clear correlation between the two.

In contrast to financial performance, hydrogen engagement has a positive impact on a company’s market value. Hydrogen engagement contributes to an increase in a company’s MV/BV of 3.604. Control variables are statistically significant and, except for GROW, are negatively associated with MV/BV. Approximately 13.3% of the variability in the MV/BV model can be explained by the independent variables in model (4). F-statistics prove that the independent variables were correctly selected for the model.

The coefficients for both PROD and STOR are positive, and the variables are statistically significant. As previously shown, the control variables are statistically significant. Model (5) with control variables employed explanations of 12.9% of MV/BV variance, and, based on the F-statistics results, the explanatory variables are included correctly.

The research results do not provide grounds to falsify the second research hypothesis stating that the impact of hydrogen production on a company’s market value is positive. Hydrogen production is the developmental direction of the energy sector as it is considered to be a widely accessible source of renewable energy [56]. Companies employing proper technologies will first gain a competitive advantage in the sector and reach higher future profits on this basis. Given that a company’s market value is the current value of future cash flows, the above chance of gaining higher profits is positively associated with a company’s value as perceived by investors. The positive impact of hydrogen engagement on market value can also be attributed to the growing investor confidence in the transition to a low-carbon economy, with hydrogen being viewed as a key enabler of decarbonization. Investors are drawn to companies engaged in hydrogen because it offers diversification away from fossil fuels and taps into emerging revenue streams, driven by the increasing demand for sustainable energy solutions. Interestingly, investors value hydrogen storage activities more than production potentially due to the more mature and commercially viable nature of storage technologies. Storage plays a critical role in ensuring the reliability and transportability of hydrogen and involves less speculative risk compared to hydrogen production, which still requires substantial capital investment and faces technological uncertainties, especially in scaling green hydrogen production. Furthermore, the preference for green hydrogen production over blue or gray hydrogen stems from its alignment with stricter environmental regulations and long-term carbon neutrality goals. Green hydrogen, produced using renewable energy, is viewed as the ideal solution for decarbonization, attracting investment due to its low-carbon footprint and its ability to benefit from government incentives and carbon pricing. In contrast, blue and gray hydrogen, while less carbon-intensive than traditional methods, are perceived as interim solutions that do not offer the same long-term growth prospects as green hydrogen.

3.3. Robustness Check

To ensure the reliability and validity of the results, a robustness check is conducted by employing alternative dependent variables in the models. This approach allows for testing the consistency of the findings across different measures of financial performance (

Table 11. Hydrogen engagement (HYDRO, PROD, STOR, GREEN, BLUE, and GRAY) impact on a company’s financial performance (ROE).

Model	Dependent Variable: ROE
	(1)				(2)				(3)
	β	Std. Err.	t-Stat.	p-Value	β	Std. Err.	t-Stat.	p-Value	β	Std. Err.	t-Stat.	p-Value
HYDRO	−0.244	0.052	−4.679	0.010	–	–	–	–	–	–	–	–
PROD	–	–	–	–	−0.247	0.137	−1.803	0.146	–	–	–	–
STOR	–	–	–	–	−0.236	0.270	−0.872	0.432	–	–	–	–
GREEN	–	–	–	–	–	–	–	–	−0.240	0.204	−1.178	0.304
BLUE	–	–	–	–	–	–	–	–	−0.226	0.074	−3.072	0.037
GRAY	–	–	–	–	–	–	–	–	−0.301	0.049	−6.166	0.004
Error term	Yes				Yes				Yes
Control variables	Yes				Yes				Yes
Country FEs	Yes				Yes				Yes
Year FEs	Yes				Yes				Yes
F-stat. (p-value)	3.761 (0.000)				3.678 (0.000)				3.550 (0.000)
Adj R2	0.081				0.080				0.078
N	1440				1440				1440

Note: control variables and error term were similar in nature as for previous models; hence, we do not report their coefficients and statistics in the table. Source: authors’ own study.

) and market value (

Table 12. Hydrogen engagement (HYDRO, PROD, STOR, GREEN, BLUE, and GRAY) impact on a company’s market value (ROE).

Model	Dependent Variable: TQ
	(4)				(5)				(6)
	β	Std. Err.	t-Stat.	p-Value	β	Std. Err.	t-Stat.	p-Value	β	Std. Err.	t-Stat.	p-Value
HYDRO	2.407	0.302	7.960	0.001	–	–	–	–	–	–	–	–
PROD	–	–	–	–	2.059	0.396	5.199	0.007	–	–	–	–
STOR	–	–	–	–	3.334	0.170	19.638	0.000	–	–	–	–
GREEN	–	–	–	–	–	–	–	–	2.205	0.498	4.431	0.011
BLUE	–	–	–	–	–	–	–	–	1.437	0.237	6.056	0.004
GRAY	–	–	–	–	–	–	–	–	1.249	0.218	5.738	0.005
Error term	Yes				Yes				Yes
Control variables	Yes				Yes				Yes
Country FEs	Yes				Yes				Yes
Year FEs	Yes				Yes				Yes
F-stat. (p-value)	14.308 (0.000)				14.168 (0.000)				12.396 (0.000)
Adj R2	0.298				0.301				0.275
N	1440				1440				1440

Note: control variables and error term were similar in nature as for previous models; hence, we do not report their coefficients and statistics in the table. Source: authors’ own study.

). We used the return on equity (ROE) ratio, computed as EBIT/Year-average total equity, to proxy for financial performance and Simplified Tobin’s Q (TQ), computed as Market capitalization/Total assets, to proxy for market value. By utilizing alternative variables, we assess whether the observed relationships hold under various specifications, and we provide a more comprehensive understanding of the impact of hydrogen engagement on corporate performance.

The robustness checks confirm that the results remain consistent across alternative dependent variables, both in terms of financial performance and market value. Whether evaluating ROA, ROE, MV/BV, or TQ, the impact of hydrogen engagement remains significant and aligned with the initial findings. These results reinforce the robustness of the conclusions drawn.

4. Conclusions

Achieving the sustainable development goals of providing affordable and environmentally friendly energy means changing business models in the energy sector from the ones based on fossil fuels to the ones built on RESs. The strategic readiness of energy companies for hydrogen technologies determines the prospects for global economic growth without any emerging energy inequalities or negative impacts of their actions.

The results of the basic regression of listed companies in the EU energy sector indicate worse financial results of companies using hydrogen technologies, which confirms the first research hypothesis and the accompanying supporting hypotheses. Companies producing hydrogen achieve lower profits than companies in the sector that do not engage in such ventures. Hydrogen production increases costs and at the same time generates insufficient benefits that would translate into financial results in the short term. To some extent, this is a natural phenomenon. The technological readiness and market availability of hydrogen production inventions is insufficient for companies to immediately achieve the desired economic or financial benefits. Hydrogen production activities still require improvements in some areas and, in others, the creation, testing, and implementation of appropriate solutions. The companies that are the first to undertake this venture, i.e., precursors, are therefore burdened with the necessity of incurring higher expenditures today for the sake of higher (but still uncertain) revenues in the future. The negative impact of hydrogen engagement on company profitability may also arise from such risks as regulatory uncertainty on gas blending thresholds, transport and storage standards, and public safety concerns and early-stage incidents. These risk factors elucidate why early hydrogen adopters in the energy sector may demonstrate limited profitability when assessed through conventional accounting frameworks, despite actively positioning themselves to secure long-term strategic advantages in a transitioning energy market. Authors also point out that hydrogen storage infrastructure costs could decline by as much as 50% across three technology learning cycles [29]. These learning effects imply that initial financial setbacks may be compensated by significant cost savings in the long run [57]. Technological advancements, policy support, and scaling efforts actively drive these learning cycles. Cumulative deployment experience accelerates innovation and standardization. Consequently, stakeholders may view short-term losses as strategic investments toward future competitiveness and sustainability. This underscores the importance of incorporating dynamic cost trajectories into hydrogen infrastructure planning and investment models. Technological learning curves not only reduce capital expenditures but also enhance system efficiency and reliability over time. Nonetheless, to mitigate these challenges and support the financial viability of hydrogen-related activities, particularly production, several actionable policy measures should be considered. For instance, targeted subsidies for green hydrogen capital expenditures (CAPEXs) could help offset high upfront investment costs, making early-stage projects more financially feasible. Harmonized regulations across European markets would reduce legal uncertainty and facilitate cross-border cooperation and investment, thereby creating a more predictable environment for stakeholders. Additionally, the implementation of blended finance schemes (combining public and private funding) can help de-risk large-scale hydrogen projects and attract private capital, enabling larger and more ambitious developments that might otherwise be too risky for individual investors. These interventions can contribute to improving the financial outlook for companies investing in hydrogen technologies, accelerate the transition to a low-carbon energy system, and unlock long-term economic and environmental benefits.

In contrast to the financial results, hydrogen production has a positive impact on the market value of a company. Therefore, the research results did not falsify the second research hypothesis or any of the supporting ones. This reflects investor optimism about the long-term potential of hydrogen as a key component in the transition to a low-carbon economy. Companies engaged in hydrogen production are often perceived as forward-thinking and well-positioned to benefit from the future demand for clean energy solutions, which can lead to increased market confidence and a higher stock price. Furthermore, as governments and industries increasingly prioritize sustainability and decarbonization, investors are more likely to reward companies that are early movers in hydrogen production. Ultimately, the positive market reaction underscores the strategic value of hydrogen engagement, highlighting its potential not only as a sustainable energy source but also as a driver of long-term growth and shareholder value.

The implications of this study open up new paths for the energy sector in the pursuit of sustainable development. Even today, potential changes in the structure of energy companies should be planned to enable them to operate in accordance with the principles of sustainable development. The research presented in this paper also reveals an interesting direction for future empirical research. Hydrogen production negatively affects the financial situation of listed companies in Europe but has a positive impact on their market value. This relationship may be analyzed in more detail in future studies, in particular by examining whether this relationship remains unchanged in different ranges of a company’s profitability and market valuation.