Repsol S.A. REPYY, a Spanish multi-energy company, has recently announced that it would be slashing its green hydrogen production targets for 2030 by up to 63%. The decision likely stemmed from the high costs associated with the production of green hydrogen. REPYY’s announcement highlights the challenges faced by the industry, including its heavy reliance on subsidies due to the high costs associated with these projects.

Following the announcement, the multi-energy company projected its hydrogen electrolyser capacity to be between 0.7 gigawatts (GW) and 1.2 GW by 2030. This suggests a significant decline from its prior target of 1.9 GW. The company intends to follow a prudent approach to capital allocation, prioritizing good returns over a particular capacity target. It believes that the market for green hydrogen is developing rather slowly and there are uncertainties surrounding the regulatory policies for this industry.

The production of green hydrogen is seen as a significant move toward the decarbonization of the European economy as it is produced using renewable energy. However, challenges loom as the high cost of these projects makes them economically infeasible without subsidies. Furthermore, since the market for the product is still developing, large-scale production involves high risks. As such, without incentives like government subsidies and a clearer regulatory framework, investment in these large-scale projects may remain selective.

REPYY’s Zacks Rank and Key Picks

REPYY currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the energy sector are SM Energy SM, Equinor ASA EQNR and Archrock Inc. AROC. SM Energy currently sports a Zacks Rank #1 (Strong Buy), while Equinor and Archrock carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

SM Energy is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The increased production, combined with the favorable oil price environment, is expected to positively contribute to its bottom line.

Equinor ASA is one of the leading integrated energy companies globally and the second-largest supplier of natural gas in Europe. The company’s expansion in the renewable energy space positions it for long-term growth as more and more countries transition toward cleaner energy solutions to meet their climate goals. Its strategic pivot toward low-carbon energy solutions unlocks new revenue streams in the growing market for clean energy and carbon management solutions.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

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