Shares of clean hydrogen companies in the U.S. and Europe have collapsed and projects have been delayed as the industry contends with lower-than-expected demand, regulatory uncertainty and investor skepticism.
Shares of hydrogen companies Plug Power, Ballard Power Systems and Green Hydrogen Systems have fallen by more than half this year to historic lows after they repeatedly reported quarterly losses. Shares of Nell, Bloom Energy and ITM Power fell by a third.
The S&P Kensho Global Hydrogen Economy Index, which tracks companies across the low-carbon hydrogen value chain, has returned to levels similar to mid-2020, when hype around hydrogen development was at its peak in late 2020 and early 2021. It’s canceling out the rise. green energy.
Hydrogen is seen as essential for decarbonizing energy-intensive industries such as steel and shipping. The fuel is produced either through renewable sources to produce “green hydrogen” or by using gas to produce “blue hydrogen” and the resulting carbon emissions are captured and stored.
Consultancy McKinsey & Co. last month revised down its 2030 green hydrogen forecast for the United States by 70%, predicting the country will miss the 10 million metric tonne clean hydrogen production target set by the Biden administration. In July, the EU’s spending watchdog, the European Court of Auditors, said the EU’s target of producing 10 million tonnes of green hydrogen by 2030 was “unrealistic” and needed a “reality check”. warned that.
“Green hydrogen is not investable yet. It’s rubbish in terms of investment,” said Mark Lacey, head of thematic equities at Schroders, adding that the UK asset manager’s “exposure” to green hydrogen in its energy portfolio is was limited,” he added.
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The hydrogen market downturn is a reversal from investor euphoria just two years ago, when President Joe Biden passed lucrative tax credits in the Anti-Inflation Act, turning the U.S. into the most attractive destination for hydrogen production. This shows that. At the same time, the EU was pursuing its newly adopted hydrogen strategy.
This comes as stocks of nuclear energy companies have soared to record highs as artificial intelligence fuels increased demand for energy.
Uncertainty over U.S. tax credit rules and tough EU regulations, combined with weak demand, are hampering projects on both sides of the Atlantic. According to a report by the McKinsey Hydrogen Council, although announced production capacity is increasing, only a few clean hydrogen projects in North America have reached final investment decisions and are targeted to be operational by 2030. Only 18% of clean hydrogen projects and 5% of projects in Europe.
“This has been a tough journey,” said Andy Marsh, CEO of hydrogen equipment maker Plug Power. The company is facing financial difficulties, admitting it has paused development of a $290 million project in New York that would have been its largest in North America.
“We initially had unrealistic expectations about how quickly this would go,” Marsh added.
Plug Power’s suspension is one of several setbacks for the nascent fuel this year. Last month, US developer Hy Stor terminated a 1GW contract with Norwegian manufacturer Nel for a high-profile hydrogen project in Mississippi. Corporate developers including Marathon Petroleum, Fortescue and CNX have stalled or pulled out of Biden’s $7 billion hydrogen hub plan.
“There will be a shakeout,” said Nell’s chief executive Haakon Völdal.
The company announced last year that it would build a $400 million factory in Michigan to make hydrogen equipment, but cited a “lack of momentum” due to higher-than-expected costs and a lack of clear tax credit rules. is not progressing.
“It’s just stupid to have a big factory with shiny machinery that can deliver gigawatts and no one wants to buy it because there are no projects,” Voldal said.
Small and medium-sized businesses, which lack diversity, have been hit hardest by the White House’s slow implementation of tax credit rules and weak demand. Shares of major integrated energy companies with hydrogen businesses, including Cummins, Air Liquide and Linde, have risen since the start of the year on rising electricity demand forecasts.
In Europe, development is hampered by slow and insufficient government funding and regulatory barriers in some states.
Spanish energy company Repsol announced this week that it would suspend all green hydrogen projects in Spain. Last month, Shell canceled a blue hydrogen project in Norway, saying it “did not (see) a blue hydrogen market materialize.”
Repsol blamed the decision on the extension of windfall taxes on energy companies. However, Thomas Malango, the company’s director of renewable fuels and circular economy, said few projects in Europe had reached a final investment decision because EU rules had little flexibility. “If you only get one shot, the risk is higher,” he says.
Despite the delays, only a small number of projects around the world have been canceled, giving the industry hope that clarity from Brussels and Washington on incentives and regulations could help the industry recover. Wood Mackenzie estimates that approximately 2% of its existing and planned low-carbon hydrogen production capacity has been retired or discontinued in the past 18 months.
Middle Eastern oil companies Saudi Aramco and Adnoc continue to invest in clean hydrogen, with Adnoc last month signing a deal to buy a 35% stake in ExxonMobil’s Baytown hydrogen project in Texas.
The European Commission launched a financing model to reduce the cost of green hydrogen earlier this year and was considering creating a “demand market” through public auctions, the people said. The U.S. Department of Energy has set aside $1 billion for a program to stimulate demand for hydrogen.
But Europe’s hydrogen industry has complained that the commission’s definition of green hydrogen is too strict. In the United States, nearly two years of heated debate over how strictly the Biden administration should define green hydrogen in tax credit rules have stalled investment and left developers running out of cash.
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Aviva Aaron Dine, the assistant secretary of the Treasury for tax policy, told reporters earlier this month that a final rule on hydrogen would be released by the end of the year.
“The bottom line is that IRAs are a very good tool in principle, but there is limited regulatory clarity. . . . It’s difficult to make final investment decisions,” Voldal said.
“You have a big piggy bank, but you can’t get anything out of it. You shake it and nothing comes out.”
