Hydrogen Economy 1Q24 Wrap

‍A) The extent of demand for green hydrogen is a question looming over the sector

Air Products (APD) is in a battle with Wall Street analysts who want to see firm offtake agreements for APD’s NEOM green hydrogen plant under development.  APD CEO Seifi Ghasemi remains highly confident APD will command premium pricing by being first to market with large scale production and believes that signing contracts closer to the start of operations (2026) will optimize returns. At the same time, Plug Power reported that it pushed through price increases for hydrogen with 6 of 8 major customers and is close with the remaining two.  Meanwhile, the very low subsidies that emerged from the European Hydrogen Bank’s inaugural auction (€0.37-0.48/kg) suggest that other project developers believe customers are willing to pay a high premium as well.

B) Notwithstanding sporadic activity, a few clean hydrogenbusiness models are thriving

Companies such as Hexagon Purus and Chart Industries that sell tanks or compression equipment to the legacy “grey hydrogen” market are now realizing incremental growth from the clean hydrogen industry. Chart CEO Jill Evanko said, “[W]e have really good line of sight on strong Q2 hydrogen order activity”.  In addition, fuel cells that run on more readily available fuels such as SFCEnergy’s methanol fuel cells are selling well. Certain niche markets such as materials handling and city buses, where Ballard Power was awarded its largest ever order for 700 fuel cell engines, are also gaining traction.

C) Project developers are spending real $ onengineering designs, but FIDs are still scarce

Plug Power highlighted mandates for 4.5GW of Basic Engineering & Design Packages (BEDP) and signed another 3GW mandate post earnings announcement. Thyssenkrupp Nucera highlighted a new 300MW BEDP for CEPSA in Spain and actually booked a €200m order related to its ongoing H2 Green Steel project. Nel received a 1GW "capacity reservation” from Hy Stor and already has a FEED underway for that customer.  Nevertheless, comments suggest the time line for some of these big projects to reach Final Investment Decision may be drifting out from mid-2024 to closer to the end of the year.

D) An AI angle for clean hydrogen?

Bloom Energy missed already revised lower Q1 revenue estimates by ~5%.  Nevertheless, management argues that a sales ramp is inevitable as the Company’s fuel cells provide one of the only practical near-term solutions to address the overwhelming demand for power from data centers being built for AI engines.  PlugPower has also speculated that data centers will eventually become its dominant business although the timeline (2025/26) is longer than for Bloom because Plug’s fuel cells do not reform natural gas.