Key Themes from Hydrogen Economy Q4 Earnings Calls

A slower pace of adoption gave further impetus to a shakeout in the hydrogen economy during Q4. Smaller companies and more speculative projects fell to the wayside even as final investment decisions and product sales accelerated in some corners of the market.

A) The EU is starting to get its hydrogen act together

The hydrogen economy appears to be coalescing in Europe as member countries get closer to establishing hydrogen quotas under REDIII, grants get disbursed, and the European Hydrogen Bank’s 2nd auction proceeds towards conclusion. Iberdrola and Acciona will also move forward with 20MW+ projects in Spain after the Spanish legislature killed an energy windfall tax. Per electrolyzer manufacturer Thyssenkrupp Nucera, “…in general we see our project pipeline maturing with Europe remaining the most promising region for FIDs…no further away than summer 2025”. Elsewhere on q4 calls, Plug Power announced 600%+ YoY growth in electrolyzer revenue due to deliveries to Europe. Chart Industries called out a record year for hydrogen equipment orders from Europe and $150m of additional business in the pipeline.

B) US blue hydrogen projects are finding a way forward by relying on 45Q

Given the possible repeal of h2 production tax credits (45V) created under the IRA, some management teams are relying on $85/ton carbon sequestration credits (45Q) instead. On Linde’s Q4 call, the CEO commented, “…about 90% of the [hydrogen] projects that we are developing in the US are ...looking at 45Q as a potential incentive...I think we feel fairly confident that the structure around 45Q will remain...since it predates the IRA”. Likewise, CF Industries expects to begin generating 45Q tax credits from its Donaldsonville blue hydrogen facility this year and is close to FID on its Blue Point ATR hydrogen facility at least partially justified by 45Q. Lastly, on its Q4 call, HydrogenPro revealed that its partner DG Fuels had switched its large sustainable aviation fuel (SAF) project in Louisiana from green to blue hydrogen and it is easy to surmise that risks to 45V had a role in the change.

C) Solid oxide fuel cells gain further traction as a power alternative for data centers

In November, Bloom Energy entered into an agreement to provide an initial 100MW of fuel cells to AEP, a utility holding company. AEP would, in turn, deploy the fuel cells to accelerate time-to-power for data centers. More recently, filings with Ohio's Public Utility Commission show that AEP is moving forward with plans to install that initial 100MW of fuel cells to enable Amazon and Cologix to expand their respective data center capacity in Ohio.  Admittedly, this is a single company phenomenon currently but the projects have outsized importance given the extent of fuel cells that could be installed for the data center market.