Will the clean hydrogen sector end this year in better shape than 12 months ago?

On the face of it, recent evidence points to a resounding ‘no’, given project cancellations, plunging stock prices, very limited progress in reaching FID and widespread reluctance to commit to long-term offtake deals.

UK company Johnson Matthey added to the gloom in late November when it reported a 46% year-on-year drop in first-half sales of hydrogen technologies, citing the “the slowing buildout of supply chains and infrastructure due to a lack of clarity around regulation and incentives.” It has reduced capex and headcount in its hydrogen business, and delayed the startup of an £80m ($101m) fuel-cell component plant in the UK.

This year may go down as the year in which hydrogen made the leap from overhyped net-zero miracle to serious industry

Siemens Energy, which recently launched a large-scale electrolyser factory in Berlin in a joint project with French industrial gases company Air Liquide, struck a similarly downbeat note at the Energy Intelligence Forum in London. The market for hydrogen has “completely stalled”, with less than 7% of projects reaching FID, Anne-Laure de Chammard, executive board member of Siemens Energy, told the forum.

Patrick Pouyanne, chairman and CEO of French energy major TotalEnergies, did not exactly champion green hydrogen either. Biofuels may be a better option than hydrogen in some markets, especially those without a carbon price, he told the forum.

In the US, the clean hydrogen sector has lost momentum in recent months on the back of continued uncertainty over the implementation of the 45V tax credit under the Inflation Reduction Act. The recent presidential election has added another, much larger, layer of uncertainty to an industry that was initially supercharged by the prospect of billions of dollars of support in the form of IRA tax credits. European electrolyser manufacturers tempted by the IRA to set up shop in the US may have some difficult decisions to make in the coming months, depending on the Trump administration’s approach to hydrogen.

“Hydrogen will only ever be a niche business,” a managing director at a US-based global investment firm told Hydrogen Economist on the sidelines of the forum.

Getting serious

However, 2024 may go down as the year in which hydrogen made the leap from overhyped net-zero miracle to serious industry—with all the challenges that come with growing a serious industry.

Investors can draw confidence from the 2024 reality check, which has whittled down the project pipeline to leave a list of more genuinely bankable proposals. At the same, the supply chain is starting to move onto a firmer footing, with established players such as Johnson Matthey and Siemens Energy able to stay the course and ride out the near-to-medium term challenges as the industry experiences growing pains.

The demand fundamentals also look solid. Once economies of scale kick in, demand for low-carbon hydrogen is still expected to be about about six times the current grey hydrogen demand by 2050.

Scrappy determination

Australia’s Woodside Energy has its eyes firmly on the long-term prize. Earlier this year, it agreed a $2.35b deal to buy OCI’s large-scale blue ammonia production project at Beaumont, Texas—the largest project of its type in the US.

“When you think about how you decarbonise heavy industries, how you decarbonise a coal-fired power station, how you decarbonise the maritime sector, we have got confidence that ammonia is going to be part of decarbonising those heavy industries,” said Meg O’Neill, CEO and managing director of Woodside.

Woodside expects to see demand growth for lower-carbon ammonia driven by Europe’s Carbon Border Adjustment Mechanism, and contract-for-difference schemes in Japan and South Korea, she told the forum. “We believe it is a profitable acquisition,” she said.

O’Neill said she was confident of political support for the project, especially at state level. “In places such as Louisiana and Texas, you have got state governments that are incredibly enthusiastic and supportive. You have got state bureaucracies that are able to move approvals through with pace,” she said.

In addition to the Texas ammonia project, Woodside is developing hydrogen projects in Oklahoma in the US as well as New Zealand and Australia. O’Neill acknowledged that the firm’s hydrogen projects have faced headwinds but insisted the company is up to the challenge.

“One of the things that I think is part of Woodside's nature is that doggedness and determination that is required to stand up an industry where one does not exist. That sort of scrappy determination is something that is at the heart of what Woodside is.”

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Author: Stuart Penson