Paul Rodden • Season: 2023 • Episode: 253
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Welcome to The Hydrogen Podcast!
In episode 253, Let’s look at the impact the hydrogen economy will have on real estate. I’ll dive into this topic on today’s hydrogen podcast.
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Paul Rodden
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Transcript:
Let’s look at the impact the hydrogen economy will have on real estate. I’ll dive into this topic on today’s hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen. And this podcast will give you the answers. My name is Paul Rodden. And welcome to the hydrogen podcast.
Before we get started today, I just wanted to give you a quick reminder that I’ll be at the Reuters North American hydrogen conference this week in Houston. If you’re around, make sure to sit in for our conversations on day two. When we cover the demand side of hydrogen, I guarantee you won’t be disappointed. In an article in biz now.com Dees Stribling writes how hydrogens $46 billion surge will fuel real estate. Investment in North American hydrogen production jumped by nearly two thirds year over year to $46 billion in 2023. Driven by the federal government’s march toward clean energy and private industries simultaneous efforts to power commercial fleets with electrification. With those billions and investment come opportunities for commercial development to deliver both the manufacturing capabilities and the distribution hubs for this unconventional but growing fuel source.
In a quote from Frank Wolak, fuel cell and hydrogen energy association president the momentum around the world is to consider ways in which hydrogen can be used as a fuel. He continues by saying there’s two real estate thrusts you’re going to see in the creation of hydrogen fuel facilities, the facilities themselves with power infrastructure, land and permits, then you’re going to see the production of the equipment and new factories that are being considered by a number of US companies, as well as new companies coming from Europe and Asia, and North America. 170 Hydrogen projects were underway at the beginning of 2023.
This according to the hydrogen Council, and McKinsey, representing $46 billion in direct investment in the sector, from 29 billion in 2022. The continent is well behind other parts of the world in terms of hydrogen production, with just 15% of global project tally, but it is rushing to make up for lost time since 2021. The report notes the total announced production capacity in North America has grown one and a half times faster than the rest of the world. Although hydrogen is the most common element in the universe, it doesn’t occur naturally on Earth in large enough quantities for industrial use. That’s where hydrogen production facilities come in, using a variety of methods to create hydrogen that can be used as fuel, with subsidies in place under the inflation Reduction Act, which authorized 369 billion and of clean energy investment, as well as the 2021 infrastructure bill that would channel $8 billion to hydrogen development. There’s a land rush for sites to build hydrogen production facilities.
The most commonly needed mechanisms are electrolyzers, which separate the components of water to release hydrogen. existing facilities are scattered nationwide, they tend to be in existing energy belts and markets with heavy concentrations of manufacturing. And a quote from Venky Krishnan executive VP and industrial business unit leader at Calnetix Technologies, it’s easy to convert industries to hydrogen for a number of reasons. One is that you can actually produce hydrogen where the demand is instead of having to distribute it. Metro Boston is among the US cities that have already seen hydrogen activity in their real estate markets.
And a quote from senior vice president Crosby Nordblom of Nordblom Co.. There are certainly a handful of hydrogen energy companies entering into the Boston Market. Two that come to mind are envision energy which just leased 35,000 plus square feet of space in the Northwest Park and electric hydrogen, which has leased 180,000 square feet. And Devon’s earlier this year, they’re likely more electric hydrogen has an r&d facility in Metro Boston with a goal to develop better electrolyzers and make the components on site bring down the cost of hydrogen, the company raised $380 million and a series D round of funding that made it the industry’s first unicorn by pushing its valuation over a billion dollars. This according to the Wall Street Journal, California is in the running to be the hydrogen hub as well. In August, the state rolled out a hydrogen energy strategy with similarities to its EV strategy. According to the California Go Biz director Dee Dee Myers. In a quote from Myers we’ve been building out hydrogen and in a variety of different formats over the last many years. But to get our clean energy goals, we need to scale our hydrogen market by 1700 times. As you know, the governor has mandated the California reach a carbon neutral economy by 2045. And hydrogen is a key key part of that process. California already has the distinction of being home to the first municipal government to commit to hydrogen power.
In June, the city of Lancaster inked a deal with solar energy specialist Heliogen to produce hydrogen Lancaster will buy. Earlier this year, the city approved the development of a hydrogen facility by SGH2 Energy that uses mixed-paper waste and other biomass to create hydrogen. Hydrogen refueling stations in the U.S. are almost all in California, though there is one in Hawaii, according to Suzanne Mattei, an energy policy analyst for the Institute for Energy Economics and Financial Analysis. The infrastructure for the stations is already moving in a similar direction of vehicle battery recharging stations, she said. In 2022, the global production of hydrogen stood at about 82.3 million metric tons, according to Wood Mackenzie data, with virtually all of that produced in nonsustainable ways. Demand for hydrogen was up 28% over the last 10 years, the company reports. Wood Mackenzie predicts that by the end of this decade, production will be 98 million metric tons, about 9% of which will be sustainably produced. After that, it forecasts a steep rise in production by 2050 to 253.8 million metric tons.
New hydrogen facilities are in the works elsewhere, such as the announcement in September of a major new electrolyzer facility in Plymouth Township, Michigan, by Norwegian company Nel Hydrogen, a 507K SF facility that represents a roughly $400M investment. Manufacturer Cummins has started using electrolyzers at a factory in Minnesota. Bosch, a German company that makes hydrogen energy equipment in Germany and China — and that is also planning to make hydrogen fuel cells for mobile applications in its U.S. plant in Anderson, South Carolina — predicts that by 2030, one in five new trucks weighing 6 tons or more will feature a hydrogen fuel-cell powertrain. Other facilities are up and running. Electrical equipment manufacturer Plug Power operates a $125M gigafactory making electrolyzers and other hydrogen tech in greater Rochester, New York. The company sells its products globally, and also has installed electrolyzers at its hydrogen plant in Georgia. It is planning to do the same at plants under development in New York, Tennessee, Texas and California. Okay, so a very interesting perspective on the hydrogen economy in one that should play a key factor in the hydrogen development landscape. prospecting for hydrogen project development needs several considerations. Obviously, demand, transport and storage need to play a pivotal role in that decision. But also at the top of the list is the need for land and facility development, especially when considering the size of some of these facilities.
The Nel facility at 500,000 square feet, in my opinion, will become the standard as larger Giga factories get developed. Because keep in mind 500,000 square feet is roughly the same size as an average distribution center here in the US. That kind of real estate requirement will need serious research to determine suitable locations. I can also see the need for companies like Bosch to expand their facility in South Carolina. But luckily here in the US we have the available space, as does Australia, most of Europe, Japan and Korea well, they’re not as abundant with land, which further adds to their import demand. Along with that consideration is the data point from Woodmac stating 9% of the demand by the end of the decade will come from sustainable sources, meaning electrolytic hydrogen from renewable power sources. I am extremely wary of that number just for the fact that the regulatory requirements haven’t yet been established here in the US. If the three pillars become rule and time matching regionality and additionality must be followed. Prospecting site location will become even harder and further reduced development options. That again, the three pillars may be reduced to two or just one No one knows currently.
So any speculation on near term electrolytic hydrogen production is going to be a weak estimate. One other big driver for the impact hydrogen will have on real estate will be the hydrogen hubs subsidies that we in the US are still waiting to hear more about. That will have a significant impact on pricing and development costs as we see certain land prices go up tenfold in locations chosen for those hydrogen hub developments.
Alright, that’s it for me everyone. If you have a second, I would really appreciate it if you could leave a good review on whatever platform it is that you listen to Apple podcasts, Spotify, Google, YouTube, whatever it is, that would be a tremendous help to the show. And as always, if you ever have any feedback, you’re welcome to email me directly at info@thehydrogenpodcast.com. So until next time, keep your eyes up and honor one another.
Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more, I’d appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com Thanks for listening. I very much appreciate it. Have a great day.
