Paul Rodden • Season: 2024 • Episode: 377
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Welcome to The Hydrogen Podcast!
Episode 377, In this episode of The Hydrogen Podcast, Paul Rodden dives into a packed week of hydrogen news. Highlights include Thyssenkrupp Nucera’s adaptability to U.S. policy uncertainty, California’s $1.4 billion investment in hydrogen refueling stations, the UK’s green hydrogen subsidy mechanism, and breakthroughs in sustainable maritime technologies. Learn how these developments are shaping the global hydrogen economy and what it means for investors and industry stakeholders.
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Transcript:
It’s a big news week, and today, I’ll cover everything from Thyssenkrupp Nucera’s adaptability to policy shifts, California’s big hydrogen refueling investment, the updates in maritime fueling, and much more. There’s a lot of great news to get through on today’s hydrogen podcast.
So the big questions in the energy industry today are, how has 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 in this podcast will give you the answers. My name is Paul Rodden and welcome to the Hydrogen Podcast.
First up today is Thyssenkrupp Nucera’s strategic flexibility amid the U.S. policy uncertainty. Now Thyssenkrupp Nucera, which is a leading producer of electrolyzers for low carbon hydrogen, has expressed readiness to re-allocate resources in response to political shifts in U.S. policies under President Elect Donald Trump. Now concerns have arisen that changes to the Inflation Reduction Act, which supports renewable energy initiatives like green hydrogen, could impact the industry.
Now despite these uncertainties, Thyssenkrupp Nucera reported a smaller than expected operating loss for 2023 and 24 leading to a 14.3% surge in its share price. CEO Werner Ponikwar emphasized the company’s global operations and asset light business model indicating preparedness to focus on other markets, such as India, if necessary. The company currently generates less than 10% of its sales in the U.S. and has called for quick clarification on green hydrogen incentives legislation in both the U.S. and Europe to prevent further industry delays.
While speaking of delays, let’s open up some of the economic data associated with this news. The current cost of green hydrogen production in the U.S. is in a range between $4 and $6 a kilogram. Now that’s without subsidies. The $3 a kilogram tax credit could reduce production costs to $1 to $3 a kilogram, making green hydrogen cost competitive with grey hydrogen, which is derived from natural gas. Compared globally, EU countries offer subsidies and contracts for differents or CFDs to stabilize green hydrogen prices around two to three euros per kilogram, or around $2.10 to $3.20 per kilogram.
And China’s production costs are already below the $3 per kilogram due to economies of scale and state-backed incentives. So then what are the investment risks around that? Well, a six to 12 month delay in implementing the IRA subsidies could result in a 20% drop in new U.S. hydrogen project announcements in 2024. And what that means is that U.S. policymakers must act swiftly to finalize IRA rules to ensure the country remains competitive. The EU has recently announced 800 million euro funding round for hydrogen projects or the Hydrogen Bank Initiative puts additional pressure on the U.S. to maintain momentum. Next up, let’s talk about California’s investment in hydrogen refueling infrastructure.
Now, California has announced a $1.4 billion investment in hydrogen refueling stations and electric vehicle charging infrastructure. This funding is part of the state’s effort to accelerate the adoption of zero emission vehicles and reduce greenhouse gas emissions, positioning California as a leader in clean transportation infrastructure. Now, this investment is set to expand its hydrogen refueling network to support its 2035 zero emission vehicle mandate. This investment aims to build 1,000 hydrogen refueling stations by 2030.
But let’s unpack some of the economic data around that like infrastructure costs. Now, a single refueling hydrogen station costs one to $2 million with an operational capacity of 200 to 400 kilograms a day. California’s plan will require approximately $1 billion in capital expenditures and 400 million in operational costs over the next decade. What about market impact? Hydrogen refueling costs for light duty vehicles are currently $10 to $15 a kilogram, which is significantly higher than gasoline. Scaling up refueling networks could reduce hydrogen costs to five to $7 a giga by 2030.
But, really, the focus is on heavy duty vehicles. Heavy duty trucks account for 6% of California’s vehicles, but generate 23% of its transportation emissions. Hydrogen offers a viable solution for this sector given its high energy density. And some of the other economic benefits of this initiative is that it’s expected to create over 20,000 high-paying jobs in engineering, construction and station operation. And California’s hydrogen economy could contribute 100 billion dollars in GDP by 2035 with spillover benefits across other sectors.
Next up, let’s talk about the U.K.’s green hydrogen projects that have secured government funding. Three green hydrogen projects in the U.K., totaling 31.8 megawatts of capacity, have officially signed funding agreements under the government’s two billion pound hydrogen allocation round one scheme. This initiative aims to support the development of green hydrogen production contributing to the U.K.’s broader decarbonization goals. Now, this effort aligns with the U.K.’s goal of producing 10 gigawatts of low carbon hydrogen by 2030, but let’s look at some of the economic data around this.
The government investment for starters, the U.K. government has allocated 240 million pounds for the HAR1 scheme, or roughly 300 million dollars. I mean, these are long term contracts via the net zero hydrogen fund to reduce risks for private investors. But there are some cost implications. Electrolyzer costs in the U.K. range between 500,000 and $1.5 million per megawatt, and so operating costs are driven by renewable electricity prices which account for 60 to 70% of green hydrogen costs. Now, there’s also the hydrogen market impact. Industries like steelmaking and fertilizer production stand to save one billion pounds, or $1.25 billion annually by switching to green hydrogen. And there’s also the transportation and heating sectors which could see a combined reduction of 10 million metric tons of CO2 annually by 2030. But let’s also compare some policies between the U.K., the U.S., and the EU.
Unlike the U.S.’ I.R.A., the U.K. relies on CFDs to stabilize green hydrogen prices, and the EU’s hydrogen bank model and the U.K.’s CFD system provide more predictable revenue streams for investors compared to the U.S. Next, let’s quickly discuss investor fatigue over delayed returns in energy transition. Investors are exhibiting growing impatience with the prolonged timelines associated with returns on energy transition investments. Companies like the British industrial group johnson matthey, known for its catalytic converter business, face strategic dilemmas. As the automotive industry shifts towards electric vehicles, johnson matthey has invested heavily in clean-hydrogen technologies, requiring significant capital.
Since 2022, its hydrogen division has consumed £310 million without clear results, leading to shareholder frustration over deferred returns. In response, the company is considering strategic options, including potential divestments to address investor concerns and realign its focus. But johnson matthey isn’t alone in this. Investors face diverging challenges in hydrogen markets of the EU and the U.S. The EU’s clear subsidy structures contrast with U.S. delays in IRA implementation. This creates uncertainty.
So let’s look at the economic data on it, the EU market dynamics, for instance. The EU hydrogen bank’s initial €800 million round provides price guarantees for green hydrogen projects, reducing investor risks. We also have European electrolyzer manufacturers like NEL and ITM Power, which benefit from streamlined permitting and financing. Then again, we have the U.S. market uncertainty.
The U.S. hydrogen sector risks losing $20 billion in potential investments if the IRA subsidies are delayed. And key players like Plug Power and Bloom Energy have expressed concerns about project delays. So then what about the global hydrogen investment trends? Well, $280 billion was invested in hydrogen projects globally in 2023, but only 20% of these projects reached FID. So then what do we need to move forward? Well, we need clear policies and predictable revenue models that are critical for maintaining investor confidence. Regions with consistent frameworks like the EU are attracting a larger share of global hydrogen investments.
And lastly today, let’s take a look at some advancements in sustainable maritime technologies. The maritime industry is making strides towards sustainability, with several cruise lines adopting innovative technologies to reduce environmental impact. Companies are implementing measures such as banning single-use plastics, enhancing fuel efficiency and exploring alternative fuels like liquefied natural gas and hydrogen fuel cells. For instance, Hurtigruten has introduced hybrid and biofuel-powered ships, while Ponant focuses on carbon offsetting and local collaborations. These efforts align with broader industry goals to achieve net-zero greenhouse gas emissions by 2050, reflecting a commitment to sustainable tourism and environmental stewardship. So then what is some of the economic data behind this news?
The first one is retrofitting costs. Retrofitting a ship to use hydrogen or ammonia cost about 5 to $10 million per vessel. An infrastructure for ammonia storage and handling cost about one to 2 billion per port. We also have the fuel costs associated with the shift. Ammonia production costs are currently 500 to $1,000 per ton with green ammonia at the higher end of that spectrum. And hydrogen costs for maritime use are estimated at three to $6 per kilogram depending on production method. But really, the focus should be on market growth.
The maritime hydrogen market is projected to reach $30 billion by 2030, growing at a compound annual growth rate of 10%. And so, some of the technical insights around this is that hydrogen fuel cells are being tested in pilot projects with Maersk and Hurtigruten leading the adoption. An ammonia’s storage advantage makes a strong contender for long-haul shipping. Okay. So, all of these stories really do highlight the rapid advancements and challenges across a lot of sectors in hydrogen. Now, some of the key takeaways that I’ve talked about today, really, the biggest one is the critical role of stable policy frameworks in attracting investment and how the EU really is outpacing the US. We also see the need for continued innovation to reduce hydrogen production and infrastructure costs, and California and the UK are really setting global benchmarks for hydrogen infrastructure and project funding.
All right, 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.
