Green hydrogen industry bleeding red

This is a follow up to a recent article, with the exhibit providing the list of bankruptcies, closures, restructuring, consolidations that the industry has been facing especially over the past few months.

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The condition is nothing short of DIRE – with the hydrogen industry having been bought literally to its knees!

Some of the key reasons for this in my view are as follows:

Uncertain geopolitical scenario – with anti-climate governments across US and Europe, the momentum towards the hydrogen industry has resulted in significant headwinds

Bankability of projects or the lack of it – on one hand the natural gas prices are way lower than the 2021-22 period and on the other significant cost and schedule overruns, questionable technology maturity for large-scale electrolyzers, all resulting in very limited end-customers willing to sign-up for long term offtake agreements

Oil & Gas resurgence – with steady crude and gas prices, and a certain outlook with the “drill baby drill” rhetoric – most of the IOCs have dropped most of their hydrogen plans – sans 1-2 once-off projects to avoid write-offs.

This reverse gear-shift has had massive consequences as these IOCs were not too long back leading the hydrogen agenda.

Falling lithium battery prices – in addition to the lack of low cost hydrogen, very low battery prices are leading to slow-death and some final nail in the coffin for several heavy mobility applications of green hydrogen.

I have also compiled my view of some of the survival strategies for green hydrogen companies in this economy:

Focus on fundamentals – over-dependency on subsidies, mandates, or someone else paying for your green-premium is simply not going to happen – this means both focus on use-cases where the business case is realistic in the medium term, and not just rely on pilots.

Being lean and nimble – building fat organizations on basis of investor capital or cash-flow from other businesses is not going to be prudent – and this has been one of the major downfall reasons for most of these companies.

Focus on utilization – with significant overcapacity and very low utilization factors, there isn’t any point building another electrolyzer manufacturing factory. Rather, the use-cases with strong fundamentals should get priority.

Prudent financial strategy across debt and capex is important especially for those 100% dependent on the green hydrogen economy. Splurging is death-sentence in this industry.

With no other cash-rich businesses, we at Umagine / H2 Carbon Zero are in the same boat, and are diligently following the above. For our peers – STAY STRONG, let us weather through this together!

Source: Santosh K Garunath

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