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This week, Senate Republicans joined their House colleagues in proposing to curtail a slew of clean energy incentives. Losing those could upend many a clean energy business, but the cuts would drive a dagger through the heart of the burgeoning green hydrogen sector in particular.
The Senate and House still need to agree on the final text of the bill, but both chambers would take a decade of incentives meant to incubate green hydrogen production and end them after this year. The truth is, though, even before Republican lawmakers sharpened their knives for the tax credit, the much-anticipated green hydrogen boom had quietly collapsed.
Just a few years ago, green hydrogen developers were planning to invest billions of dollars to build gigawatts of wind and solar capacity in prime locations from the Gulf to the desert Southwest, then funnel that electricity into huge banks of electrolyzers. These devices zap water and deliver pure hydrogen gas without the carbon dioxide released by conventional hydrogen production. Ambitious dreamers even proposed billion-dollar pipelines to carry the gas across Texas to ports on the Gulf, where it could be shipped to buyers in Europe and Asia.
I caught a bit of hydrogen fever myself during a reporting trip along the Gulf Coast in December 2023.
In Mississippi, leaders from a company called Hy Stor Energy showed me a vast sandy tract, framed by mastlike pines, where they intended to build a clean industrial park powered by gigawatts of off-grid wind and solar. These power plants would electrolyze hydrogen, which Hy Stor would stash in enormous subterranean storage tanks carved from the region’s salt dome formations. Then steelmakers and chemicals companies would flock there for an uninterrupted supply of undeniably clean hydrogen.
Sure, it sounded bold, but not impossible: Hy Stor’s then-CEO Laura Luce had previously developed salt dome storage for natural gas, and elsewhere in the region, salt dome tanks already store hydrogen molecules for the Gulf petrochemical corridor.
By October 2024, though, Hy Stor had canceled a contract to buy over 1 gigawatt of alkaline electrolyzers from Norwegian cleantech company Nel, and the company’s leadership had moved on, per their LinkedIn pages. (When I texted a former Hy Stor leader to request comment for this story, the phone number’s new owner told me they had nothing to do with the company. A few days later, they texted me again asking if I could give them $20.)
Other firms have canceled projects partway through construction, are holding off on final investments, or have found new customers for their renewables. A few green hydrogen projects are still moving forward, but they’re either in jeopardy, heading overseas, or far more modest than the gigawatt-scale ventures recently under development.
“I think it is overstating it to say [green hydrogen] is dead,” said Sheldon Kimber, whose firm Intersect Power spent years developing ideal wind and solar sites for hydrogen production, before pivoting to supply clean energy to data centers. But, he added, projects that get built in the next few years are likely to rank in the tens of megawatts, not the thousands, and focus on “small-volume, high-margin markets.”
Plug Power stands out as the rare company still building substantial non-fossil-fueled hydrogen production in the U.S. It recently finished a site in St. Gabriel, Louisiana, that can liquefy 15 metric tons of hydrogen daily, bringing its total production capacity to 40 metric tons per day. The company claims it runs the largest liquid-hydrogen production fleet in the nation.
Plug, however, serves as an inauspicious standard bearer for the U.S. green hydrogen industry. The 28-year-old company reported an accumulated deficit of $6.8 billion as of late March, meaning its cumulative losses outweigh any profits by that hefty amount. In February 2021, CEO Andy Marsh raised a warchest of $5 billion to build 500 metric tons per day of green hydrogen production by 2025; the stock traded above $60 a share at that time. Plug burned through that cash and completed just a sliver of the production goal. Currently, its stock trades at just over $1. (A company spokesperson did not respond to requests for comment.)
Plug Power and other hydrogen developers attracted billions of dollars from investors on the promise that success was just around the corner. Now, though, the hydrogen build-out has collapsed under the weight of several interlocking burdens. Self-defeatingly slow federal rulemaking on tax credits, soaring production costs, a dearth of major industrial buyers, and AI’s insatiable demand for power hobbled green hydrogen construction well before the Trump administration decided to go for the jugular.
The late 2010s were a euphoric time for clean energy developers. Renewables construction shot forward despite President Donald Trump’s 2016 campaign vows to bring back coal. Low interest rates paired nicely with the low but predictable returns that renewables projects could generate. Entrepreneurs imagined ways to capitalize on the imminent abundance of clean electricity by converting it into hydrogen.
The Covid-19 pandemic slowed the pace of activity, but then the Biden administration passed the 2021 infrastructure law, which designated $7 billion for a series of “hydrogen hubs” around the country. The administration chased that with the Inflation Reduction Act, which included a lucrative credit for the production of clean hydrogen, up to $3 per kilogram. A new multibillion-dollar industry was in the offing, and visionaries prepared to make their moves, as soon as the Internal Revenue Service published its guidance on how to claim that credit.
Then they waited. And waited.
“At $3 per kilogram, if your plant did not qualify for that and your neighbor’s plant did, then you’re out of business,” said Brenor Brophy, who ran development for Plug Power’s hydrogen production business in the early 2020s (he is no longer with the company). But there was no airtight way of ensuring one’s project would qualify until the final rule came out.
“The Treasury Department sat on that for two and a half years,” which was worse for the industry than if the credit were never created, Brophy added.
Paralysis seized the whole supply chain. Savvy suppliers chose a wait-and-see approach. This saved them money, at the expense of the communities they had promised to invest in.
Michigan Gov. Gretchen Whitmer (D), for instance, famously flew to Oslo to close a deal with Norwegian electrolyzer company Nel. That firm planned to invest $400 million to build a factory near Detroit, and gain $16 million in state funds for creating some 500 jobs. Nel has declined to make a final investment decision on the site. Despite that display of financial discipline, its stock was trading for pennies at the time of writing.
Plug Power, not afraid to be early to the party, went ahead and built a factory in Rochester, New York, in 2021 capable of fabricating 1.5 gigawatts of electrolyzers per year. That’s a big swing compared to today’s demand: Plug noted its Georgia plant, which it called “the largest liquid green hydrogen plant in the U.S. market” in January 2024, contains 40 megawatts of electrolyzers.
Biden’s Treasury Department didn’t release final guidance until days before Donald Trump moved into the White House. The new administration promptly held back funds appropriated by Congress for clean energy efforts and then set about dismantling the clean energy tax credit regime.
“Most of the pipeline will get abandoned if they cannot get a $3/kg subsidy,” said BloombergNEF analyst Xiaoting Wang. Some developers have put on a brave face and said they’ll plow ahead even without the tax credit, but she suspects such assertions are “more advertisement than a real business decision.”
Many of the planned hydrogen projects would have enriched solidly Republican districts, like Texas and Louisiana, the locus of legacy hydrogen production for petrochemical refining. But the prospect of self-inflicted economic pain has proven less of a deterrent for Republican lawmakers than industry insiders had hoped.
Project cancellations have continued amid the uncertainty. Major legacy hydrogen producer Air Products was supposed to build a $500 million green hydrogen production plant in Massena, in upstate New York. The company had cleared the 85-acre site and laid foundations to support 35 metric tons per day of green hydrogen electrolysis, per reporting by local outlet North Country Now.
But new CEO Eduardo Menezes took office in February, after an activist investor attacked the company’s green hydrogen strategy. Menezes promptly canceled Massena and a few other projects, incurring a cost of $3.1 billion for breaking contracts and writing down asset value. Burning that cash seemed preferable to actually finishing and operating those projects.
“Treasury was so effective at destroying the industry that it kind of seems malicious,” Brophy said.
Scaling breakthrough technologies requires faith that costs will fall and customers will want to buy. Elon Musk bet on that happening for electric cars, long before they were widely available to consumers. Solar evangelists dismissed predictions that their technology would never go anywhere; now solar is the fastest-growing new source of electricity production in the U.S. and the world.
Similarly, in that bright period before Biden-era inflation set in, hydrogen boosters saw a clear path to achieving cost declines akin to what solar and batteries had achieved. Legacy dirty hydrogen could be made for about $1 per kilogram; the green stuff cost several dollars more. But a technological learning curve could close that gap, the thinking went, and sway large industrial buyers. In 2021, the Biden Department of Energy set a goal to get green hydrogen costs down to $1 per kilogram within a decade.
Unfortunately, the cost declines that experts expected in the early 2020s never materialized. A late-2024 DOE report on clean hydrogen commercialization noted that costs had gone up, not down, by $2 to $3 per kilogram since its March 2023 analysis. The report cites higher real-world installation costs, rising interest rates, and escalating prices for clean power to meet the IRS requirements for the tax credit.
BloombergNEF analysts looked back at real-world installation costs for electrolysis plants built in 2023, and found they were 55% higher in the U.S. and Europe than the firm had predicted in 2022. Earlier estimates had assumed the core electrolysis equipment would drive most of the cost, but in practice, the seemingly incidental factors — like utility and contractor management, and contingency planning — inflated project costs considerably, Wang noted.
Researcher Joe Romm oversaw hydrogen efforts at the DOE’s Office of Energy Efficiency and Renewable Energy in the 1990s, and subsequently published a book-length critique, “The Hype About Hydrogen.” He reissued it this spring, just in time for the latest cycle of boom and bust.
“Electrolyzers aren’t like photovoltaic cells or battery cells,” he told me recently. “There’s no ‘then a miracle occurs’ thing. … If there was going to be a learning curve, we never got there.”
Solar panels and battery cells are identical units that get mass-produced economically. Electrolyzer systems require more hands-on and bespoke installation work, with pipes and pumps and compressors and water tanks.
The other problem with analogizing green hydrogen to wind, solar, and batteries is a key difference in their uses. The latter group delivers electricity, which is distributed and used across modern society. But clean hydrogen requires highly specialized infrastructure to transport and utilize the famously flighty molecule.
“Someone’s going to have to take a big gamble, and if they lose, they’re stuck with a stranded asset,” Romm noted. An electrolysis plant with no green hydrogen customers can’t do anything else. And would-be producers struggled to find any committed customers.
Michael Cembalest, chairman of market and investment strategy for J.P. Morgan Asset and Wealth Management, tallied the missing demand to damning effect in his annual global energy-market report from March (see slide 46). He calculated that only 1% of green hydrogen projects slated for completion by 2030 have a binding offtake agreement.
That’s not to say developers were crazy for trying. A few years ago, major companies in Asia and Europe seemed eager to purchase large volumes of green hydrogen for their decarbonization plans, said Kimber, from Intersect Power. Such high-volume deals were vital for justifying construction of gigawatt-scale electrolysis projects in the sunny, windy sites of the American West.
“We had plenty of negotiations for gigawatt and multi-gigawatt-scale hydrogen, but most of them were with European and Asian customers, and most of those folks have backed away from the table,” Kimber said. “Without that policy certainty, no large oil company, steel company, power company is going to move ahead purchasing green molecules globally.”
Lacking that kind of anchor customer, a developer can’t justify building big or financing a whole pipeline to market — the billion-dollar gigaprojects depend on high utilization to make any financial sense, Kimber noted. They’re not something you can build and then wait a few years for demand to materialize.
Electrolysis devours electricity, which is fine in a world of cheap and abundant power. But, suddenly, any fledgling hydrogen project has to compete with much better-funded rivals in electric gluttony: AI computing hubs.
The business calculus of clean hydrogen necessitated driving down energy costs as much as possible to compete with cheap dirty hydrogen. For green hydrogen ventures to succeed, they would need to render their product a cheap commodity.
AI customers, on the other hand, are flush with cash and willing to pay top dollar to anyone who could deliver them gobs of power as soon as possible.
“When you enable a more valuable product, the total pie of value for the supply chain to carve up is greater,” Kimber said. “That makes the whole process of dealing with your customer and your vendors and everybody just less of a fight to the death. Everybody can truly be focused on, how do we scale this industry?”
For clean energy developers like Intersect, then, the choice to swap customers was uncomplicated. They had scouted the most energy-rich acreage they could find, but the big buyers for green hydrogen never showed up, and suddenly the wealthiest tech companies in the world wanted to sign deals ASAP.
“We were never a hydrogen company,” Kimber said. “We have been, are, and will be a company that is focused on finding ways to use the massive surpluses of all forms of energy that exist in places like West Texas, the panhandle of Texas, to power new industrial loads.”
“Now, it’s very easy for us to pivot into data centers,” he continued. “We’re negotiating AI data centers on all of our large [hydrogen] projects right now.”
Plug Power CEO Marsh opened a quarterly earnings call in May by going on defense about the tax credit revisions proposed by congressional Republicans.
“My first reaction was, we’re going to have to work to start construction this year to make sure that that plant would qualify,” Marsh told investors, referencing a development in Texas.
Then, tellingly, he handed the mic to Chief Revenue Officer Jose Luis Crespo, who talked up the bounty awaiting across the Atlantic, saying “Europe today is the most dynamic electrolyzer market in the world.” The European Union’s binding hydrogen procurement rules will soon kick in, and electrolysis projects at the 100-megawatt scale are starting to move toward reality, he explained.
Instead of building gigawatts of electrolyzers in the U.S. to export hydrogen to Europe, investment might just flow there instead.
Other U.S. entrepreneurs hope to survive through a more targeted approach: building small but closer to customers. The U.S. already produces 10 million metric tons of hydrogen per year for industrial users; many of them are open to cleaner and cheaper options, said Matt McMonagle, founder and CEO of startup NovoHydrogen.
“There’s no pricing transparency in this market; it’s very opaque,” he said. “There’s no Henry Hub equivalent like there is for natural gas.”
Green electrolysis still can’t compete with the $1 per kilogram that it costs to make dirty hydrogen at huge petrochemical complexes with cheap natural gas. But companies that get smaller deliveries of super-cooled liquid hydrogen can pay anywhere from $5 to $50 per kilogram, depending on region and shipping distance, McMonagle explained.
“We try to focus on the ones where we can save the customer money,” he said, recalling prior experience selling solar and batteries to businesses that wanted to cut their utility bills. And, unlike so many giga-scale hydrogen projects, NovoHydrogen actually has signed offtake agreements. “There’s no project without a customer,” McMonagle noted.
Novo is developing 10-megawatt electrolyzer systems at customer sites, which can produce about 2 metric tons per day depending on uptime, McMonagle explained. These projects will hook up to the grid, drawing power via clean energy supply agreements from the local utility. By building on-site, Novo needn’t worry about constructing pipelines across hundreds of miles or driving a fleet of super-cold tanker trucks.
Novo’s bigger projects function more like community solar: They’re located off-site but still near customers. Novo intends to install 235 megawatts of solar production across 1,000 acres in Antelope Valley, at the outer reaches of Los Angeles County, and funnel that power into electrolysis. If it comes online as planned in 2028, this facility should make about 27 metric tons per day. That’s nothing close to the colossal projects other companies contemplated at the height of the boom times, but it’s still bigger than any single green hydrogen source in the U.S. today.
As McMonagle sees it, the lure of the $3-per-kilogram credit attracted maybe too much attention to hydrogen, beyond situations where it really makes sense.
“A lot of people may have been chasing a shiny object and didn’t understand the details,” McMonagle said. “Let’s burst the bubble. I don’t think that means green hydrogen as an industry is gone — it will play a fundamental role in certain use cases. Trying to do everything just invites criticism that’s frankly valid.”
Hydrogen’s critics have long insisted that it never made much sense, either as a decarbonization strategy or a moneymaking venture. They see the industry’s implosion as a chance to avoid plowing billions of dollars into a technological dead end. Many climate advocates have dismissed hydrogen as a guise for fossil-fuel interests to prolong the use of their planet-warming product; they won’t be shedding any tears now.
But for the contingent of hydrogen entrepreneurs who emerged from successful renewables firms, the sudden loss of momentum delivers a yearslong setback in efforts to clean up heavy-duty transport, steelmaking, and other industries that are hard to decarbonize, and a missed opportunity to head off the worst impacts of climate change.
“I worry we’ve lost a decade, and that was a decade we didn’t have,” said Brophy.
The sudden vaporization of the imagined green hydrogen economy may be the kind of healthy correction this market needed. Whichever hydrogen projects ultimately get built could prove more durable for having made it through the ringer after the days of easy money. But that’s paltry consolation for the townships and states that were promised billion-dollar projects and high-tech jobs within a couple years. Beyond the economic hit, the green hydrogen collapse removes a leading contender for cleaning up the most carbon-intensive industries — at least until the next hydrogen boom comes around.
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