Is the Hydrogen Bubble Bursting?

Somehow, it’s November 1st already. We’re having a lovely fall, the leaves are changing, the Halloween decorations being taken down and New York is 80 degrees. Wait, what?? I don’t know what deity decided to remind NYC about losing the World Series to the Dodgers by giving them L.A. weather in November, but that just seems cruel.

Anyway, while I wait for Yankees fans to show up at my house with pitchforks, let’s get into a climate tech movement that I’m watching from the week.

Is the Hydrogen Bubble Bursting?

For the last few years the hype and branding around hydrogen has been so strong that you’d think its deployment was inevitable. It was touted as the solution to seemingly everything, from maritime shipping to personal transport to electricity. And the fuel made sense to us. A hydrogen car can be refueled like an internal combustion car. It could be piped into homes for heating (theoretically) or burned in a turbine like combustion sources today. Hydrogen seemed to just kind of fit.

Lately, however, it seems like the hydrogen honeymoon phase is over. Several of the U.S. hydrogen hubs, which are meant to be early mover projects that aid in commercialization, have hit a snag. Fortescue, a partner in the Pacific Northwest hub, says that they need clean electricity to be around $30 per megawatt-hour for the project to be economic. That is incredibly low for the area.

The PNW hub was slated to provide hydrogen to refueling stations along Washington, Oregon, and Montana’s highways but is having a tough time finding outfits that are willing to commit to purchase that hydrogen. This has become a constant dance in the hydrogen space. The potential users don’t want to convert because there isn’t a firm supply and the suppliers don’t want to invest too much because there isn’t firm demand.

Further east, the Appalachian hub is grappling with almost identical issues. Multiple developers have backed out, projects have been scrapped, and a third of the projects have been shelved altogether. High electricity prices and a lack of demand have been cited as reasons for the turbulence. It should be noted that the hub is currently working on replacing the developers that have backed out and still has several others on board. The hub is still moving forward at this time, but a high rate of churn will make financing and project development difficult.

All of these issues mean that hydrogen is facing an uphill battle when there is a mature competitor, such as transportation or generating power. Heat pumps are beating out hydrogen in the home heating market, battery electric vehicles are smashing fuel cell electric vehicles, grid connected battery costs are dropping rapidly while using hydrogen as electricity storage is not. One by one, sectors seem to be moving past hydrogen.

Despite that bleak picture, clean hydrogen can still make sense in replacing dirty hydrogen or as a chemical feedstock for decarbonizing chemical production. Cement, desulfurization, and ammonia production are a few examples. Hydrogen production methods that match the needs of those use cases and have secondary value streams could start to gain traction. Several companies, such as Modern Hydrogen and Monolith Materials, are going that route. It remains to be seen if there will be enough of a hydrogen market to support them.

Climate Tech Year in Review is Coming.

Today was a shorter edition, so I’m going to tease a pretty cool deal we’ve got on the horizon.

2024 was a weird year for climate tech. We came into the year with incredible investment from the government and mediocre investment levels from VC and PE. We’re ending the year with some wild momentum. To that end, we here at Watt About It are working on our climate tech Year in Review report. This will be a long form report that will tackle the movements in each of the major energy and industrial technologies, lessons learned, and key companies or technologies to watch for 2025.

Be sure that you’re subscribed. If you’ve got comments or suggestions, I welcome them. Hit reply and let me know.

Appreciate you all.

-James