“The FT writes, share prices of US and European clean hydrogen companies have collapsed”, Our Take, With Doug Sheridan

Shares of hydrogen companies Plug Power, Ballard Power Systems and Green Hydrogen Systems have fallen by more than half this year to historic lows as they reported repeated quarterly losses.

The FT writes, share prices of US and European clean hydrogen companies have collapsed while projects have been delayed as the industry battles lower than expected demand, regulatory uncertainties and growing investor scepticism.

Shares of hydrogen companies Plug Power, Ballard Power Systems and Green Hydrogen Systems have fallen by more than half this year to historic lows as they reported repeated quarterly losses. Shares of Nel Hydrogen, Bloom Energy and ITM Power have dropped by a third.

The S&P Kensho Global Hydrogen Economy Index, which tracks companies across the low carbon hydrogen value chain, is back to levels akin to those in mid-2020, erasing gains made in late 2020 and early 2021 at the height of hype over the development of the green energy.

Last month, McKinsey & Company slashed its 2030 green hydrogen forecast for the US by 70%, predicting the country would miss its 10mn tonnes clean hydrogen production target set by the Biden admin. In July the European Court of Auditors, the bloc’s spending watchdog, warned the EU’s goal to produce 10mn tonnes of green hydrogen by 2030 was “unrealistic” and a “reality check” was needed.

“Green hydrogen is still not investable. It’s rubbish in terms of investment,” said Mark Lacey, head of thematic equities at Schroders, adding that the UK asset manager had “limited exposure” to green hydrogen in its energy portfolios.

The downturn of the hydrogen market marks a turnaround from the investor euphoria just two years ago when Biden signed into law lucrative tax credits in the IRA, which transformed the US into the most attractive destination for hydrogen production. At the same time the EU was charging forward with its newly adopted strategy for hydrogen. Many had unrealistic expectations about how fast it could move.

Our Take 1: One industry insider said, “It boils down to IRA being a very good tool in principle, but when there’s limited clarity on the regulations . . . it’s difficult to take the final investment decision. You have this big piggy bank, and you’re not able to get anything out of it. You’re shaking it, but nothing is coming out.” Wow. Is this now what business is...the act of shaking the public piggy bank to see what kind of taxpayer funds fall out? Not enough subsidies and business can't be conducted?

Our Take 2: To be honest, we haven't put a pencil to the math behind green hydrogen, mostly because our understanding is that the economics so far out of the money that these projects have virtually no chance of being viable—even with massive taxpayer subsidies, which we understand can be as high as...wait for it... $14 per MMBtu in the US.