Lackluster hydrogen demand forces kit makers to cut costs, call off bets

Hydrogen companies are slashing spending, reducing staff and canceling production after betting on a market for clean fuel that still has yet to materialize.

Last year's electrolyzer sales were "a disappointment," Nel ASA CEO Håkon Volldal said on the company's Feb. 26 earnings call. Fuel cell electric vehicle manufacturer Nikola Corp., which was briefly valued higher than Ford in 2020, has become a penny stock over the past year en route to filing for Chapter 11 bankruptcy in February. Another hydrogen truck developer, Hyzon Motors Inc., announced its delisting from the Nasdaq in February after California subsidies dried up.

The turbulence comes despite multiple efforts under the Biden administration to spur demand for "clean" hydrogen. The 2021 bipartisan infrastructure law authorized $9.5 billion in hydrogen project grants and the 2022 Inflation Reduction Act created a $3/kilogram production tax credit. The goal was not only to reduce the emissions of existing hydrogen end uses, such as refining and fertilizer production, but also to promote hydrogen as a substitute for diesel and natural gas.

The government's vision was initially met with excitement in the industry, spurring dozens of hydrogen development proposals. But when the administration's rules to qualify for the Section 45V tax credit proved tougher than expected, developers began to rethink their plans. The nascent industry took another hit with the election of President Donald Trump, who has vowed to slash federal clean energy spending.

"I think there's a narrative," Volldal told analysts. "It was a very positive narrative in '21, '22. And now that narrative is very negative."

Upstream

The loss of momentum has hurt the sale of electrolyzers, which produce "green" hydrogen by splitting water.

In January, Nel paused production at its Herøya, Norway, plant. The Norwegian manufacturer has now terminated 25% of its workforce, Volldal said. And despite accumulating nearly $200 million in state and federal financing deals for a potential US factory, the company is withholding its commitment.

"[We'd] really love to build a facility in Michigan, but we can't build that until we have a market," CFO Kjell Christian Bjørnsen told analysts.

Regulatory uncertainties in Europe and the US and high startup costs for hydrogen producers are also slowing orders for electrolyzers from ThyssenKrupp Nucera AG & Co. KGaA, executives said on Feb. 13.

Another electrolyzer maker, Elogen, is on the verge of halting production altogether after failing to secure any significant orders in 2024, according to parent company Gaztransport & Technigaz SA. On Feb. 10, the French manufacturer said it planned to terminate 110 employees, suspend construction of its gigafactory and strip Elogen down to a research and development company.

"The electrolyzer market is challenging," Anders Rosenlund, an analyst with SEB Group, said in an email.

A few years ago green hydrogen developers were creating a lot of perceived demand, Rosenlund said. But most of those projects lacked financing and never resulted in firm orders.

"We don't see such projects to the same extent anymore," Rosenlund added. "Is the tide turning? Hard to say — we don't see any good indication of a pickup in demand."

But not all clean hydrogen development has stalled. Developers of "blue" hydrogen — produced with gas and carbon capture technology — have advanced projects on the Gulf Coast, encouraged by a separate tax credit for carbon sequestration. However, most of those facilities say they are targeted at Asian customers or existing hydrogen markets, as opposed to domestic energy use.

Downstream

The general bearishness has floated downstream, where hydrogen fuel cell and vehicle developers are announcing project delays and deep financial losses.

Nearly two years after its launch, Cummins Inc.'s zero-emissions technology brand is still years away from breaking even, forcing the engine maker to take a $312 million hit, executives said on a Feb. 4 earnings call. The noncash charges are primarily from inventory write-downs and accounting losses as Cummins shifts the focus of its Accelera unit.

"We expect that battery electric vehicles will be important in some of our commercial vehicle and industrial applications," said CEO Jennifer Rumsey. But the company has become more selective in its fuel cell investments as "adoption continues to push out," Rumsey added. Cummins is also pacing its electrolyzer investments.

Aviation company Airbus SE has delayed its plans to develop a hydrogen fuel cell propulsion system to 2035, executives said on a Feb. 20 earnings call.

"The scaling up of the hydrogen ecosystem is challenging and is unfortunately progressing at a slower pace than we had previously anticipated," Airbus CEO Guillaume Faury said on the call. "The scalability of fuel cell technologies towards a commercially viable product will also require more time."

Nikola CEO Steve Girsky said in the company's bankruptcy filing that the leading US hydrogen truck company could not raise enough cash to sustain operations. The company said it would operate some fueling stations until the end of March, requiring "one or more partners to support such activities" thereafter.

Heavy-duty hydrogen transportation is significantly closer to cost parity with incumbent diesel fuels compared to light-duty applications, according to data from Platts, part of S&P Global Commodity Insights. However, the nascent application is still largely reliant on subsidies, and a decline in government spending could prove terminal for companies in the space.

Garbage truck maker Hyzon announced its Nasdaq delisting after California's Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project's (HVIP) general fund ran out of cash in November 2024.

Hyzon was negotiating contracts for its trucks and had "multiple fleets at signatures" when it learned the HVIP general fund "went to zero," former CEO Parker Meeks said at a conference on Dec. 8, 2024. He called California "the oxygen" for the fuel cell truck industry.

"I strongly believe this will take off at some point once the fueling infrastructure grows and hydrogen costs come down," Hyzon software director David Zhang said in a Feb. 18 LinkedIn statement announcing the company's dissolution.