Hydrogen Economy

Blue is Bankable – Competitive and Likely Fundable Through LNG-Type Contracts
March 12, 2024
This Week:
Blue is Bankable
Next Week:
Early Read on The Hydrogen Hype at CERA

The Hydrogen Economy # 37

Blue is Bankable – Competitive and Likely Fundable Through LNG-Type Contracts

Key Points

  • The US LNG export industry developed through fixed-margin offtake agreements that supported funding. We believe that the US blue hydrogen/ammonia industry should evolve in a similar manner.
  • With the benefit of 45Q, blue ammonia should have a lower cash cost than grey ammonia for the better projects – suggesting that new capacity should be financeable. The risk is that cash cost-based pricing gets in the way.
  • Grey hydrogen/ammonia facilities in the US are mostly depreciated, and in weaker markets, pricing does not reflect full costs – including capital. Full-cost blue hydrogen/ammonia cannot compete with cash-cost grey.
  • For the first time since we started this report, we have no projects to discuss in detail. This is not surprising given the slowdown in hydrogen momentum – there have been some updates of projects already covered.
  • We look at some of the challenges that power may face with the availability of equipment and materials, focusing on copper. We also look at expected power prices in Germany.

Exhibit 1: We see production economics supporting blue hydrogen investment, but only strong demand pull will support fixed economics offtake deals.

Source: Capital IQ and C-MACC Analysis

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