The Great Hydrogen Reset – Economics and Insufficient Incentives Spell Trouble for Some

Key Points

It is very hard to get away from the physics of splitting water atoms, and without cheap power, the economics don’t work. One of the core messages of CERA Week was expected power shortfalls – not good for hydrogen.
A very skeptical John Kerry reluctantly admitted that CCS was likely needed in transition, and this is clearly the bet that the US majors are making, and by so doing, supporting the idea that blue hydrogen has real potential.
We have suggested that the evolution of the market looks discouraging for green hydrogen equipment producers, especially those who have spent too much – the discussions over the last week reinforce that view.
To develop the green hydrogen market, we will need to move demand to sources of cheap and reliable power, and where this is not close to the centers of demand, we will need to move the hydrogen as something else.
With a growing interest in direct air capture (DAC), E-Fuels investments may make more sense at remote cheap power locations than ammonia – but everywhere there is cheap clean power, data centers for AI may pay more.

Exhibit 1: Costs have risen outside the US as spot power prices have tracked natural gas and carbon values have fallen.