Making The Most of Unattractive Economics – Finding the Best Pathways

Key Points

For a hydrogen investment to work several factors need to be stacked in your favor, not just one or two. Lining up all the options should give you a place to start, but it is unlikely that any two opportunities will be the same.
The most common misalignment is where you can find inexpensive power, but you cannot find nearby demand, but sequestration opportunities vary dramatically with geography and jurisdiction, and capital costs vary also.
In our Sunday piece we discussed deteriorating geopolitics as one of the uncertainties in ethylene rationalization globally, and the role of China in energy transition technology and spending remains a wild card.
Investors need to get behind projects where they have a handful of unique opportunities to help drive a profitable solution, but in almost all cases one of those opportunities will need to be a customer willing to pay.
US ammonia and methanol cost advantages remain significant, but coal-based methanol supply in China is keeping pressure on prices and margins – blue projects do not need high prices, but they need stability.

Exhibit 1: Very few hydrogen projects can work if only a couple of the factors below are favorable.