Investments in Hydrogen Powering Down – A Hard Reboot Is Needed

Key Points

As longer-term hydrogen demand forecasts decline, the short-term implications are severe, as the constraints that impact longer-term estimates are happening now – near-term problems drive long-term conclusions.
As more equipment capacity is added, the industry becomes less financeable, and the supply overhang has been looking difficult for years. We cannot stimulate the green hydrogen industry without driving up power demand.
The needed industry reboot will be painful, and many electrolyzer initiatives will look like folly in hindsight. Still, a leaner and less fragmented industry is necessary to reduce costs and help future growth.
Blue hydrogen looks like the safer bet, with no equipment maker bubble in this market. Still, blue hydrogen to generate power for a data center in Texas makes little sense to us given abundant cheap TX renewable power.
Otherwise, we look at another expensive German project, which may not be the best use of the clean power; we note that grey ammonia prices are still defying some fundamental gravity, and we look at battery storage.

Exhibit 1: No one wants to invest here, and many stocks are trading at levels that imply high risk of failure.