Last Friday, President Joe Biden announced the locations of seven regional hydrogen hubs that will receive $7 billion from the government as part of the bipartisan infrastructure law. The infrastructure bill passed by Congress in 2021 allocated up to $7B to launch the Regional Clean Hydrogen Hubs program, which will help fund 6-10 regional clean hydrogen hubs across the country. The hubs are part of Biden’s ambitious climate goals wherein he has pledged to cut the country’s greenhouse gas emissions by 50%-52% below its 2005 emissions levels by 2030. The hubs will produce hydrogen powered by renewables, natural gas and nuclear energy.
“I made it a goal for our country to get to net-zero emissions from pollutants no later than 2050. That’s where hydrogen comes in. Using hydrogen, you can power industries like the production of steel and aluminum. It’s going to end up changing our transportation system. That lets us get to this place without putting more carbon in the atmosphere,” Biden said, adding that hydrogen is an important supplement for renewables like wind and solar, especially for hard to decarbonize sectors such as power heavy industry, heavy duty trucks and shipping.
The seven hubs will eventually produce 3 million tons of hydrogen per year, or 30% of the national goal DOE has set for 10 million tons of hydrogen produced by 2030. A senior administration official has estimated the hubs will lower the country’s planet-warming carbon dioxide pollution by roughly 25 million metric tons per year from end use, roughly equivalent to taking 5.5 million gasoline-powered cars off the road.
DOE’s $7 billion investment in the hubs will be met by a combined cost share of more than $40 billion by the awardees.
Hydrogen Stocks Lagging
Unfortunately, the market appears largely unimpressed by Biden’s hydrogen bonanza with hydrogen stocks hardly moving in Moday’s trading. Shares of leading hydrogen fuel cell manufacturer Plug Power Inc. (NASDAQ:PLUG) were up a mere 0.14% at 1300 hrs ET despite the company announcing on Friday that it expects to generate ~$6B in revenues by 2027 and $20B by 2030, multiples higher than the company's estimate of ~$1.2B for FY 2023 revenue and the $1.28B analyst consensus estimate.
Plug also revealed it is the preferred supplier for a 550 MW electrolyzer supply contract to Fortescue Metals for the latter's proposed Gibson Island project in Australia, and was selected by Arcadia eFuels to provide a 280 MW proton exchange membrane electrolyzer system for the production of sustainable aviation fuel at Arcadia's Vordingborg plant.
Plug Power is part of the Appalachian Hydrogen Hub (ARCH2) straddling West Virginia, Ohio , Kentucky and Pennsylvania that was awarded $925 million. Other ARCH2 partners include CNX Resources Corp. (NYSE:CNX), Dominion Energy (NYSE:D), Empire Diversified Energy (OTCPK:MPIR), EQT Corporation (NYSE:EQT), MPLX LP (NYSE:MPLX) and TC Energy Corp. (NYSE:TRP).
Plug Power is also part of the Midwestern Hydrogen Hub that straddles Illinois, Indiana, and Michigan that will receive up to $1 billion of the DOE funds.
Shares of Ballard Power Systems (NASDAQ:BLDP) were up less than 1% while those of FuelCell Energy (NASDAQ:FCEL) tumbled 4.6% with both companies not part of any of the seven hubs.
Shares of Plug Power’s peer Bloom Energy (NYSE:BE) have, however, rocketed 8.7% thanks to the company being part of the Mid-Atlantic Hydrogen Hub straddling Pennsylvania, Delaware and New Jersey that will receive up to $750 million. Other companies in this hub are Air Liquide (OTCPK:AIQUF), Chesapeake Utilities (NYSE:CPK) and Enbridge Inc. (NYSE:ENB).
After a strong showing in 2022 courtesy of ample backing by the Biden administration, hydrogen stocks have badly lagged in the current year as investors scrutinize their fundamentals. Leading hydrogen and fuel cell makers have returned mixed Q2 2023 results but with one common theme: all remain unprofitable despite posting mostly robust topline growth.
Here are the latest quarterly results by top hydrogen companies.
- Plug Power Inc. (NASDAQ:PLUG): Revenue of $260.18M (+72.0% Y/Y) beat by $21.73M while Q2 GAAP EPS of -$0.40 missed by $0.14
- Bloom Energy Corp. (NYSE:BE): Revenue of $301.1M (+23.8% Y/Y) missed by $10.26M while Q2 Non-GAAP EPS of -$0.17 missed by $0.03
- FuelCell Energy Inc. (NASDAQ:FCEL): Revenue of $38.3M (+133.8% Y/Y) beat by $11.52M while Q2 GAAP EPS of -$0.09 missed by $0.01
- Ballard Power Systems Inc. (NASDAQ:BLDP): Revenue of $15.3M (-26.8% Y/Y) missed by $0.63M while Q2 GAAP EPS of -$0.10 beat by $0.03
Limited adoption and high costs remain a major challenge for hydrogen tech companies. First off, these companies have to contend with high research and development costs as they innovate and improve their fuel cell technologies. Further, additional expenses like manufacturing and production costs are high as they scale up their manufacturing capabilities.
Interestingly, Big Oil will also partake in Biden’s hydrogen jackpot with U.S.’ biggest energy companies Exxon Mobil Corp. (NYSE:XOM) and Chevron Inc. (NYSE:CVX) both being part of the Gulf Coast Hydrogen Hub that will be centered in the Houston, Texas region. This hub was awarded $1.2 billion and will engage in large-scale hydrogen production using both natural gas with carbon capture and renewables-powered electrolysis.
Back in April, Exxon CEO Darren Woods caused quite a stir after he claimed the company’s newly formed Low Carbon business has the potential to outperform its legacy oil and gas business and generate hundreds of billions in revenues in a decade.
By Alex Kimani for Oilprice.com
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