Thyssenkrupp Nucera CEO Expects Hydrogen Market Reckoning
Projects are being reassessed because of regulatory uncertainty, slow permitting and high costs
Many hydrogen projects will be canceled or delayed as the industry’s growth potential recalibrates, the chief executive of electrolyzer company Thyssenkrupp Nucera NCH2 2.03%increase; green up pointing triangle said.
A reckoning is underway after hopes around hydrogen, especially so-called green hydrogen—which is produced using renewable energy—lost steam due to regulatory uncertainty, slow permitting and high costs.
Businesses and governments looked to hydrogen produced with renewable energy as a lever for decarbonizing heavy industry and transportation, but some are now casting doubt on its viability in the short term and putting projects on hold.
Companies announced plans for more projects than they could build, Thyssenkrupp Nucera Chief Executive Werner Ponikwar said in an interview. Availability of funding isn’t an issue, but projects don’t reach a phase where its developers decide to invest, he said.
Donald Trump’s U.S. election victory added another layer of unpredictability, Ponikwar said. However, hydrogen likely faces a lower risk under the incoming administration than other programs covered by the Inflation Reduction Act, he said, referring to President Biden’s signature climate law.
“In the next five years, we talk about maybe 400 gigawatts of announcements in terms of electrolyzers that should be up and running. This is just impossible,” Ponikwar commented. Electrolyzers are machines that split water molecules into hydrogen and oxygen.
The consensus is that the electrolyzer capacity that will be built in that period will be around 100 gigawatts, according to Ponikwar.
The International Energy Agency said last month the total electrolyzer capacity with committed investment stood at 20 gigawatts globally, including 6 gigawatts in the past year.
Total announced investments in hydrogen projects through 2030 amount to $680 billion, but the sum falls to $75 billion when taking into account those with committed funding, according to a report by industry group Hydrogen Council and consultancy McKinsey.
“It’s just a recalibration, a very natural maturing process of an embryonic industry,” Ponikwar said. “We shouldn’t be too surprised about that and we shouldn’t be too concerned.”
Saudi Arabia’s futuristic city, Neom, is the biggest project for the production of hydrogen with renewable energy that Thyssenkrupp Nucera is involved in. Ponikwar doesn’t anticipate any delays in that project.
Nevertheless, the company sees the U.S. and Europe as the markets with the biggest potential, even if Ponikwar cautions that their development is restrained by regulatory uncertainty.
As President-elect Donald Trump prepares his return to the White House, hydrogen project developers are still waiting for rules on tax credits under President Biden’s Inflation Reduction Act to be finalized, Ponikwar said.
“Certainly, the expectation is that the new [U.S.] government will consider changes on the different rules and regulations but that remains to be seen,” Ponikwar said.
Shares in Thyssenkrupp Nucera have fallen about 15% since Nov. 5, the day of the U.S. election.
In Europe, project developers are waiting for new rules to be implemented too, Ponikwar said. He urged the European Union to relax market rules to help the industry grow.
“This should be done very quickly, because we cannot afford another two years of debates and discussions in the European Union before anything is agreed or decided on,” he said. Such changes would allow for the production of hydrogen at a lower cost, Ponikwar said. Steelmaker ArcelorMittal and utility RWE this month said the European hydrogen market wasn’t progressing as quickly as expected.
Thyssenkrupp Nucera outsources a lot of its manufacturing to third parties, reducing the risk of sitting on underutilized assets, Ponikwar said.