Cipher News Cipher News

Hydrogen is considered one of the most viable alternatives to carbon-intensive fossil fuels in industries like steel, cement, shipping and long-distance hauling.

So, manufacturers in the United States are forging ahead with new technologies to make hydrogen from clean energy, despite policy uncertainties, supply chain disruptions and a lack of infrastructure and demand for this versatile molecule.

The U.S. government, through the 2022 Inflation Reduction Act’s (IRA) generous tax credits, is pouring billions of dollars into making the clean technologies that will jumpstart the nascent clean hydrogen sector. Some dozen companies have either announced plans or are operating factories that make electrolyzers, the machines that use renewable or nuclear power to make hydrogen from splitting water molecules, according to data in Cipher’s Cleantech Tracker as of June 2024.

Cipher spoke with executives from a handful of these companies about the challenges they face. They were: Ravi Prasher, chief technology officer for California-based Bloom Energy; Jason Mortimer, senior vice president for global sales at Massachusetts-based Electric Hydrogen; Constantine Levoyannis, head of government affairs for Norway-based Nel Hydrogen; Rasool Aghatehrani, chief strategy and marketing officer for California-based Ohmium; and Kim Saaby Hedegaard, chief executive officer of Danish manufacturer Topsoe’s Power-to-X division.

Here are a few key takeaways from our conversations, lightly edited for length and clarity:

Amena: What is the key challenge facing electrolyzer manufacturing today?

Bloom’s Prasher: The lack of infrastructure for hydrogen. That is true not only for those making hydrogen, but also for those involved in electrolyzer manufacturing. Without a place to store or transport hydrogen, demand for hydrogen cannot be created.

Electric Hydrogen’s Mortimer: Ultimately, the fight is with the cost of natural gas. If we consistently make expensive hydrogen, we’ll find a small market. The whole point is to get the levelized cost of hydrogen down and you do that by making a lower cost electrolyzer and pairing it with lower cost power and doing it at scale.

Amena: Investment in clean hydrogen (made using both natural gas and carbon capture technology and electrolyzers run on renewable energy) is outpacing investment in making electrolyzers, even though having more electrolyzers would greatly expand the renewable hydrogen market. Why is that?

Ohmium’s Aghatehrani: Many jurisdictions are working on defining the permitting process for hydrogen projects, which is time consuming. As the market matures, electrolyzer manufacturing will grow and expand.

Nel’s Levoyannis: This is one of those chicken and egg situations. If you need hydrogen from splitting water, then you need electrolyzer technology. The key challenge for us is to scale the production to the point where it becomes affordable. For that to happen, hydrogen demand needs to be stimulated at economies of scale.

Mortimer: The vast difference in the investment in announced clean hydrogen projects versus electrolyzer projects is the uncertainty over how the Biden administration is going to finalize the clean hydrogen tax credit guidance. It’s really hard for project developers to make investment decisions in the absence of clarity.

Amena: The manufacturing sector has been beset by supply chain disruptions since the pandemic. How are you working around the impact these issues have on your bottom line?

Aghatehrani: We do our research and development (R&D) here in San Francisco and in India but our supply chain is in India, where the labor and material costs are lower. If you look at India, the manufacturing is really efficient, like Apple is manufacturing there as are car manufacturers. It’s high volume, high quality and low cost.

We also have a very good plan to reduce the use of rare metals in our PEM (proton exchange membrane) electrolyzers that we are executing now to lower our costs further.

Prasher: We are using materials that do not cost as much, such as nickel, the workhorse of the chemical industry, as a catalyst for the reaction that splits water into oxygen and hydrogen. We also use these same materials for our fuel cells, which has maintained a robust supply chain even during the pandemic.

Amena: Have you taken advantage of the IRA’s tax credits?

Hedegaard: We have received a manufacturing tax credit toward the construction of our electrolyzer factory in Richmond, Virginia, but we won’t receive a tax credit for making parts at our facility in Denmark. We will ship those parts to the company First Ammonia in New York starting in the second quarter of 2025. We also will not receive a tax credit for clean hydrogen, but we will benefit indirectly from our customers who do.

Aghatehrani: We believe that if our customers [hydrogen producers] can receive the tax benefit for their projects, and basically the IRA enables the market in the U.S, then we will benefit from it. It all depends on the policies and the demand.

Amena: Are you concerned that a change in administration could affect prospects for clean hydrogen?

Hedegaard: From our perspective, we have had bipartisan support — from Virgnia Governor Glenn Youngkin, a Republican, to the congressional delegation — for building our factory in Richmond, Virginia. We are not as concerned because we think the investments occurring across the country are nonpartisan in nature. They’re really just about creating jobs and accelerating the clean economy.

Prasher: The energy transition already is underway. The United States along with other countries already are on an energy-transition path. It would be unwise to stop that momentum.

Editor’s note: Electric Hydrogen’s investors include Breakthrough Energy Ventures, a project of Breakthrough Energy, which also supports Cipher.