While the prospects for green hydrogen production around the world have continued to rise over the past 12 months, the finances and share prices of Western electrolyser makers have continued to slump.

Stay ahead on hydrogen with our free newsletter
Keep up with the latest developments in the international hydrogen industry with the free Accelerate Hydrogen newsletter. Sign up now for an unbiased, clear-sighted view of the fast-growing hydrogen sector.

Some could be said to be under financial stress as they face what might be seen as a quintuple whammy of pressures: the need to expand to meet future demand; a slower-than-expected roll-out of subsidies; the threat of being undercut by cheaper Chinese electrolysers and/or newer, more efficient technologies; and an outside threat that demand for green H2 could slump amid a natural-hydrogen boom.

Expanding amid little income

OEMs have been caught between a rock and a hard place in recent years. They need to expand their production facilities to be in a position to win large shares of the gigawatt-scale orders that will be up for grabs in the coming years, but building new factories or expanding existing ones costs a lot of money.

And these expansions are coming at a time when manufacturers have little income from selling electrolysers.

Slower-than-expected roll-outs of green hydrogen subsidies, particularly in the US and EU, mean that projects developers have been reluctant to make final investment decisions on their projects and therefore finalise electrolyser orders.

So ambitious electrolyser makers have little choice but to make massive investments when their income is minimal, causing losses to pile up.

Consequently, share prices have plunged across the board, further denting investor confidence, and potentially making it harder to secure low-interest loans or investments that may be crucial in keeping things ticking over until the orders flow in.

Share price changes over the past 12 months for selected electrolyser makers

Electrolyser maker (country) Share price fall/rise over past 12 months (at time of publication)
McPhy (France) -84.77%
Plug Power (US) -75.38%
Nel (Norway) -69.44%
Longi (China) -50.23%
ITM (UK) -45.94%
Thyssenkrupp Nucera (Germany) -35.80%*
Siemens Energy (Germany) -27.24%
Sungrow (China) -22.68%
Cummins (US) +8.58%

*Share price drop since Thyssenkrupp Nucera's IPO in July 2023

And longer delays to the flow of subsidies means further losses are inevitable. It may be that only executives of those companies with deep pockets (and/or strong government support) are able to sleep soundly at night.

Electrolyser makers that are large corporations, or largely owned by them, such as Siemens Energy, Cummins and Thyssenkrupp Nucera have seen their share prices hold relatively firm (see table above), while smaller pure-play hydrogen companies, such as US-based Plug Power and France’s McPhy, are standing on shakier ground, with Plug recently telling the market that they may not be able to continue as a going concern (but withdrawing this status earlier today).

Green hydrogen developers must be asking themselves whether they should be seeking to buy equipment from manufacturers that have next to no chance of going out of business in the coming years, with deep enough pockets to sort out any future problems with their electrolysers, or opt for potentially cheaper equipment from companies with little track record on reliability that could go bust in the coming years.

Subsidy delays

A year or so ago, it had widely been expected that generous subsidies in the US and EU would start to make their way into developers’ hands in 2023, but this has not proved to be the case.

Despite the US Inflation Reduction Act — which created hydrogen production tax credits of up to $3/kg of clean hydrogen — becoming law in August 2022, the rules and regulations determining what developers need to do in order to access them are still being fought over and no dates have been set for when they might be finalised.

And in the EU, the first green hydrogen subsidies from the first €800m European Hydrogen Bank (EHB) auction — which closed earlier this month, offering subsidies of up to €4.50/kg of green H2 — are not due to get final sign-off until November this year.

A second EHB auction, with €2.2bn of subsidies, which was due to be held this spring, is now set to be delayed until autumn.

With many developers unlikely to place firm orders until they are sure of receiving subsidies — and offtake — these delays will only cause further problems for electrolyser makers.

The ongoing Chinese threat

Amid the rising losses, there is also the threat from Chinese manufacturers that are able to sell electrolysers at a fraction of the cost of those made in the West.

Indeed, the biggest fear among Western electrolyser companies is that developers will increasingly turn to cheaper Chinese electrolysers, causing the same kind of collapse that was seen in the European solar industry in the 2010s, when cheap PV panels flooded global markets and even strict import tariffs couldn’t save once-market leading European solar manufacturers from collapse.

However, with news emerging from China that locally produced electrolysers have been failing to work as advertised, confidence in Chinese equipment is not exactly sky-high right now, and few Western developers have announced plans to buy electrolysers made in China.

But Chinese OEMs have begun to secure orders from outside China, with Longi, Mingyang and Shuangliang recently selling equipment to Uzbekistan, Oman and Thailand, respectively.

And a lot of these Chinese companies are already well-established, with deeper pockets than some of their Western counterparts.

For instance, Longi is one of the world’s biggest solar-panel manufacturers, Mingyang has a thriving wind turbine business, and Peric, another leading Chinese electrolyser maker, is a unit of state-owned shipping giant CSIC.

The threat from newer technologies

Alkaline electrolysers have been around for more than 100 years, while rival technology proton-exchange membrane (PEM) was developed in the early 1960s.

Other, newer technologies such as solid-oxide electrolysers and anion-exchange membrane machines have begun carving out their own niches in the marketplace, while barely a day seems to go by without a new start-up promising a new kind of electrolyser technology that will be able to produce cheaper green hydrogen than any of the existing technologies.

These include supercritical-water electrolysers, capillary-fed electrolysers, plasma electrolysers, alkaline electrolysers with novel catalysts, PEM electrolysers that promise improved economies of scale.

If any of these technologies prove to offer significantly cheaper green hydrogen at scale, current electrolyser makers stuck in the past could become irrelevant overnight.

Natural hydrogen: a new threat?

For investors and banks that will be increasingly called upon to ensure electrolyser makers stay in business, there may be another concern in the backs of their minds.

What if natural hydrogen becomes widely available at scale, at a price that is far cheaper than green H2?

If all the world’s hydrogen needs could be supplied from wells in the Earth, would anyone still want electrolysers?

It is possible that all the hundreds of millions of dollars invested in electrolyser companies around the world proves to be money down the drain.

Sounds far fetched? Not only did the US Geological Survey (USGS) recently state that there is enough natural hydrogen underground to meet global demand for hundreds of years, but the prospect is emerging for subsurface H2 to be produced artificially by stimulating iron-rich rocks through the injection of high-pressure hot water.

Or it could turn out that no natural hydrogen turns out to be commercially exploitable.

The head of the natural-hydrogen programme at the USGS, Dr Geoffrey Ellis, told US senators on Wednesday that “the vast majority of the in-place hydrogen resource is likely to be in accumulations that are too deep, too far offshore, or too small to be economically recovered”.

He did add: “However, the remainder could constitute a significant resource.”

And Peter Johnson, CEO of natural-hydrogen firm Koloma, which is backed by billionaire Bill Gates, added: “The question that needs to be answered is... are there accumulations that are large enough to be commercial?

“The bust scenario is not that there’s no hydrogen under the ground, that science is established. The bust scenario is there’s nothing big enough or the only thing that’s big is in the middle of Greenland.”

Hydrogen Insight is an official media partner of the World Electrolysis Congress in Dusseldorf, Germany, on 4-7 March.

The 3rd World Electrolysis Congress will span four days and host 100 specialised speakers across four streams. It will delve deep into the most relevant topics in renewable hydrogen, including policy, finance, electrolyser efficiency, large-scale projects, and offshore projects.

Hydrogen Insight readers can receive a 20% discount using the code WEC24_HydrogenInsight20 when registering your place. Click here to register.

Download the brochure here for more information.