HydrogenPro puts 500MW Texas factory on hold amid clean hydrogen tax credit uncertainty

Electrolyser manufacturer HydrogenPro has put its plans for a 500MW factory in Texas on hold, citing delays to green hydrogen projects due to a lack of certainty on how the clean hydrogen production tax credit will be regulated.

This Texas facility would also be the firm’s first factory outside of Tianjin, China, where it has the capacity to produce 300MW of high-pressure alkaline electrolysers a year.

“Long-term projections for North America continue to show high expectations for both the production and demand of low-carbon hydrogen,” HydrogenPro said in its results for the final quarter of 2023.

“However, uncertainty in the final rules for incentive programs has delayed project decisions and development of the market.”

While the US Treasury released its proposed guidelines for the tax credit in December, it has only just closed its call for comments, with a public hearing due to be held in March. However, HydrogenPro is optimistic that these rules will be finalised in the spring.

The US market already contributed a major boost to HydrogenPro’s revenue in the second half of 2023, as it completed the delivery of 220MW of electrolyser capacity for the ACES project in Utah, which had been contracted by Mitsubishi Power Americas in 2022.

The Norwegian manufacturer attributed its 44% gross margin for Q4 2023 — a massive leap from the 10% margin seen the previous quarter — mainly due to lower costs on producing electrolysers for ACES, as well as less obsolete goods and positive currency impact.

This left the company with NKr12m ($1.1m) in adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) in Q4, although it still reported nearly NKr .9m in total comprehensive losses for the quarter and a NKr63.7m loss for the year.

Its order backlog has also steadily fallen from NKr747m as of Q4 2022 to NKr423m, albeit with a NKr101m uptick from Q3 2023 following a 100MW purchase order from Andritz for a Salzgitter green steel project.

Despite this, HydrogenPro is upbeat about its sales pipeline, given that the firm has historically seen front-end engineering and design (FEED) contracts as a sign that projects are close to FID. The manufacturer is engaged in FEED studies for more than 1,755MW of electrolysis capacity, of which 1,100MW is located in the US.

In North America, the company is also in final negotiations for FEED on a 1,100MW green hydrogen plant and a 300MW facility specifically seeking to produce ammonia as well. This compares to a pipeline of four projects in Europe ranging from 100MW to 200MW.

However, HydrogenPro already anticipates that with the massive order for ACES Delta complete, it will likely ramp down manufacturing load in Tianjin from the beginning of this year.

The manufacturer has already decreased the number of employees at its Chinese factory by an unspecified number, although it notes that personnel expenses in Q4 fell by NKr3m from the previous quarter.

“Although projects are realised, we still see an overcapacity in the manufacturing ability, so being disciplined and agile in the ramp-up ability when projects [are] being sanctioned will be essential,” the company adds in its results.