Weak Growth in the Hydrogen Market: Regulatory Uncertainties and Stalled Projects

The stock prices of hydrogen companies in the US and Europe have sharply declined as projects face delays due to weaker demand, regulatory uncertainties, and growing investor skepticism. Pioneers like Plug Power, Ballard Power Systems, and Green Hydrogen Systems saw their stock prices drop by more than half to historic lows this year, following repeated quarterly losses. Nel, Bloom Energy, and ITM Power also experienced stock price declines of one-third. The S&P Kensho Global Hydrogen Economy Index, which tracks companies along the low-carbon hydrogen value chain, has fallen back to mid-2020 levels, losing the gains made in late 2020 and early 2021. Hydrogen is considered crucial for the decarbonization of energy-intensive industries such as steel and shipping. It can be produced from renewable sources as "green hydrogen" or from gas as "blue hydrogen," where the resulting carbon emissions are captured and stored. However, the global ambition for hydrogen utilization is on shaky ground. According to a report by McKinsey and the Hydrogen Council, only 18 percent of clean hydrogen projects in North America and 5 percent in Europe, which are supposed to be operational by 2030, have reached a final investment decision. This has led to a painful adjustment process, as reported by Andy Marsh, CEO of Plug Power. The company has paused the development of its 290 million dollar project in New York, which was set to become the largest in North America. Amidst the declining confidence in the hydrogen market, shares of nuclear energy companies have surged to record highs due to rising energy demand driven by artificial intelligence. Even though announcement capacities have increased, the market is hindered by uncertainties surrounding US tax policies and stricter EU regulations. Larger diversified energy companies such as Cummins, Air Liquide, and Linde, however, have benefited from their broader energy portfolios and the rising energy demand forecast. Despite these challenges, efforts by European and American authorities provide hope for recovery. The European Commission has introduced a financing model to lower the costs of green hydrogen and plans to create demand markets through public auctions. The US Department of Energy has established a program to stimulate hydrogen demand. Nonetheless, the final decision-making process remains complex due to ongoing regulatory uncertainties.