Hydrogen-Ambient's merger signifies a forthcoming trend in the electric industry
In a significant move for the hydrogen industry, Electrolyzer manufacturer Electric Hydrogen has purchased hydrogen developer Ambient Fuels. The acquisition, backed by a $400 million investment from Generate Capital, is intended to finance projects worldwide that use zero-carbon hydrogen fuel.
The hydrogen industry has been experiencing a period of relative policy certainty, with the Inflation Reduction Act enacting a 45V tax credit. However, there was debate over the eligibility criteria for this tax credit, a discussion that persisted for some time. President Donald Trump's pledge to rescind much of the IRA initially threatened the policy's fate, but lobbying by powerful Trump allies helped preserve the tax credit.
The industry, which is facing limited near-term demand for its fuel, is anticipated to undergo a wave of consolidation. If all green and blue hydrogen projects announced worldwide came to fruition, they would generate 200 million metric tons of fuel per year. Yet, only 6% of those projects have identified offtakers to buy the fuel, and just 13% have binding offtake agreements.
For Electric Hydrogen, this acquisition marks a shift from being an electrolyzer manufacturer to a potential player in the hydrogen market. The company, led by CEO Raffi Garabedian, who has a history of scaling up manufacturing even during a downturn, has never been a hydrogen producer before the Ambient Fuels acquisition.
Ambient Fuels faced challenges in meeting the initial eligibility criteria for certain segments of the industry. One of their planned projects in Texas, smack dab in the middle of six refineries running on gray hydrogen, encountered issues due to a lack of physical space for the required solar panels and wind turbines.
The acquisition of Ambient Fuels expands Electric Hydrogen's potential customer base to include hydrogen end users. If the industry can find enough buyers for green hydrogen, a tie-up between Ambient Fuels' projects and Electric Hydrogen's electrolyzers may help create a giant in the hydrogen market.
The initial proposal for the 45V tax credit included three pillars: additionality, deliverability, and hourly matching. The final rule added some flexibility, providing carve-outs for nuclear plants and projects in states with high amounts of renewables. Despite the challenges, the hydrogen industry continues to push forward, seeking to establish itself as a key player in the transition towards a more sustainable energy future.
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