Why There’s Still Hope for a Green Future
The recent plunge in share prices across major green hydrogen companies as highlighted in a McKinsey report and covered by the Financial Times, about the delays affecting many projects, has sparked concern about the viability of green hydrogen as a pathway to sustainable energy. Investors are questioning whether the current model for green hydrogen production – one that requires large-scale government support, complex planning, and substantial financing – is truly viable. But, these challenges, while significant, reveal a pathway forward: a shift toward distributed, demand-aligned hydrogen production could transform the sector’s outlook. Here Haush takes a closer look at the core issues and why there is still strong potential for green hydrogen as an energy solution.
Challenges of Scaling Green Hydrogen: A Lesson from the EV Market
Large-scale hydrogen production, such as gigawatt-level electrolyser plants, presents logistical and financial challenges, requiring extensive government funding, clear regulatory guidelines, and long-term demand commitments. Historically, we have seen this pattern of delayed development and uncertain demand in other green sectors – such as electric vehicles (EVs). Europe’s EV market, for example, took nearly a century to mature from experimental vehicles in the early 1900s to meaningful market share only in the past decade. This progression shows that the growth of green technology is often slower than anticipated due to complex infrastructure requirements and lengthy regulatory approvals.
However, unlike early EV technology, hydrogen fuel cell technology is already well-developed and ready for deployment. As companies like Toyota and Hyundai roll out fuel cell electric vehicles (FCEVs), especially in heavy-duty transport like HGVs (Heavy Goods Vehicles), hydrogen’s market trajectory may well accelerate faster than EVs as discussed in this Haush article. The limitations of battery-powered HGVs—such as the battery weight that reduces payload capacity—make FCEVs a more viable option for this segment.
Centralised vs. Distributed Production: A Better Path Forward
The current approach of building enormous hydrogen plants that can take up to a decade to bring online may be part of why investors are retreating. These plants require immense financing and meticulous planning, meaning many may not even be operational until 2030 or beyond. Moreover, the success of these projects depends heavily on aligning production with demand from industries in transition to hydrogen, which is itself a slow-moving process.
By contrast, smaller and more distributed hydrogen production facilities can offer a faster, more flexible solution. Companies like Haush in the UK are pioneering distributed green hydrogen production by locating electrolysers close to end-users. This model benefits from shorter build times, lower risk, and the ability to scale production to meet immediate demand. Distributed production also reduces reliance on the often-overloaded national grids, which in the UK alone are facing delays for green project connections, with over 1,000 projects queued and some connection dates set for 2035.
Financing and Demand Alignment: Breaking the Logjam
Large-scale hydrogen projects demand substantial upfront investment, yet financing remains high-risk. The problem lies in the uncertain demand from industries transitioning to hydrogen—a transition that, based on historical shifts in energy-intensive sectors, is likely to take 5–10 years to fully materialise. Many investors hesitate to commit without contractual off-take agreements that assure a stable demand for hydrogen.
However, nimble and innovative private companies focused on distributed hydrogen production are better positioned to secure these critical off-take agreements. By tailoring production to local demand, these companies can lock in buyers more easily than their larger counterparts, which are more dependent on broader market conditions and government incentives.
The Importance of Flexible, Modular Technology
The modularity of modern electrolyser technology offers a significant advantage in adapting to demand, yet many large-scale projects have overlooked this flexibility. Electrolysers can be installed in stacks that can be scaled up based on demand, which is a more viable approach than the “one-size-fits-all” design of gigawatt facilities. Distributed projects like Haush’s demonstrate this modular approach by closely aligning production capacity with actual, local demand.
Regulatory Hurdles and the Need for Government Clarity
In the United States and the EU, regulatory uncertainties and strict definitions of “green hydrogen” have hindered project advancement. Many developers remain unclear on the specifics of tax credits and regulatory incentives, and as a result, are hesitant to proceed with final investment decisions. This situation has forced companies like Plug Power and Nel to pause or scale back projects. The release of clear guidelines is essential for reviving investor confidence and enabling companies to unlock government incentives.
Green Hydrogen’s Potential Beyond Public Markets: Private Sector Innovation
Although public companies like Plug Power, Ballard Power Systems and Green Hydrogen Systems have seen sharp drops in share prices, this does not reflect the entire green hydrogen sector. The future of green hydrogen could well rest in the hands of smaller, private companies capable of agile responses to market needs. These firms can operate on shorter timelines, deliver hydrogen to niche markets, and focus on profitability by serving immediate demand rather than banking on long-term speculative growth.
Companies like Haush and their Pembroke Dock green hydrogen development, are spearheading this approach, using commercial insights to assess who needs green hydrogen, when, and how it can be delivered most efficiently. By focusing on private sector innovation, the green hydrogen industry may yet find a way to bridge the demand-supply gap in a more sustainable, profitable manner.
Green Hydrogen’s Long-Term Promise
While green hydrogen faces significant challenges, the collapse in share prices for some of the largest companies in the field does not spell doom for the industry as a whole. Instead, it highlights the need for a more flexible, demand-focused approach. History shows that transformative green technologies—from EVs to solar—require time to mature, and hydrogen may follow a similar trajectory. By shifting focus to distributed production, aligning capacity with demand, and embracing private-sector innovation, green hydrogen still has a strong future as a pillar of decarbonisation. The current financial pressures are a reminder that green hydrogen’s success will be achieved not through sheer scale alone but through strategic, agile responses to real-world demand.
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