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Justin Milberg's picture
Managing Member KV Catalyst IM LLC

Justin Milberg is an analyst and currently serves as a Managing Member of KV Catalyst IM LLC with a focus on the hydrogen economy.  Previously, he served as a Managing Director at Resource...

  • Member since 2022
  • 12 items added with 3,747 views
  • Nov 30, 2022

While hydrogen economy headlines can be dominated by MOUs and LOIs, implementation was increasingly in focus in Q3 for better and for worse. Quarterly reports from hydrogen economy companies offered several high level takeaways:

1)     Government support for hydrogen is crystallizing. 

Management teams see tailwinds from massive government support coming together in Q3 including: (i) the promulgation of a wide spectrum of hydrogen-oriented tax credits under the U.S Inflation Reduction Act, (ii) approval of EUR10bn+ in grants under the European Union’s IPCEI program and (iii) a “Funding Opportunity Announcement” for the $8bn US DOE Hydrogen Hub Initiative. Approximately 60 companies and JVs will participate in the IPCEI grants with additional allocations still pending.

2) The industry continues to struggle with global economic conditions. 

As with other industrial sectors, inflation and supply chain issues weighed on gross margins and curtailed deliveries putting immense pressure on management teams, especially those of smaller companies. ITM Power’s CEO stepped aside to make room for a replacement with “global manufacturing expertise” and Hyzon Motors also announced a leadership transition. Xebec Adsorption and NFI Group sought relief under their respective credit lines. Companies such as Ballard Power and Ceres Power were forced to recalibrate growth expectations in China due to Covid driven shutdowns.  The global industrial gas companies, a notable exception to overall trends, continued to thrive as they have been able to pass on rising input costs to customers among other advantages.   

3) Disciplined capital allocators are making significant commitments to low-carbon hydrogen production.

Air Products detailed its five-year investment plan that comprises $30bn+ in projects of which ~50% are focused on low-carbon hydrogen (evenly weighted between green and blue). Cummins is building new electrolyzer manufacturing facilities in China, Spain and the US.  Toyota, Posco, Fortescue, and Linde are among others announcing specific investment commitments in the hydrogen sector.

4) Very preliminary outlines of a low-carbon hydrogen market are starting to take shape.

Amazon signed a low-carbon hydrogen offtake agreement with Plug Power for 10,950 tons per year. Delta Airlines and Air France signed offtake agreements with DG Fuels for 76 million gallons per year of green hydrogen based sustainable aviation fuel annually. Air Liquide commenced operations of its waste-to-hydrogen plant in Las Vegas that will supply hydrogen fueling stations in California.  


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