Hydrogen-Ambient merger signals a future trend in the electric industry
In a move to bolster its position in the rapidly growing hydrogen market, Electrolyzer manufacturer Electric Hydrogen recently announced the acquisition of hydrogen developer Ambient Fuels. The deal, financed by $400 million from investor Generate Capital, is part of a predicted wave of consolidation in the hydrogen industry.
The acquisition expands Electric Hydrogen's potential customer base to include hydrogen end users. Until now, Electric Hydrogen has only built large-scale electrolyzer plants for industrial projects, not producing hydrogen themselves. With this acquisition, the company aims to become a developer of hydrogen projects and buy their own electrolyzers.
The hydrogen market is currently dominated by Chinese manufacturers, but a tie-up between Ambient and Electric Hydrogen may help compete in this competitive landscape. Analyst Martin Tengler has expressed concerns about the potential oversupply of hydrogen and not enough demand for electrolyzers. However, Electric Hydrogen aims to seize as much of the demand in the hydrogen market as possible.
The deal comes as the final rule for the tax credits was announced in December 2022, mere weeks before the Trump administration took office. The 45V tax credit enacted as part of the Inflation Reduction Act brought relative policy certainty to the hydrogen industry. President Donald Trump's pledge to rescind much of the IRA initially threw the policy into uncertainty, but lobbying by powerful allies helped preserve the tax credit.
The final rule for the tax credits added some flexibility, providing carve-outs for nuclear plants and projects in states with high amounts of renewables. However, only 6% of announced green and blue hydrogen projects have identified offtakers to buy the fuel, with just 13% of those having binding offtake agreements.
The debate over the Treasury guidance for the 45V tax credit persisted well into last year, but the acquisition of Ambient Fuels by Electric Hydrogen indicates a level of confidence in the policy's long-term viability. If all announced green and blue hydrogen projects came to fruition, they would generate 200 million metric tons of fuel annually.
Electric Hydrogen's CEO, Raffi Garabedian, stated that the company is scaling up manufacturing even during a downturn. Despite concerns about the potential oversupply of hydrogen, Electric Hydrogen is positioning itself to capitalise on the growing demand for clean energy solutions.
However, it remains unclear who will take over Ambient Fuels as a hydrogen producer after its acquisition by Electric Hydrogen, as there are no search results indicating this information. The acquisition is a significant step for Electric Hydrogen, and it will be interesting to see how the company's strategy unfolds in the competitive hydrogen market.
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