The fusion of Electric and Hydrogen-Ambient companies signifies a future trend in the industry
In a strategic move to seize a significant portion of the hydrogen market, Electrolyzer manufacturer Electric Hydrogen recently purchased hydrogen developer Ambient Fuels. The deal, backed by $400 million from investor Generate Capital, is expected to close in May 2025, with financing deployment set to begin in 2026.
The acquisition marks an extension of Electric Hydrogen's tactic of scaling up manufacturing even during a downturn. The funds will finance projects worldwide that use zero-carbon hydrogen fuel. If all green and blue hydrogen projects announced worldwide came to fruition, they would generate 200 million metric tons of fuel per year.
The hydrogen industry is experiencing relative policy certainty, following the enactment of the Inflation Reduction Act. The Act enacted a 45Q tax credit for hydrogen projects. However, the initial proposal prompted intense pushback from certain segments of the industry, with the debate over the Treasury guidance persisting well into last year. The final rule added some flexibility, providing carve-outs for nuclear plants and projects in states with high amounts of renewables.
Martin Tengler, head of hydrogen research at BloombergNEF, has stated that there are more than 100 hydrogen manufacturers, but not enough demand for the electrolyzers they produce. This has led analysts to predict a wave of consolidation in the hydrogen industry due to limited near-term demand for its fuel. The tie-up between Ambient's projects and Electric Hydrogen's electrolyzers may help create a giant in the hydrogen market that can compete with Chinese manufacturers.
Raffi Garabedian, Electric Hydrogen's CEO, discussed the company's strategy on the Green Blueprint podcast in March. He stated that the acquisition of Ambient Fuels is part of the company's strategy to seize as much of the demand in the market as possible. The Ambient project in Texas, although initially facing challenges due to the draft guidance requiring solar panels and wind turbines to run 24/7 for eligibility, now stands to benefit from this strategic move.
The hydrogen end-customer financing Electric Hydrogen’s hydrogen production through the acquisition of Ambient Fuels is Generate Capital. Generate Capital partnered with Electric Hydrogen to provide up to $400 million in project finance for clean hydrogen projects. The industry finally got clarity on how the tax credits would work in December 2022, with the Treasury Department's initial proposal for the credit including three pillars: additionality, deliverability, and hourly matching.
Despite the challenges and uncertainties, the hydrogen industry is poised for growth. Only 6% of the hydrogen projects announced worldwide have identified offtakers to buy the fuel, and just 13% have binding offtake agreements. As more projects come online and demand grows, companies like Electric Hydrogen are well-positioned to lead the way in the production and distribution of zero-carbon hydrogen fuel.
