Last week, electrolyzer manufacturer Electric Hydrogen bought the hydrogen developer Ambient Fuels. The deal was backed by $400 million from the investor Generate Capital to finance projects all over the world that use the zero-carbon version of the fuel.
It’s part of what analysts say is a forthcoming wave of consolidation as an industry that expanded quickly grapples with limited near-term demand for its fuel.
“You’ve got way too much potential supply out there,” Martin Tengler, the head of hydrogen research at the consultancy BloombergNEF, told Latitude Media. “We count more than 100 manufacturers and not enough demand for the electrolyzers they produce. That naturally leads to attrition.”
In some cases, that means mergers. In July, for example, oil and gas giant Baker Hughes bought hydrogen heavyweight Chart Industries. In others, it means going bust. In May, the French hydrogen stripe McPhy collapsed into insolvency, with a court overseeing the sale of its parts.
If all the green and blue hydrogen projects announced worldwide came to fruition, the industry would generate 200 million metric tons of fuel from renewably-powered electrolyzers and carbon capture-equipped gas per year, Tengler said. That’s double the global supply of gray hydrogen, the version of the fuel made with unmitigated gas.
Yet only 6% of those green and blue hydrogen projects have identified offtakers to buy the fuel, which is far more expensive than the dirty alternative. Of that 6%, just 13% have binding offtake agreements.
“So, less than 1% of this 200 million tons have secured a binding agreement where the buyer must buy,” Tengler said. “If you don’t have that kind of offtake agreement, it’s going to be hard to find a banker to finance the project.”
Electric Hydrogen appears to be betting it can capture more of the market by vertically integrating its equipment with the projects deploying it.
“Clean hydrogen is poised for significant growth in the years ahead,” Raffi Garabedian, Electric Hydrogen’s CEO, said in a statement. “We believe this new integration will both enable the industry to scale faster and give Electric Hydrogen even more ways to serve our diverse array of customers — from those who want to do it all themselves, from power procurement all the way to the finished clean-fuel — to those who prefer a partner to finance and develop the hydrogen plant so they can remain focused on their business outcomes.”
In other words: Electric Hydrogen wants to seize as much of the demand in the market as possible. It’s an extension of the company’s enduring tactic of scaling up manufacturing even through a downturn, as Garabedian explained on a March episode of the Green Blueprint podcast.
For more on Electric Hydrogen’s strategy, listen to Raffi Garabedian on the Green Blueprint:
But until now, Electric Hydrogen’s approach has solely been to build large-scale, 100-megawatt electrolyzer plants for industrial projects; the company has never itself been a hydrogen producer. With the Ambient acquisition, Electric Hydrogen is expanding its potential customer base to include hydrogen end users — as well as the ammonia plants or SAF facilities that have already been buying the company’s electrolyzers to make hydrogen of their own.
“If you don’t have demand for hydrogen, you won’t have demand for electrolyzers,” Tengler said. “The idea of this deal is that it helps them become a developer of hydrogen projects, and they’ll be the ones buying their own electrolyzers. If they can find a buyer for the hydrogen, then that seems like an interesting move.”
The shifting policy landscape
The acquisition comes as the hydrogen industry leans into something it hasn’t had for years: relative policy certainty.
The 45V tax credit enacted as part of the Inflation Reduction Act was just the start of a regulatory rollercoaster. The months that followed the law’s passage in 2022 brought fierce debate over how the Treasury Department should define eligibility for the credit — and by extension what kind of hydrogen could be considered “clean.” The fairly strict initial proposal included three pillars — additionality, deliverability, and hourly matching — and prompted intense pushback from certain segments of the industry.
Ambient, for instance, planned to build a major project in Texas “smack dab in the middle” of six refineries currently running on gray hydrogen, and there wasn’t enough physical space to add new batteries big enough to deploy solar panels and wind turbines and allow those refineries to run 24/7 — as the draft guidance would have required for eligibility for 45V credits.
“We wanted to be the billboard for the next generation of carbon-free hydrogen, right in the middle of all that heavy industry, all that refining,” Ambient CEO Jacob Susman told Latitude Media last year. “In making that choice, we put ourselves at risk. If you were required to have this hourly matching, it might make more sense to be sitting right next to the solar plant or the wind farm.”
The debate over the Treasury guidance persisted well into last year. The industry finally got clarity on how the tax credits would work in December 2024, mere weeks before the Trump administration took office. The final rule added some flexibility, providing carve-outs for nuclear plants that would have been excluded under the additionality requirement, and for projects in states with high amounts of renewables.
When President Donald Trump took office pledging to rescind much of the IRA, the fate of the policy was once again thrust into uncertainty. But lobbying by powerful Trump allies, including some representatives of the oil and gas industry, helped preserve the tax credit in the One Big Beautiful Bill Act that largely replaced the IRA. The turnaround helped ensure that certain projects would pencil out beyond a single year.
This was roughly what Susman predicted last fall, telling Latitude Media: “We don’t think they’re coming for hydrogen first.”
If the industry can manage to find enough buyers for green hydrogen now, Tengler said, a tie-up between Ambient’s projects and Electric Hydrogen’s electrolyzers may help produce a giant in the space that can compete with the Chinese manufacturers currently dominating the market.
“If you don’t have demand for hydrogen, you won’t have demand for electrolyzers,” Tengler said. “The idea of this deal is that it helps them become a developer of hydrogen projects, and they’ll be the ones buying their own electrolyzers. If they can find a buyer for the hydrogen, then that seems like an interesting move.”
