Bloom Energy was able to increase its turnover by 24 percent in the second quarter to over 301 million USD. The right growth, meanwhile, is to take place – as in every year contingent on project completions – again in the second half of the year – principally in the fourth quarter. The ratio is assumed to be 30:70, so 70 percent of sales – with increasing trend – will wind up in the second semester.
The expectation of delivering in the fiscal year a total turnover of 1.4 to 1.5 billion USD has been validated. The non-GAAP profit margin is to come out to 25 percent for the whole year. The cash on hand was able to be raised as per June 30, 2023 to an astounding 923 million USD. This includes net proceeds from a convertible bond in the amount of 560 million USD.
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New business model: Series 10
For industrial customers requiring at least 10 MW of energy output, Bloom offers to make this scalable to purchase via electricity and heat supply contracts – term of at least five years –– without having to themselves invest in technology/hardware. The customer receives energy at a fixed calculable price and that reliably 24/7. For this, Bloom can continue to employ natural gas but also biogas and hydrogen, depending on availability. In addition, Bloom is determined to use waste heat – for example at data centers – wisely. Consider that data centers in particular require a lot of energy for cooling the servers, but at the same time the resulting waste heat (process heat) is also useful. Specifically:
The customer receives a secure supply of energy at a fixed price over an extended period of time. Up to 0.099 per kWh at the lower end.
If there is a need for more energy, the system can be expanded to the requested amount through further delivery of additional Energy Servers within 50 days after the signing of the contract.
No upfront investment required. Bloom provides the Energy Servers and infrastructure for the customer at no additional cost.
Installation, service (maintenance) and management of the Servers is carried out by Bloom Energy.
The systems are designed so that they can run on natural gas, biogas and hydrogen – according to customer requirement and availability. Also the switch from one energy source to another is no problem.
The energy can be requested directly by the customer, but also alternatively through a provider that supplies the customer with energy according to need. Bloom cooperates with energy suppliers of all kinds for this.
Heating
More than 50 percent of the energy used in the business realm is process heat. This area is one of the most important in terms of decarbonization. Rising energy prices are an additional challenge. On the other hand, the increasing digitalization is leading to higher power requirements for data centers and associated networks. Up to 40 percent of the energy required there is used to cool the systems. That energy is primarily electricity. This is also the case with air conditioning and appliances for cooling or freezing. Hydrofluorocarbons (HFCs) are employed in these, which are very destructive to the climate – 100 times more damaging than CO2.
Here, Bloom can make a start by employing CHP (combined heat-and-power), as the Energy Servers give off a large amount of heat. From this point of view, the heat is a perfect usable waste product, which can be used by the industrial customer for its process heat. The waste heat can equally be used in return for air conditioning and chilling/freezing. At the end of the day, all this is achieved without the use of HFCs.
All this saves money and reduces CO2 emissions as well as energy requirements. This is already being utilized in Europe, but now with the Inflation Reduction Act, the USA is on track to use this potential for itself. Bloom is in talks with many potential industrial customers on the subject.
Summary: You can bet on the fourth quarter of this year already today. It must be, based on the forecasts, overall very positive in terms of a) the profit margin and b) expected turnover: 400 to 500 million USD. The third quarter is expected to remain at the level of the second quarter and so not offer any surprises. Further speculation should focus on the introduction of high-temperature electrolyzers in 2024, as a further boost to sales and order volume could derive from this.
Bloom is still experiencing losses but will enter the profit zone in 2024/25 – and with high sustainable growth, is my expectation. Furthermore, the topic of hydrogen (production, application, tax incentives via Inflation Reduction Act) will have increasing importance for Bloom. The stock market will have no choice but to show the long-term prospects in its valuation. Bloom seems to me to be very well positioned in the field of energy and hydrogen. Target: More than 50 USD in two years. Collect and leave alone. The stock market anticipates all this.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Plug Power reports on a variety of projects related to hydrogen, its production, use and future markets in which it is active and feels it is a frontrunner. Company representatives talk about an H2 production facility in Georgia that is the largest of its kind in the USA. They’re active everywhere – in stacks, cryotechnologies (liquefaction), electrolyzers and hydrogen-powered vehicles.
The figures, though, speak a completely different language: Turnover indeed grew by a remarkable 70 percent to over 260 million USD in the second quarter. But the quarterly loss likewise increased 58 percent to minus 236.4 million USD, or 0.40 USD per share (minus 0.26 USD per share was the expectation for the Q2). Liquidity decreased noticeably to only about 1 billion USD, so the CFO expects that Plug needs in the next 12 to 18 months between 1 and 1.5 billion USD in new liquid capital.
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Is an offering (share placement) coming soon or will a credit of over 1 billion USD be given by the DOE (Department of Energy) via the Inflation Reduction Act? Best could be a convertible bond at the value of 1 to 2 billion USD, as large funds are focusing especially on green bonds that fit with the sustainability theme and the company has sufficient capital. The stock market, meanwhile, appears skeptical and has let the share price plummet.
“By the end of 2023 we aim to generate 1.4 billion dollars (USD) in revenue, commission more than 200 tonnes of liquid green hydrogen plants and become the largest global player, exceed 400 million dollars in electrolyzer sales, deploy 30 megawatts of stationary power products, which will serve as a substantial source of recurring revenue for Plug and finally clearly demonstrate the path of profitability for all our investors.”
Plugquarterly report
That’s a lot of nice talk – but realistic? The forecasts are maintained: 1.2 to 1.4 billion USD turnover is taken as the target for the entire year 2023. The plans are huge. Alone in the business area of electrolysis, a capacity of 7.5 GW will be expected. The current figures (order book with about 224 million USD for electrolysis) speak a different language. The target level corresponds to a sales potential of up to 5 billion USD. Realistic? When?
There are many new sites in the world where hydrogen could be used in forklifts – the basis of their business with customers like Amazon and Walmart. But Plug needs to produce the liquefied hydrogen itself and earn money from it instead of buying it, even at a loss, from third parties, is my assessment. Otherwise, each new customer brings a loss with it, is my subjective view.
Plug calculates the price for hydrogen based on 0.03 USD per kWh in the USA as 2.75 USD per kg. In Europe, because of the imposed conditions and the price of electricity, around 0.75 USD per kg higher. If costs such as liquefaction and transportation are included, however, then 4.50 to 5 USD per kg is a realistic basis. Here, the subsidy via the US Inflation Reduction Act of 3 USD per kg will have a positive impact (profit margin).
Summary: Plug Power will require still longer before the share can be recommended as a buy. After placement of a convertible bond (my expectation/prediction). And then sufficient liquidity for all the ambitious plans must be reassessed. The company has very good potential to become a top player in the hydrogen sector. One should still be critical, however, since Plug is working on a large number of projects (building up capacity) in parallel, possibly positioning itself too broadly, and this at many different construction sites at the same time, and then also internationally active. Less is more, I would say. The company is for me – after studying the 10-Q (quarterly report) – too little transparent. Starting 7 USD, I’d consider the share.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
That happened fast: From 0.60 USD to over 3.70 USD in a few weeks and then the bounce back under 1.50 USD – triggered by the abrupt departure of Michael Lohscheller as CEO and president. The outlook, though, cannot be better, even if not everything is following a straight line – certainly the case at the stock exchange and in the share price. But Nikola Motors is a startup, and that contains some risk and some rough paths in the still young company history. In detail:
The news hit like a bomb: CEO Lohscheller is going back to Europe and is ending his career at Nikola – immediately operationally, but he will remain as a consultant during the transition until the end of September. Lohscheller gave as reason for his departure an illness in the family. He achieved great things for Nikola in a difficult environment and positioned the company well during its early days. His successor, Steve Girsky, is no stranger, though. For quite some time – since the beginning and IPO – he has had a management function at Nikola, most recently as chairman. Earlier, he brought Lohscheller in to join him at Opel and later likewise at Nikola. At GM, he was on the board and was in charge of the company turnaround at the time. In answer to an analyst’s question whether he was only taking a transitional role as Nikola CEO, Girsky said, in essence: He’s here to stay.
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Another personnel issue is weighing on the company: The president of energy responsible for the Hyla brand has left the company – reasons unknown. Here too, however, a solution should quickly be found.
Prior to this was the vote on increasing the authorized share capital from 800 million to 1.6 billion shares, which was decided in favor at the annual shareholders meeting on August 4, 2023. A simple majority was finally enough after the change in legislation (before, a majority of all outstanding shares was required). Once again, Nikola has the power to generate new company capital via issuance of shares – through ATM (at-the-market) transactions but also placement with institutional or even strategic investors or through convertible bonds.
An existing ATM program with Citicorp worth 600 million USD was extended on August 4, 2023. Nikola still needs, according to its own predictions, a good 600 million USD in order for the company to be positioned in the next two years to enter the profit zone. Which is forecasted for year 2025 (cashflow positive).
Cost-cutting programs take effect
Very positive was the notice from the company that they are on track to reduce their capital requirement per quarter to 100 million USD by the end of 2023. Currently, the liquidity outflow (cash burn) lies at about 150 million USD in a quarter. In 2022, it was even over 240 million USD per quarter. All this shows that Nikola has correctly done its homework and is well positioned until it is in full swing. Goal: Sustainable breakeven with high sales growth.
Sales of 1,000 to 2,000 hydrogen-powered trucks are necessary to move into the black, was a take from the press conference on financial results (transcript). So far, they already have 200 Tre FCEV units across 18 customers in the books. That many such orders are coming can be safely assumed; after all, Nikola is the first to offer these trucks in large number. Remember: California is giving a subsidy in the amount of 288,000 USD per FC truck on top of the 40,000 USD via the Inflation Reduction Act from the US federal government. Additionally, the hydrogen is subsidized if it is green (regeneratively produced): 3 USD per kg, with an additional 2 USD per kg in California.
As a hydrogen-powered truck from Nikola costs 400,000 USD (the Tre BEV costs 324,000 USD before subsidies), this should get many shippers to buy, since it is heavy transport of long hauls that really needs to be decarbonized and there are many restrictions (emissions laws, restrictions up to and including the ban on diesel vehicle sales by 2035 in many places) creating pressure to convert truck fleets – to battery-electric and/or hydrogen-powered via fuel cell or hydrogen engine (the last exists but not yet in series production).
On top of this, remember that through the scaling of Tre FCEV production, the production costs per unit will drop significantly or, in other words, the profit margin will be increased. Currently, the cost of materials alone per vehicle is 275,000 USD. This will, however, come out to be more favorable with increased scaling. Now, there are ten gamma trucks that have been produced (for test trials with customers). The first Tre FCEVs will find delivery in September. Until the year’s end, 100 Tre FCEV units are targeted and additionally, of the already produced Tre BEV units, 100 to 150 could find buyers by the end of the year.
In the third quarter, the number of units should be 60 to 90 and bring a net turnover of 18 to 28 million USD (after deduction of the dealer discount). Currently, there are 139 on company premises and 92 at dealerships. Nikola will not continue producing these until the start of 2024, and even then only after each order placement – produce to order.
Anheuser-Busch as trump card?
With the beer giant Anheuser-Busch, Nikola has had a long cooperation – since 2018. Anheuser has prepared itself via LoI (letter of intent) to buy 800 Tre FCEVs. So far, a few Tre FCEVs have already been driving with Biagi Brothers, a company that transports goods on behalf of Anheuser, and have clocked over 12,000 miles (19,000 km) without a hitch. Will a solid order come out of this? The probability is very high, as so far Anheuser has shown no signs of turning its back on Nikola. With such an order, 1,000 FC trucks would then immediately be in the books. Battery-electric trucks for Anheuser will come from BYD (50 units) and sometime also 40 Semis from Tesla.
What’s certain: The focus is clearly on hydrogen-powered trucks, as money is earned with this – especially with hydrogen – 60,000 to 80,000 USD has been calculated as the average amount of hydrogen per vehicle per year in terms of dollars. And here Nikola is a first mover, where there is already a line of competitors with battery-electric models on the market.
Michael Lohscheller said regarding this: “Nikola is the real deal…. We think we are the best position company to lead the commercial zero emission transition and accelerate the hydrogen economy.” Nikola will offer various purchasing options for the Tre FCEV, since some customers prefer to acquire the truck based on a lease deal and would like to see the hydrogen directly included via a flat rate. Anything is possible.
News in the past weeks
Two programs at once to promote H2 infrastructure in California can be made use of by Nikola. For eight H2 refueling stations, there are subsidies of over 58 million USD. This should be valuated very positively, as Nikola has already concluded an agreement with Voltera (subsidiary of investment fund group EQT) for the construction of 60 stations over the coming years and will get further support through their subsidization.
An order for 13 e-trucks (10 battery-electric and 3 hydrogen-powered) from J.B. Hunt was able to be gained. This company operates its own extensive fleet, but also provides freight shipment and logistics services for over 1 million trucks in the USA. That looks like a springboard for much more.
Battery supplier Proterra under bankruptcy protection
A credit due of over 170 million USD has prompted battery supplier Proterra to seek Chapter 11 bankruptcy protection. The aim was to gain enough time to make use of the still available liquidity of over 60 million USD, as the said credit could be frozen via Chapter 11 if the court decides that. Battery production is continuing, however, so Nikola (but also Daimler Truck) can expect to be further supplied, although Nikola could very well also use LG as another supplier. With Proterra, however, shareholders will now be left empty-handed should a recapitalization take place. The holders of the bonds could become shareholders if equity (shares) come out of the liabilities.
Problems with battery-electric trucks
Weeks ago, two battery-electric vehicles on the company premises caught on fire, the cause of which was confirmed as a defect with the coolant. Nikola has addressed this and announced a recall of the about 209 Tre BEVs. In addition, the recommendation was made to have a way to remotely monitor the trucks at all times and to not park them in halls. The problem has been recognized and will be fixed, is the impression from the investigations. On top of this was the report that Nikola will not reach the sales target of 350 to 500 Tre BEVs in 2023. More important, though, are the Tre FCEVs, whose sales have just started.
Liquidity situation eases noticeably
If you add up all the possible forms of financing and liquidity procurement, Nikola has, as per the start of July, 743 million USD in potential. Included in this is, among other things, the funding commitment from Tummin that still amounts to over 200 million USD and can be used by Nikola at its own discretion (issuance of shares as countervalue). The liquidity base amounted to 295.4 million USD at the end of the second quarter (see above). Contained in this is the gain from the deal with Iveco of 26.5 million USD and the sale of land (sale & lease back) from the company grounds in Coolidge, Arizona for 49 million USD.
The revenue from sale of the planned hydrogen production facility in Buckeye to Fortescue Future Industries in the amount of 20.7 million USD is included in the total liquidity in July, but not in the figure as per June 30, 2023, so Nikola then has 316.1 million USD in cash available. This should be sufficient for the time being, although further shares can be issued at any time ATM (at the market), as Nikola now theoretically has up to 800 million shares for issue.
From the press conference, it can be gathered that this option will now be used with less less pressure and fewer conditions. Essentially, new shares will not be placed at just any price – but it will really be up to the bank to decide how this ATM program is implemented. In any case, it will be a very important event if Nikola receives inflows of 100 to 300 million USD through the ATM program and is thus fully financed. The stock exchange will value this – if it occurs – very positively.
Convertible bond of 325 million USD
Nikola is issuing a convertible bond with a nominal value of 325 million USD and a coupon in the amount of five percent. Large investors in particular like to invest in such securities, especially when as in this case with Nikola they’re also green bonds. Since the bonds can be converted into shares, the holder receives in addition to the return, the added potential of gains in the share price, while the holder receives the original capital back at the end of the period if conversion does not take place. For Nikola, this will yield the possibility of being able to settle such debts through shares (own capital), if the share price develops favorably.
Summary
The shares of Nikola will remain very volatile, especially since short-sellers have a great interest in depressing the share price and using any further negative-seeming news for their own advantage. As per the end of July, 138.5 million shares have been sold short – over 23 percent of the free float. At the same time, the company will become more and more attractive the more the two truck variants find buyers and the infrastructure (charging stations and H2 refueling stations – mobile or with fixed location) is developed as well as the required hydrogen generated (from outside or in-house production).
Nikola is a frontrunner in its market and in my opinion has the potential to become a kind of Tesla for trucks. The continuous increase of this stock in portfolios through institutional investors demonstrates the confidence in the company. Time is needed, as real growth will only really take off in the next two to three years. Equal to consider is that the stock exchange is an anticipation mechanism that allows future developments (expectations) to flow in long before their concrete appearance in the price development.
In the further course of year 2023, I expect a price range between 1.50 and 4 USD, but already 5 to 10 in 2024, and 15 to 20 in 2025. Particularly the order influx for the Tre FCEV will drive the share price already in the short term, as the sales and earnings potential can be derived on this basis.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
The past few months have been extreme for Hyzon Motors, but all figures for the past two years since the IPO had to be reprocessed because of the accounting debacle, in order to comply with accounting guidelines and the conditions for listing on the stock exchange (quoted share price needed to be above 1 USD again, all quarterly reports available, deadlines met). All this has now been accomplished and there is clarity. In addition, the board of directors was newly formed and expanded to include experienced professionals.
The stock market has translated this – as I predicted – in the form of rising share prices, which involved a rapid increase from about 0.50 USD to just over 2 USD (company value rose from 150 to over 400 million USD). Recently, a marked decline in the price occurred again, which however in view of the company prospects should be transitory in nature.
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To the figures: At the end of the second quarter, cash and cash equivalents still amounted to 172.4 million USD. The loss for the quarter in the amount of 60.2 million USD contains the high legal costs in connection with the SEC investigations and the necessary legal measures, for which 32 million USD was recorded and 28.5 million USD of that can be regarded as non-recurring.
The capital requirement per month is estimated at 9 to 12 million USD, with between 73 and 81 million USD of capital expected to be put to use in the second half of the year, and then in total 110 to 120 million USD in 2024. So the company is still well financed, but will surely have to raise capital in the course of 2024 (issuance of shares, loans, subsidies under the Inflation Act, etc.) or seek other forms of financing (convertible bond, participation by a strategic partner). Still unclear, however, is what the costs for the final report from the Securities and Exchange Commission for Hyzon will come to in year 2024.
Matthew Foulston new board member
Matthew Foulston has over thirty years of experience mainly in the automotive industry and there especially in the heavy haul industry. Among other things, he was CFO at Navistar Truck and CFO of Mazda North America as well as in top positions at Ford Motor. Hyzon will certainly have made a good choice in this regard that serves the company’s goals.
In addition, on August 24, 2023, current board member Erik Anderson was elected Chairman of the Board of Directors. Anderson succeeds George Gu, who stepped down from his position.
200‑kW fuel cell has reached milestone
The site in Rochester, New York will be closed down or sold to reduce costs. The 200‑kW stack that was developed in the production facilities and the corporate-owned research center in Bolingbrook, Illinois, on the other hand, is in test series and on the road. The start of production there and commercialization can therefore begin in 2024. In parallel, the fully automated production of the MEA (membrane electrode assembly) was set up. Now it’s on to the product design and acceptability. Another 16 prototypes are still to go through testing.
The 200‑kW stack (single stack) has many advantages compared to the competition, according to the press release on it, regarding the size, weight, range (more km per kg hydrogen), but also the price (25 percent lower). In addition, the service requirement is lower. Ten trucks have already been equipped for test runs with these 200‑kW stacks, three of them in Europe and seven in Australia. All very good news.
A global market of 68 million diesel-powered trucks can be retrofitted with such and thus contribute to decarbonization. The Inflation Reduction Act would come into play here to, as 60 million USD have been made available for processes for the reduction of diesel emissions, another 2 billion USD for related production facilities on US soil, another 3 billion USD for technologies that help technologically improve motor vehicle production, etc. Hyzon will surely be named some figures, as they expect subsidies out of these for themselves, since they’ve classified themselves as a “technology innovator.”
A good sign: The short sellers are stocking up. Over 20 million shares were still sold short a few months ago, so this number has fallen to under 13 million. After prices around 2 USD, it went back down, to 1.20 USD, although this could be seen as a reaction to the rise from 0.50 USD to 2 USD (profit taking, technical reaction). The current prices around 1.20 USD invite considerations again of buying.
Hyzon, likewise to Nikola and Ballard, is engaged in exactly the right market – the fuel cell in the commercial vehicle segment. Some orders in 2024 will drive the share price of Hyzon in the positive direction. Also the participation of a strategic investor is conceivable at any time. Hyzon is thinking about pursuing partnerships like that with Fontaine Modification (system integrator in USA) in others regions as well, like with partners present in Europe.
Tests with 110‑ and 120‑kW modules
Hyzon Motors also is transitionally positioning itself with its 110‑kW and 120‑kW modules. Already 15 test trials of FC trucks with customers (Performance Food, Airgas, Bison Transport, Talke, Total Transportation Services, MPREIS, Hylane and lastly Seaboard Transport) were able to be successfully completed. They were tested under extreme weather conditions and in all conceivable daily operations. Over 2,900 hours of continuous use of the FC systems and over 68,000 miles (110,000 km)in distance were clocked in the process. This test program is underway in Europe and the USA and is to be extended to Australia – with customer Remondis. The number of employees is to remain at around 380.
Partnership with Fontaine Modification
Hyzon builds, in contrast to Nikola Motors, no truck chassis of its own, but supplies the complete fuel cell module. The installation is carried out by companies such as Fontaine Modification from the USA as a system integrator for Hyzon. After all, Fontaine alone converts over 44,000 trucks for customers every year. With it, Hyzon has the perfect partner.
Fontaine Modification belongs to the holding company Marmon Holdings, which has a stake in over 100 companies from, among others, shipping and logistics, machine building and medical technology, with an annual turnover of 10 billion USD. Marmon Holdings in turn belongs to the investment portfolio of billionaire Warren Buffett, Berkshire Hathaway. For me, this can be used to justify the speculation that Marmon could make a stake in Hyzon in order to use the FC knowhow (patents, products) in-house for subsidiaries like Fontaine.
So you can well imagine that Hyzon is going with FC modules a way similar to Ballard Power with Ford Trucks or Nikola with Bosch, but could also become part of a larger strategic whole. Fontaine/Marmon could be this, but also companies like Cummins or automotive suppliers such as Dana or Magna could be considered. Or truck producers who themselves would like to have the FC powertrain in house, but have “slept through” the development. So Hyzon is becoming highly interesting, in addition to the growth prospects around the FC stacks, as an acquisition speculation.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
The Green Hydrogen in India congress took place in New Delhi on April 18 and 19, 2023. The occasion prompted an invitation for me to travel from Mumbai via Surat to New Delhi and then through Ahmedabad back to Mumbai. Scheduled along the way was a host of individual meetings with key representatives from major Indian corporations, often at their headquarters. These companies have all identified hydrogen as a new field of high growth and already have large amounts of renewable energy available – primarily solar energy – for hydrogen production. Their aim is to export hydrogen by ship in the form of green ammonia.
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A number of large Indian corporations have not only already installed up to 5 gigawatts of solar generation but are each increasing their photovoltaic capacity by 1 gigawatt every year. This could result in green ammonia production of around 1 million metric tons annually – colossal amounts and highly ambitious plans. Although India is currently an importer of ammonia as fertilizer, it wants to turn this situation around within a few years. And its goal is not just to become self-sufficient but also to tap into a huge export market for green ammonia and green methanol. The plan is to take a 70:30 approach, i.e., 70 percent of the volume produced for in-country use and 30 percent for export.
President Modi takes on hydrogen
On the eve of the hydrogen congress, President Narendra Modi gave a speech about climate change on the India News television channel. He set out how India intends to tackle the climate crisis through numerous programs and measures. Every individual in India was reportedly called upon to manage the environment and resources wisely.
In January of this year India set in motion a comprehensive hydrogen program. The initiative gives particular weight to solar energy and wind power as the basis for the production of hydrogen. Green ammonia, along with green methanol, is clearly seen as the way to make hydrogen internationally transportable over the long term, an option which will allow India to develop it as an export commodity. However, since India itself has a large appetite for sustainably produced energy with the aim of reducing, and if possible supplanting, the importation of fossil fuels, the percentage of hydrogen exported will be smaller than the amount remaining in the country.
Of course, alongside climate change, there is also the issue of energy security and how technology may potentially be used to tackle these problems. The focus of the congress in New Delhi was purely on hydrogen.
National Green Hydrogen Mission
Launched only in January, India’s hydrogen program – the National Green Hydrogen Mission – is all-encompassing. Every aspect, from production to the many deployment opportunities, is addressed. Additionally, there will be numerous subsidy schemes. Here’s one example: The blending of hydrogen in gas grids is subsidized by the state, in other words the state assumes the transport costs in the pipelines. As the gas grid is currently not used to capacity, this is the perfect opportunity for hydrogen. To date, the proportion of hydrogen that can be injected is up to 18 percent.
Green Hydrogen in India
India has fully recognized the potential of green hydrogen. The country is working on highly ambitious plans in which companies are expected to be the primary drivers of implementation. The world’s largest energy conglomerate, India’s state-run NTPC, also plays a significant role in this decarbonization process which is being hastened thanks to a large number of individual projects being carried out across the nation.
India wants and needs to move away from oil and gas imports and also to find alternatives for coal so as to ensure energy security as well as tackle the issue of decarbonization. As it stands, the country spends over USD 90 billion buying in fossil-based energy carriers such as oil and gas. In all, 40 percent of its primary energy is imported. On the other hand, India boasts virtually endless potential to produce renewable energy very cheaply, mostly via solar power and increasingly via wind power – and predominantly offshore in the future. India sees itself as a hydrogen front-runner as renewable energy via solar power can be produced locally at highly affordable prices when compared globally.
There is a real eagerness to lay the foundations for large-scale hydrogen production. Rapid approvals procedures will be put in place for projects relating to renewables generation. People are talking about weeks or a few months rather than years like in Germany. Many areas are ideally suited since they are categorized as “wasteland,” meaning land which is not fit, for instance, for growing food or raising cattle.
The government and the responsible ministries are working on accelerating and supporting the ramp-up of the hydrogen economy by simplifying regulatory processes in addition to introducing assistance mechanisms. In this respect, President Modi is putting considerable pressure on local authorities to quickly make this a reality and to constructively support the hydrogen economy. Modi presumes, in a positive sense, that he is taking the right course of action as guided by his entrepreneurial mode of thinking. I’m told that this is something he is renowned for in his country.
Green ammonia: a foreign currency earner
Given that India still imports over 3 million metric tons of ammonia – derived from natural gas – for use as fertilizer, over the coming years it is possible that the many renewable energy resources coupled with future hydrogen production will make the country not just self-sufficient but also an exporter of ammonia. We are talking about 3 to 5 million metric tons of green ammonia per year as early as 2030 as a means of making green hydrogen transportable. A plethora of projects aiming to build ammonia plants are already at the planning and implementation stages. Many initiatives are located close to ports, rendering them ideal from a logistical perspective.
Pioneering conglomerates
The demand for green hydrogen is huge – above all in the chemicals industry, steelmaking and other industrial applications. A proportion of 10 percent is envisaged for the mobility sector, a figure which includes the use of hydrogen in commercial vehicles, on ships and on railroads. Yet the need for hydrogen is also foreseen for automobiles in the medium to long term according to the manager responsible for this area at the Reliance Group, whose major shareholder Ambani plans to invest more than USD 50 billion in hydrogen.
Ultimately, the issue of the day is still decarbonization. And India’s billionaires were well ahead when it came to hydrogen matters. That’s what leading executives at Reliance, Adani and other companies told H2-international when elaborating on their hydrogen plans. For example, Tata launched a hydrogen think tank together with Rand Corp. way back in 2004. Furthermore, the subsidiary Tata Motors set up a joint venture with Cummins Engine which has recently been extended to involve hydrogen technology.
India to keep electrolyzer production at home
However, there is a squeeze on the availability of electrolyzers needed to produce hydrogen. This situation is not just about the energy required by the electrolyzer but the availability of the necessary quantities of components and/or their capacities. Chinese manufacturers still dominate the scene when it comes to alkaline electrolyzers – the most widely adopted form of electrolysis. India’s intention is to set up its own industry, in other words attract foreign manufacturers and make use of their expertise through the construction of production facilities within the country, all of which will be subsidized by means of state-funded programs.
Market leaders in renewables such as Greenko have therefore established partnerships and joint ventures with companies like John Cockerill (electrolyzers) to ensure that they, too, can have sufficient electrolyzer capacity to meet ambitious corporate goals which include the use of hydrogen for ammonia production. Uniper already has an off-take agreement relating to future production quantities.
For companies in Europe, particularly in Germany, this development is creating extremely interesting opportunities not just to buy hydrogen but also to set up production (fuel cells, electrolysis, hydrogen tanks and component parts) through the transfer of technology by means of partnerships and joint ventures in India in a “local-for-local” approach.
On right path to the hydrogen era
India has fully comprehended the potential for producing its own hydrogen and is setting about making this a reality. Of course, this won’t happen overnight since it requires an enormous amount of capital investment and the projects need to meet the criteria for their financing. The high number of personal conversations with top-ranking officials from government and industry as well as delegates from key provinces leads me to the conclusion and the appreciation that India is perfectly positioned in this respect and will become a leading international player.
Increasing energy demand will continue to be met initially by fossil fuels but will be replaced by renewables and hydrogen little by little. India is on the right path to achieving that goal. Its aim is to be energy self-reliant by 2047 and reach net-zero carbon emissions by 2070. Several weeks ago, India became the most populous country on Earth with a total population of 1.4 billion – overtaking China. This means an intense and rapidly growing hunger for energy – but thankfully this energy will be renewably produced in the medium to long term.
I was able to attend this congress as a member of the delegation from the German advisory initiative Lili Navitas (which stands for “green energy”). The organization’s purpose is to connect up German and Indian companies focused on hydrogen and associated production technologies (e.g., electrolysis) and to facilitate connections in order to foster joint projects in both India and Germany. The initiator was Kiran Bhojani who previously worked in a high-level position at E.ON in Germany and has Indian heritage. He considers it his mission to guide India on its journey to becoming a hydrogen society and to support this by providing contacts and encouraging links between companies.
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