Air Products' Hydrogen Strategy: Risks and Rewards

Air Products' Strategic Goals for Hydrogen

Air Products aims to lead the hydrogen market by investing $15 billion in global clean energy projects, focusing on large-scale energy transition and low carbon hydrogen initiatives. With over 65 years of experience, they are committed to advancing hydrogen production and distribution, supporting global climate goals and clean energy deployment.

""As the leading global supplier of hydrogen, Air Products has made a commitment to invest $15 billion in clean energy projects around the globe to accelerate the energy transition and build the robust ecosystem needed to meet our collective climate change goals and generate a cleaner future for everyone." Expo attendees are invited to stop by Air Products' booth #2030 on the exhibit floor to learn more about Air Products' hydrogen solutions for the heavy-duty trucking and transportation sectors and meet our team of energy innovators." --- (APD, press release, 2024/05/15)

"Air Products, worldwide leader in terms of hydrogen supply, has been a first mover, committing more than $15 billion dollars to real, large-scale energy transition projects and launching several large low carbon hydrogen projects in the world, making it a leading and reliable supplier." --- (APD, press release, 2024/06/07)

""As the leading global supplier of hydrogen, Air Products has made a commitment to invest $15 billion in clean energy projects around the globe."" --- (APD, press release, 2024/05/24)

"The company's technologies are used in over 1.5 million refuelings. With over 65 years of global hydrogen experience operating in over 50 countries, Air Products has the proven capability and know-how to make hydrogen through all available production methods and to distribute this increasingly important emission-free fuel safely, reliably, and economically." --- (APD, press release, 2024/05/24)

"Air Products' Global VP, Hydrogen for Mobility, Eric Guter participated in an engaging panel discussion on the latest in California’s hydrogen market development strategy to accelerate clean energy deployment and more at the California Hydrogen Convention. https://t.co/AhpumQsvlM https://t.co/Bvunn9M09X" --- (APD, twitter, 2024/05/30)

Regulatory Environment and Policies

Regulatory policies are crucial for Air Products' hydrogen strategy, with mandates and incentives driving adoption. Supportive government policies and necessary permits are essential for advancing low-carbon hydrogen projects. Significant legislative changes in Europe, such as the Renewable Energy Directives, further shape the regulatory landscape, impacting hydrogen as a feedstock and transport fuel.

"It's an economy that is large and demand continues to go up. That said, the policy environment has been one that is geared towards reducing investment in traditional energy, encouraging investments in these lower-carbon energies." --- (CVX, earning call, 2024/Q1)

"I think it's important to take a step back and highlight, I think some of the several regulatory mandates and incentives that are driving the adoption." --- (APD, conference, 2024/05/23)

"Agreement aims to advance low-carbon hydrogen market, driving toward a cleaner energy future Enables transportation of low-carbon hydrogen from ExxonMobil's facility through Air Liquide's existing pipeline network Air Liquide supplies oxygen and nitrogen needed to produce low-carbon hydrogen and ammonia Final investment decision subject to supportive government policy, necessary regulatory permits ExxonMobil (NYSE:XOM) and Air Liquide today announced an agreement to support the production of low-carbon hydrogen and low-carbon ammonia at ExxonMobil's Baytown, Texas facility." --- (XOM, press release, 2024/06/24)

"Implementation of jurisdiction-specific policies and programs can be dependent on, and can affect the pace of, technological advancements, the granting of necessary permits by governing authorities, the availability and acceptability of cost-effective, verifiable carbon credits, the availability of suppliers that can meet our sustainability-related standards, evolving regulatory or other requirements affecting ESG standards or other disclosures, and evolving standards for tracking, reporting, marketing and advertising relating to emissions and emission reductions and removals." --- (CVX, sec filing, 2024/Q1)

"But last year, like I mentioned, was a seminal moment in European legislative landscape, right, with an alphabet soup of delegated acts that were passed, the Renewable Energy Directive 2 for transport fuels, the Renewable Energy Directive 3 for bringing hydrogen as a feedstock into a lot of industrial applications, the carbon border adjustment mechanism and clearly there's a lot here to digest, but as investors do their homework, they'll realize the frameworks work, the incentives work, etcetera." --- (APD, conference, 2024/05/23)

Market Opportunities for Hydrogen

Hydrogen presents diverse market opportunities, including energy storage, carbon capture, and distributed power generation, as highlighted by FCEL. BE emphasizes the advanced state of their hydrogen technology, while APD notes increased demand in on-site business. FCEL also sees potential in hydrogen fuel cell vehicles, despite current economic and availability challenges noted by BE.

"We think with our technologies, we're well positioned today to be around a number of different opportunities depending on how the market evolves, whether that's using hydrogen as a long duration energy storage, which we continue to believe is ultimately a more compelling solution than a mineral-based solution, rather the opportunities emerge faster along the lines of carbon recovery or carbon capture, and the opportunity we see just increasing around distributed power generation as interconnection cues continue to extend out on grids, at least certainly domestically." --- (FCEL, earning call, 2024/Q2)

"Our technology, invented in the U.S., is one of the most advanced electricity and hydrogen producing technologies on the market today." --- (BE, sec filing, 2024/Q1)

"Volumes improved modestly as higher demand for hydrogen in our on-site business was partially offset by weaker merchant volume." --- (APD, sec filing, 2024/Q2)

"We suspect that as Toyota continues to advance its efforts to distribute hydrogen-based fuel cell electric vehicles, that that will create additional opportunities for that technology." --- (FCEL, earning call, 2024/Q2)

"customers to purchase our power solutions to run on natural gas. Increasingly, customers want a zero-carbon solution for power, and, although our power solutions are designed to run on biofuels or hydrogen (in addition to natural gas) and help our customers achieve their sustainability goals, these fuels continue to have very limited availability and, for most customers, are not yet economical." --- (BE, sec filing, 2024/Q1)

Technological Advancements in Hydrogen

Nikola is advancing hydrogen technology through the development of hydrogen fuel cell electric trucks and the creation of a comprehensive hydrogen refueling ecosystem, including infrastructure to support these vehicles.

"With our Class 8 vehicles, including battery-electric and hydrogen fuel cell electric trucks, and our energy brand, HYLA, we are driving the advancement of the complete hydrogen refueling ecosystem." --- (NKLA, press release, 2024/04/04)

"The Energy business unit is developing hydrogen fueling infrastructure to support our FCEV trucks." --- (NKLA, sec filing, 2024/Q1)

Competitive Landscape in Hydrogen Market

ExxonMobil is confident in its strategic positioning within the challenging hydrogen market, leveraging its expertise and investments in hydrogen and carbon technologies to maintain a competitive edge and capitalize on emerging opportunities.

"So I think we feel good about where we're at in a very difficult market. Our view is that those market conditions are going to be with us for a little while here going forward, but we also feel like we're well positioned to be successful there." --- (XOM, earning call, 2024/Q1)

"So even in these markets that are set by other capacity, the work that we've done to position ourselves, more advantaged – in a more advantaged position in competition continues to deliver a value." --- (XOM, earning call, 2024/Q1)

"We're focused on carbon capture and storage, hydrogen, lower emission fuels and lithium. In a fast transition, we'll accelerate investment in these areas to grow earnings and cash flow." --- (XOM, event transcript, 2024/05/29)

"Companies that have the expertise to contribute should be encouraged and incentivized. As a hydrogen and carbon technology company, we see tremendous opportunity to transform the molecules that today are the source of the world's climate challenge into critical elements of the solution." --- (XOM, event transcript, 2024/05/29)

Partnerships and Collaborations in Hydrogen Sector

Nikola and Honeywell emphasize the importance of partnerships to build hydrogen infrastructure and advance the market. Nikola highlights industry-wide collaboration, while Honeywell positions itself as a facilitator and partner. Both companies are committed to leveraging partnerships to drive development in the hydrogen sector.

"We look to develop and leverage partnerships wherever we can build volume and hydrogen infrastructure across North America." --- (NKLA, earning call, 2024/Q1)

"And more than just a Tier 1 supplier, we see ourselves as a partner or even a facilitator in the space, whether that be helping to educate on best practices and timelines, coordinating with regulators, and even hosting some events to help advance the market." --- (HON, conference, 2024/05/30)

"But we will wait. We are not going to make FID on that project until those rules of what is the definition of green hydrogen is final on the books and on which basis one can count on the tax credit." --- (APD, earning call, 2024/Q2)

"We want to emphasize that building the hydrogen ecosystem requires industry-wide collaboration for the benefit of all." --- (NKLA, earning call, 2024/Q1)

"I think you'll hear us continue to advance that. And in some of those areas where we haven't done as much development work, I think you'll see us continue to lean into partnerships in that area." --- (HON, conference, 2024/05/30)