Hydrogen is starting to navigate the hype cycle

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The hype cycle posits that a new technology will generate vast excitement and high expectations, which tend to end in bitter disappointment. From that disillusionment, a more realistic way forward may emerge.

Hydrogen, the energy source that has produced more hype than heat in recent years, is starting along that path. Electrolyser maker Thyssenkrupp Nucera sketches out the way of things to come. 

The €2bn group was listed in July 2023 by Germany’s Thyssenkrupp and Italy’s De Nora, which still own three-quarters of the shares between them. Something of an oddity in an industry beset by teething problems and shrinking forecasts, it does what it says on the tin. 

Its first quarter, ended in December, showed deliveries on track, a growing order book, and an increase in the number of projects that it hopes to capture. Not that it is actually making money yet. Thin margins and rising ramp-up costs contributed to operating losses, although these were widely flagged. Indeed, its results were a lone bright spot in parent Thyssenkrupp’s challenging quarter.

What makes Nucera different? The first point is that — unlike makers of smaller, flexible electrolysers — its hulking alkaline machines are designed for industrial applications such as refining and steelmaking. In its order intake, Nucera snagged contracts from Swedish producer H2 Green Steel, and from a Shell project in the Netherlands. 

That is helpful. Green hydrogen’s suitability for many applications is increasingly questioned. Yet in the industrial space — whether to replace existing hydrogen production, or to provide feedstock for processes — its role is more secure.

Nucera’s second advantage, in a nascent industry, is that it is emphatically not a start-up. While its alkaline electrolyser technology is new, it is rooted in the older, chlor-alkali chemical process, which still makes up almost 40 per cent of revenues.

Similarly, while the group is newly listed, it has a pre-existing global manufacturing capacity of 1GW, out of about 8GW existing in the world. That enabled it to secure the biggest hydrogen project in the world, Saudi Arabia’s green Neom city, which accounts for more than 80 per cent of current revenues, according to Martin Wilkie at Citigroup.

Nucera’s progress has been cold comfort for investors. The stock is down by a third since the IPO as excitement drained from the wider sector. Stricter conditions to access subsidies in the US, unveiled at the end of last year, have not helped.

But, in an industry likely to be buffeted for some time to come, Nucera is at least showing what might be left once the hydrogen hype subsides.