'Game changer' | Shares in hydrogen-focused companies soar in wake of US climate bill's H2 tax credits

Shares in US hydrogen companies have soared since the US climate bill and its generous clean hydrogen production tax credits (PTC) were announced on 27 July, with European companies in the H₂ space also seeing substantial increases, according to Recharge analysis.

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Since 26 July — before Senate Majority Leader Chuck Schumer and renegade Democratic Senator Joe Manchin unveiled their surprise climate bill, the Inflation Reduction Act (IRA) — shares in US electrolyser and fuel cell makers Plug Power and Bloom Energy have risen by 75.7% and 73.7%, respectively.

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The IRA — which would grant tax credits of up to $3/kg to clean hydrogen producers for a period of ten years — was passed by the US Senate on Sunday, and the House of Representatives is expected to follow suit this week, with President Joe Biden signing the bill into law as soon as this weekend.

The increase in the Plug Power stock price came despite the New York state-based company posting second-quarter revenue figures that were 10% below analyst expectations and a $173.3m net loss over the previous 12 months.

US fuel cell manufacturers Ballard Power Systems and FuelCell Energy have also seen uplifts of 35% and 45.3%, respectively.

And the impact on shareholder confidence can also be seen in Europe, with stocks in pure-play electrolyser makers ITM and HydrogenPro rising by 22.5% and 22.4% over the same period, respectively.

The trend is smaller, but still noticeable, among companies where electrolysers are only part of their business.

For instance, shares in Siemens Energy, Cummins and Thyssenkrupp have risen by 14.5%, 8.1% and 9.5%, respectively, since 26 July.

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Plug Power flagged up the impact of the Inflation Reduction Act (IRA) in a letter to shareholders on Tuesday, writing: “The IRA bill is a tremendous catalyst for all forms of clean energy development, and we believe it is a game changer for Plug and green hydrogen.

“It is important to note that the PTC of $3/kg for green hydrogen will dramatically expand the economics for green hydrogen, making green hydrogen economical versus grey in essentially all hydrogen markets.

“[The PTC]… should result in improved plant payback by 4-5 years and incremental cash flow of $500m per year at 500 [metric] tons per day (TPD) with targeted production by YE [year-end] 2025.”

It added: “We believe that the PTC will help capital formation, recycling of capital, and back leveraging.

“We believe this dynamic provides access to a larger pool of capital to help accelerate the growth of the green hydrogen industry while reducing the levelized cost of green hydrogen.”

JP Morgan analyst William Peterson wrote in a letter to clients that the clean hydrogen tax credits — as well as the extension of fuel-cell tax credits in the IRA — “could bring the company toward profitability inflection about six months earlier than expected”.

And Colin Rusch, senior research analyst at investment bank Oppenheimer & Co, added: “We believe Plug is uniquely positioned to benefit from the [IRA] legislation with its leading position in green hydrogen. We expect the company to aggressively book new business with numerous customers and build out a comprehensive green hydrogen network in the US serving industrial applications first, followed by incremental material handling, stationary power and over-the-road transportation.”