Investors have historically been skeptical of green hydrogen. High production costs, infrastructure construction, competition with batteries and minimal government support have made the green hydrogen sector a risky bet. But at least one company, Electric Hydrogen, appears to have found a way to convince investors that its technology is a bet they should take.
Electric Hydrogen (EH2), a Massachusetts-based green hydrogen technology company, just became the first green hydrogen unicorn, with a $380 million Series C raise that brought its valuation to $1.000 billion. That round also brought EH2's total funding to roughly $600 million, according to Crunchbase data. The startup is backed by heavyweights such as the Microsoft Climate Innovation Fund, United Airlines, BP and Fortescue Metals.
The funds will be used to expand production capacity for its electrolyzers, according to a company spokesperson. Electrolyzers are devices that use a process called electrolysis to split water (H2O) in its constituent elements, hydrogen (H2) and oxygen (O2). They are expensive and consume tons of renewable energy to produce a small amount of hydrogen.
EH2 says it has discovered a way to produce more hydrogen at a cheaper price.
Part of that apparent success is the company's technology. EH2 engineers designed and built all critical components of the electrolyzer in-house at the company's laboratory in Massachusetts. They increased performance to reduce costs, a move that came from Raffi Garabedian, CEO of EH2 and former chief technology officer at First Solar. Garabedian co-founder Dave Eaglesham was also former CTO of First Solar.
The startup can leverage its profits to take full advantage of the incentives offered by the Biden administration's Inflation Reduction Act. EH2 says those deals will help produce green hydrogen that is truly competitive in today's market and doesn't use cheap natural gas to generate greenhouse gas emissions. In parts of the country where renewables are cheap and tax credits exceed production costs, hydrogen could even be free for buyers.
Much of the transportation world is embracing the battery-powered revolution. But for large vehicles like trucks and airplanes, as well as industrial sites like steel mills, fertilizer factories, and chemical plants, batteries are not the right choice. Green hydrogen is increasingly seen as the solution for moving green energy over long distances.
EH2 is working quickly to build its electrolyzer factory in Massachusetts for launch in 2024. It plans to deliver and operate 100-megawatt electrolyzer systems, each capable of producing nearly 50 tons of green hydrogen per day at low production prices, according to the company. .
By 2030, EH2 hopes to enable customers to produce Hydrogen in states with a lot of renewable energy, such as Texas, for about $1,50 a kilogram, which is about what it costs when produced from natural gas.
Electric hydrogen seems to be in fashion. Last month, the company was selected to equip New Fortress Energy's green hydrogen plant in Texas. NFE expects first hydrogen production in the fourth quarter of 2024, with full commercial operation in 2025.
