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Secretary of Energy Chris Wright canceled 24 decarbonization grants worth $3.7 billion.
Especially with carbon capture tax incentives on the verge of disappearing, perhaps At One Ventures founder Tom Chi is onto something.
The House budget bill may have kept the 45Q tax credit, but nixing transferability makes it decidedly less useful.
The company will use the seed funding to bring on more engineers — and customers.
The buzzy clean energy tax credit marketplace expanded into debt right in the nick of time.
The company has a new CEO and a new strategy — to refocus on its “core business.”
Ecolectro, a maker of electrolyzers, has a new manufacturing deal with Re:Build.
By all outward appearances, the green hydrogen industry is in a state of arrested development. The hype cycle of project announcements stemming from Biden-era policies crashed after those policies took too long to implement. A number of high profile clean hydrogen projects have fallen apart since the start of the year, and deep uncertainty remains about whether the Trump administration will go to bat for the industry or further cripple it.
The picture may not be as bleak as it seems, however. On Wednesday, the green hydrogen startup Ecolectro, which has been quietly developing its technology for more than a decade, came out with a new plan to bring the tech to market. The company announced a partnership with Re:Build Manufacturing, a sort of manufacturing incubator that helps startups optimize their products for U.S. fabrication, to build their first units, design their assembly lines, and eventually begin producing at a commercial scale in a Re:Build-owned factory.
“It is a lot for a startup to create a massive manufacturing facility that’s going to cost hundreds of millions of dollars when they’re pre-revenue,” Jon Gordon, Ecolectro’s chief commercial officer, told me. This contract manufacturing partnership with Re:Build is “massive,” he said, because it means Ecolectro doesn’t have to take on lots of debt to scale. (The companies did not disclose the size of the contract.)
The company expects to begin producing its first electrolyzer units — devices that split water into hydrogen and oxygen using electricity — at Re:Build’s industrial design and fabrication site in Rochester, New York, later this year. If all goes well, it will move production to Re:Build’s high-volume manufacturing facility in New Kensington, Pennsylvania next year.
The number one obstacle to scaling up the production and use of cleaner hydrogen, which could help cut emissions from fertilizer, aviation, steelmaking, and other heavy industries, is the high cost of producing it. Under the Biden administration, Congress passed a suite of policies designed to kick-start the industry, including an $8 billion grant program and a lucrative new tax credit. But Biden only got a small fraction of the grant money out the door, and did not finalize the rules for claiming the tax credit until January. Now, the Trump administration is considering terminating its agreements with some of the grant recipients, and Republicans in Congress might change or kill the tax credit.
Since the start of the year, a $500 million fuel plant in upstate New York, a $400 million manufacturing facility in Michigan, and a $500 million green steel factory in Mississippi, have been cancelled or indefinitely delayed.
The outlook is particularly bad for hydrogen made from water and electricity, often called “green” hydrogen, according to a recent BloombergNEF analysis. Trump’s tariffs could increase the cost of green hydrogen by 14%, or $1 per kilogram, based on tariff announcements as of April 8. More than 70% of the clean hydrogen volumes coming online between now and 2030 are what’s known as “blue” hydrogen, made using natural gas, with carbon capture to eliminate climate pollution. “Blue hydrogen has more demand than green hydrogen, not just because it’s cheaper to produce, but also because there’s a lot less uncertainty around it,” BloombergNEF analyst Payal Kaur said during a presentation at the research firm’s recent summit in New York City. Blue hydrogen companies can take advantage of a tax credit for carbon capture, which Congress is much less likely to scrap than the hydrogen tax credit.
Gordon is intimately familiar with hydrogen’s cost impediments. He came to Ecolectro after four years as co-founder of Universal Hydrogen, a startup building hydrogen-powered planes that shut down last summer after burning through its cash and failing to raise more. By the end, Gordon had become a hydrogen skeptic, he told me. The company had customers interested in its planes, but clean hydrogen fuel was too expensive at $15 to $20 per kilogram. It needed to come in under $2.50 to compete with jet fuel. “Regional aviation customers weren’t going to spend 10 times the ticket price just to fly zero emissions,” he said. “It wasn’t clear to me, and I don’t think it was clear to our prospective investors, how the cost of hydrogen was going to be reduced.” Now, he’s convinced that Ecolectro’s new chemistry is the answer.
Ecolectro started in a lab at Cornell University, where its cofounder and chief science officer Kristina Hugar was doing her PhD research. Hugar developed a new material, a polymer “anion exchange membrane,” that had potential to significantly lower the cost of electrolyzers. Many of the companies making electrolyzers use designs that require expensive and supply-constrained metals like iridium and titanium. Hugar’s membrane makes it possible to use low-cost nickel and steel instead.
The company’s “stack,” the sandwich of an anode, membrane, and cathode that makes up the core of the electrolyzer, costs at least 50% less than the “proton exchange membrane” versions on the market today, according to Gordon. In lab tests, it has achieved more than 70% efficiency, meaning that more than 70% of the electrical energy going into the system is converted into usable chemical energy stored in hydrogen. The industry average is around 61%, according to the Department of Energy.
In addition to using cheaper materials, the company is focused on building electrolyzers that customers can install on-site to eliminate the cost of transporting the fuel. Its first customer was Liberty New York Gas, a natural gas company in Massena, New York, which installed a small, 10-kilowatt electrolyzer in a shipping container directly outside its office as part of a pilot project. Like many natural gas companies, Liberty is testing blending small amounts of hydrogen into its system — in this case, directly into the heating systems it uses in the office building — to evaluate it as an option for lowering emissions across its customer base. The equipment draws electricity from the local electric grid, which, in that region, mostly comes from low-cost hydroelectric power plants.
Taking into account the expected manufacturing cost for a commercial-scale electrolyzer, Ecolectro says that a project paying the same low price for water and power as Liberty would be able to produce hydrogen for less than $2.50 per kilogram — even without subsidies. Through its partnership with Re:Build, the company will produce electrolyzers in the 250- to 500-kilowatt range, as well as in the 1- to 5-megawatt range. It will be announcing a larger 250-kilowatt pilot project later this year, Gordon said.
All of this sounded promising, but what I really wanted to know is who Ecolectro thought its customers were going to be. Demand for clean hydrogen, or the lack thereof, is perhaps the biggest challenge the industry faces to scaling, after cost. Of the roughly 13 million to 15 million tons of clean hydrogen production announced to come online between now and 2030, companies only have offtake agreements for about 2.5 million tons, according to Kaur of BNEF. Most of those agreements are also non-binding, meaning they may not even happen.
Gordon tied companies’ struggle with offtake to their business models of building big, expensive, facilities in remote areas, meaning the hydrogen has to be transported long distances to customers. He said that when he was with Universal Hydrogen, he tried negotiating offtake agreements with some of these big projects, but they were asking customers to commit to 20-year contracts — and to figure out the delivery on their own.
“Right now, where we see the industry is that people want less hydrogen than that,” he said. “So we make it much easier for the customer to adopt by leasing them this unit. They don’t have to pay some enormous capex, and then it’s on site and it’s producing a fair amount of hydrogen for them to engage in pilot studies of blending, or refining, or whatever they’re going to use it for.”
He expects most of the demand to come from industrial customers that already use hydrogen, like fertilizer companies and refineries, that want to switch to a cleaner version of the fuel, or hydrogen-curious companies that want to experiment with blending it into their natural gas burners to reduce their emissions. Demand will also be geographically-limited to places like New York, Washington State, and Texas, that have low-cost electricity available, he said. “I think the opportunity is big, and it’s here, but only if you’re using a product like ours.”
Not even the companies that — on the surface, at least — seem most likely to benefit from them.
Amidst the chaos of President Donald Trump’s tariff regime so far, there has been one constant — the 25% levies on steel and aluminum imports applied in February, with no country-specific exemptions. I’ve been a bit befuddled as to what these tariffs may, or may not, mean for the companies trying to green these notoriously hard-to-decarbonize sectors. And it turns out, some of them are a bit befuddled, too.
“It’s a mixed bag,” Cody Finke, CEO of the Bay Area-based clean cement and alumina startup Brimstone told me. Brimstone’s core breakthrough is figuring out a way to co-produce cement and alumina — the core material in the critical mineral aluminum — using carbon-free calcium silicates such as basalt rather than limestone, which releases a lot of CO2 when it’s processed.
At least on the surface, a company like Brimstone should fall squarely among the beneficiaries of Trump’s trade policy — the whole point of the tariffs, after all, is to increase demand for domestic steel and aluminum by making foreign metals more expensive. That will likely allow U.S.-based producers to raise prices, too, generating even more revenue.
Then again, green steel and aluminum producers rely on imports of these same materials to build their own plants. Tariffs on these vital construction materials — plus exorbitant levies on all goods from China — will make building new production facilities significantly costlier. (As Keith Norman, CEO of the domestic battery manufacturer Lyten told me last month, “The reality is, the energy transition is a manufacturing transition.”) Not to mention the fact that the auto industry — a heavy user of both steel and aluminum — is facing its own 25% tariffs on imported vehicles and auto parts. That stands to raise the price and thus lower the demand for cars, in turn reducing demand for the materials needed to build them, green or not.
Large industry players such as Nucor and Cleveland Cliffs — both of which have plans to produce green steel — have seen mixed responses since the tariffs were announced. “Nucor recently said on an earnings call that they have huge backlogs, suggesting increased demand. [Cleveland] Cliffs, on the other hand, is idling plants due to low demand,” Hilary Lewis, the steel director at Industrious Labs, a nonprofit advocating for heavy industry decarbonization, told me via email. But it’s difficult to know how much a company’s recent performance is attributable to the tariffs. “The impact of the steel tariffs are uneven and subject to other disruptions in the market,” Lewis said.
Industrious Labs aluminum lead Annie Sartor told me that Trump’s first term tariffs on aluminum failed to revitalize the industry, which she said “saw a continued downturn.” So while the latest tariffs are more robust, Sartor is hesitant to to think that “this will be a real game changer.” As she explained, “The biggest challenge that the industry faces is access to electricity, and specifically renewable electricity.”While the tariffs won’t directly address that, Sartor said that an optimistic analysis would suggest that with their extra revenue, companies that rely on electrification to clean up their operations “could use those additional funds to help them access the renewable energy that they want.”
At least for now, many of the leading companies have expressed strong support for Trump’s trade agenda. Century Aluminum’s CEO Jesse Gary said the tariffs “will help drive the resurgence of domestic aluminum production,” while Cleveland Cliff’s CEO Lourenco Goncalves stated they would “penalize the foreign competitors who have been playing by a different set of rules.” And while Leon Topalian, CEO of Nucor, acknowledged that the tariffs will increase the price of the raw materials for steel, such as iron ore, he told investors that he thinks this will be outweighed by “the overall macroeconomic trends in the industry, a healthy, vibrant steel industry.”
Aluminum giant Alcoa, which has also expressed interest in producing green aluminum, is an outlier among industry leaders in its opposition to tariffs. The company’s CEO, Bill Oplinger, told the crowd at a metals and mining conference in February that the disruption caused by the tariffs could eliminate 100,000 jobs in the domestic aluminum industry. The company operates two smelters in Canada that will be subject to tariffs, while it’s closed down many older smelters in the U.S. that it’s in no rush to reopen. “It’s hard to make a restart decision based on tariffs that could change,” Oplinger said during an analyst call, the Wall Street Journal reported. “We just don’t know whether they will stick.”
Startups focused narrowly on green metals production, however, have generally been more circumspect in their responses. “At this point, we’re trying to just stay steady through all of it — not reacting to the day-to-day,” Adam Rauwerdink, senior vice president at the green steel startup Boston Metal, told me. His company uses renewable power to electrolyze iron ore at high temperatures to create molten iron, the feedstock for steel.
Boston Metal has yet to build its first demonstration plant, and while Rauwerdink told me the tariffs could provide some incentive to site the facility in the states, the increase in domestic materials demand that tariffs will presumably bring is by no means enough to guarantee a U.S.-based facility will be worth it. “Here in the U.S. right now, the challenge is just the grid not being sufficient,” he said.
With electricity demand on the rise, green metals companies are now competing for renewable resources with tech giants that are trying to scoop up as much clean energy as possible to power their artificial intelligence-focused data centers. “Innovations like that, which change the landscape on the grid, can definitely impact some of these other solutions that are going to be competing for electrons and are probably less profitable than an AI data center,” Rauwerdink told me.
Electra, a startup that’s also using electrolysis to decarbonize the ironmaking process, recently landed a $186 million Series B funding round to build its demonstration plant in Colorado. But the tariffs aren’t enough for them to commit to the U.S. market, either. As the company’s CEO, Sandeep Nijhawan, told me, building a facility in an area with easy access to renewables is of paramount importance to them too.
Adding to all of this tariff-related uncertainty is the fact that many of these demonstration plants or first commercial facilities, including Brimstone’s, aren’t even scheduled to come online until the latter half of Trump’s term, if not the next decade. “We don’t know what the policy of the United States will be at that time,” Finke told me. The plan is for the company’s first commercial demonstration plant to be operational in 2030. “Maybe the next president will extend those tariffs, or maybe they will cut them back,” Finke said. After all, Biden mostly kept Trump’s first term tariffs on steel and aluminum in place — although prior to this February, there were numerous country-specific exemptions in place.
At the end of the day, tariffs are only one of numerous policy unknowns plaguing these green producers. Another major one is the status of the funding many of them were granted from the Department of Energy but have yet to see. In Brimstone’s case, that’s a $189 million award from the Office of Clean Energy Demonstrations to build its first plant. While Finke told me the company has started spending that money scoping out potential sites, it hasn’t yet been reimbursed. I asked him if that was concerning. “It’s a good question,” he told me. “At this time, it’s too early to say that.”
Similarly, Century Aluminum and Cleveland Cliffs both have $500 million awards from OCED to produce green aluminum and green steel, respectively. While I reached out to both companies for comment on the tariffs and the status of their funding, neither got back to me. Boston Metal also has a $50 million DOE grant for a facility that would produce chromium, a critical material for many advanced energy technologies. That money is, of course, now mired in “limbo and uncertainty,” Rauwerdink told me.
Green aluminum manufacturers large and small also stand to benefit from the Inflation Reduction Act’s advanced manufacturing production tax credit, which incentivizes the domestic production of critical minerals, as well as certain types of clean energy components. This credit — along with so many others — may or may not be slashed as Republicans look to cut funding for a variety of IRA-related initiatives in the budget reconciliation process.
While Finke told me — as so many other companies did — that Brimstone does not rely on tariffs, tax credits, or the company’s DOE grant for its survival,it sure would be nice to have just a little certainty for once. “What we’d really like is to know what number to put in our financial model,” he told me.
Wouldn’t we all.
