Air Products exits $4 billion green hydrogen project in Texas

The industrial gas firm Air Products & Chemicals has pulled out of what it previously described as the largest green hydrogen project in the US, a 1.4 GW plant in northern Texas powered by renewable energy and capable of producing 200 metric tons of hydrogen per day.

The $4 billion plant was to be a 50:50 joint venture with the energy company AES. Air Products had agreed to be the plant’s sole customer, selling all hydrogen produced to buyers in the region.

Air Products CEO Seifi Ghasemi revealed the decision during an investor presentation on Dec. 7. “This project never reached final investment decision,” he said. “It does not meet our established guidelines for new low-carbon project investments, and therefore we have stopped our involvement with this project, and we have sold our development rights to our partners.”

As of publication of this story, AES has not said if it will proceed with the project.

In May, Air Products delayed a final decision on the project, citing uncertainty in the implementation of the Inflation Reduction Act. The 2022 federal law contains large subsidies for low-carbon hydrogen, but project developers are anxious about proposed rules that would limit their ability to use power from renewable sources that predate their projects.

The rationale now is different, however. In response to a question from Deutsche Bank analyst David Huang, Ghasemi said the market for green hydrogen isn’t mature enough to justify the investment. The project “did not meet our criteria, which was that we do not make final investment decision until we have an anchor customer and until we have loaded 75% of our existing facilities,” he said.

Air Products’ clean hydrogen strategy is at the center of a dispute with the activist investor Mantle Ridge. Ghasemi has advanced the idea that the market for low-carbon hydrogen will grow rapidly in the coming years, reaching $1 trillion by 2050, and that investing heavily now will let the firm claim first-mover advantage. Mantle Ridge argues that too much of Air Products’ spending plan involves speculative projects without committed customers.

The dispute echoes a disconnect seen across the hydrogen industry right now. Firms say they want to build low-carbon hydrogen capacity but need customers lined up first. Potential customers say they want to use clean hydrogen to make chemicals and fuels, but they can’t build plants around the idea until stable and affordable supply is available.

Air Products is not abandoning clean hydrogen entirely. Ghasemi said its 600 t per day Neom green hydrogen project in Saudi Arabia is going forward, as is a 1,700 t per day plant in Louisiana that will make fossil fuel-based hydrogen known as blue because by-product carbon dioxide is captured. A related biofuel partnership with World Energy, however, is on hold.

“We are committed to low-carbon hydrogen, green and blue,” Ghasemi said. “We think the lowest-cost place to produce green is in the north of Saudi Arabia, and the lowest-cost place to produce blue is in the US Gulf Coast.”