Ballard in cost cutting mode as hydrogen adoption slows, but remains confident and positioned for the longterm
But its business plan depends on the widespread installation of hydrogen infrastructure and, perhaps more importantly, on the production of clean hydrogen. Progress has been slow on both fronts. Here’s why and how it’s affecting both Ballard and the broader hydrogen sector.
Lagging energy transition
“In the context of a challenging macroeconomic and geopolitical outlook and amid protracted policy uncertainty, we see a multi-year push-out of the availability of low-cost, low-carbon hydrogen and hydrogen refuelling infrastructure,” chief executive Randy MacEwen said in a press release.
Specifically, the company cited “a slowdown in hydrogen infrastructure development and delayed fuel cell adoption.”
The investor excitement that Biden brought to new energy companies such as Ballard was not entirely hype: his policies have committed billions of dollars to build out a hydrogen sector.
“It’s a significant amount of capital that’s kind of almost a once-in-a-lifetime type of opportunity for funding,” MacEwen told analysts on the second-quarter conference call in August. “The challenge is that the overall investment cycle is coming earlier than the market adoption.”
Ballard said that it received only $5 million in new orders in the second quarter and doesn’t have an order book large enough to need the Texas plant — at least, not yet.
But as Biden prepares to leave office, there’s no guarantee that the policies drafted by his administration will still be in place when or even if hydrogen adoption accelerates.
Where are the promised tax credits?
That would be a shot in the arm for sector players such as Ballard, but the regulations remain subject to debate in the U.S., so they haven’t affected the market yet.
China’s presence
But years later, the relationship hasn’t generated much business, and MacEwen earlier this month said Ballard is “conducting a strategic review of our China strategy, including all options” relating to the joint-venture agreement as a result of underperformance.
Nicolas Pocard, vice-president of marketing and strategic partnerships at Ballard, said there is widespread policy uncertainty both in the U.S. and in China. He estimated that it’s delaying the production of hydrogen at scale by three years to five years, meaning he sees demand kicking in around the end of the decade.
The number of hydrogen-related projects around the world has risen to 1,572 in May 2024 from 228 in December 2020, according to a report this month by the Hydrogen Council, an organization with 140 corporations interested in the larger adoption of hydrogen.
That’s a nearly seven-fold increase, which sounds impressive, but the number of projects in “the committed stage” has grown more slowly, to 416 from 102, during the same time period.
Pocard said the policy uncertainty is making it harder for hydrogen project proponents to raise capital.
“We are not going to see this acceleration in demand as early as we thought,” he said.
A bright spot
One bright spot has been Europe. In April, Ballard announced that Poland-headquartered Solaris Bus & Coach SP z o.o ordered 1,000 fuel cell engines, with delivery starting in 2024 and continuing into 2025.
It marked the largest order in the company’s history and meant the company’s products would be deployed in Munich, Hamburg, Germany, and 20 other cities across Europe.
It’s one example of the hydrogen sector stirring to life.
“Hydrogen is kind of like a Swiss Army knife,” said Brendan Frank, director of policy and strategy at Clean Prosperity, a Canadian think tank focused on market-oriented solutions to climate change. “But in most cases, it’s competing against something else and it’s not always going to win.”
Producing and transporting hydrogen both involve energy losses, which add expenses to the overall cost.
Hydrogen is kind of like a Swiss Army knife…But in most cases, it’s competing against something else and it’s not always going to win
Brendan Frank
Frank said he sees hydrogen projects succeeding when there’s a certain trifecta: favourable economics, enthusiastic customers and political support.
The hydrogen would be produced using offshore wind, and though details remain vague, it is a sign that the hydrogen market is advancing.
But the actual role that hydrogen can play in Canada may be limited, according to Frank at Clean Prosperity, which modelled several different pathways that the country could reach its net-zero emissions goals.
“We see only a modest deployment of hydrogen as an energy carrier, at two per cent to five per cent of final energy use,” the think tank said in a December report. “Even this low level of hydrogen use requires significant amounts of new infrastructure.”
Still, Ballard is prepared for a market slowdown. It had US$678 million in cash and cash equivalents on its balance sheet and listed about US$36 million in operating expenses last quarter.
“We remain confident in the long-term value proposition of hydrogen fuel cells,” MacEwen told analysts in August.