Case Studies of Good H2 Companies
Sifting the legitimately skilled companies from the frauds or incompetents in new industry is hard, especially in energy, and even moreso on the equipment side. I’ve written about traits lead to inevitable failure in hydrogen , but which are the company traits that are a hallmark of success? Today I highlight a few critical successes – and traits of companies that can be successes. Investors should be looking for in their portfolio companies and what project developers should be looking for as they go through feasibility and procurement.
I’m only going to talk about companies that I’ve actually done procurement with – IE I’ve had direct experience with them over the past decade. None of these have been a client. There are certainly many more companies out there – but until you’ve actually done procurement and operations with equipment, you can’t know whether the company and hardware is solid.
Compression – only two companies I like so far
Why compression matters
I will be writing about this in another post, but the short version is that in the production-distribution-offtake value chain, compression is critical to distribution and the end use offtake. Bad compressors will make projects fail and hold back the entire industry. The most important part is that these compressors can load follow so they can shut down when the renewables and powering – something that liquid hydrogen can’t do. In other words, they are much more compatible with renewable H2 production.
Unfortunately to get the most of out gaseous hydrogen, carbon fiber tube trailers are commercially necessary. This isn’t a problem in the EU, but we can’t have nice things in the US because the US Department of Transportation doesn’t have an approval process for H2 carbon tubes, so we’re years behind. As more carbon fiber tubes go through the awful ad-hoc DOT process, however, these compressors will start to see value in the US.
Maximator
If you opened up a hydrogen compression system in the late 2010s, you would find Maximator components. Eventually Maximator jumped up from a component OEM to a tier 1 station provider. Now in the EU they operate over 25 operational stations with 20 more being deployed this year with 96% hardware availability. Compare this to any developing industry equipment and it’s nearly unachievably successful.
One core reason for Maximator’s H2 compressor success is their intense focus on the sealing ring – their equipment automatically detents when a sealing ring is damaged and mechanically swaps in the next one – allowing for 1000-2000 hours of maintenance-free operation with up to 90% efficiency – resulting in a fueling compressor that delivers 1.2MW of useable power to a vehicle (the average BEV charger delivers about .05MW on average) with 90% efficiency (the same BEV chargers are about 85% efficient in optimal conditions). In other words, Maximator has a top-notch engineering team, and their lead engineer/scientist is one of the smartest people in the industry.
Maximator also has a proper balance of commercial and engineering skills to have a sound product strategy – unlike companies like Nel that are all marketing and not enough product dev or reliability improvement. For example, Maximator knows that building only one station in a region will result in high maintenance costs that will fail a pilot project. Instead, they aim for 10+ stations in a region so they can have a local maintenance center to drastically reduce the cost of station upkeep. Maximator is also expanding to much larger compressors for distributed production and large-scale refueling stations.
Maximator’s success in the EU has led to over 186,000 vehicle fills and 1600 tons of H2 dispensed.
Burckhardt
Another compression company I have respect for is Burckhardt. This is a company with a century of experience in compression- notably with experience in the oil and gas industry. Their equipment is known to have high reliability and low recurring maintenance costs. Recently they moved into the hydrogen sector for heavy-duty systems compatible with distributed H2 production and mobility.
Burckhardt sells a four ton per day compressor that can easily go up to 550 bar pressure – absolutely perfect for a 10MW electrolysis site or for a bus refueling depot.
Burckhardt is also testing a 10 ton per day compressor that can go to 900 bar – large enough to refuel 700 bar heavy duty trucks and replace an entire US-sized on-highway heavy duty diesel refueling station (US refueling stations are larger than just about anywhere else in the world). The base hardware for this refueling compressor is nearly the same as the production site compressors. This is a very smart move to make one compressor system that can handle two different market segments – it means maintenance costs for both will come down, development costs are halved, and the resulting operational costs and contribution to the Levelized Cost of Hydrogen are minimized. In addition, Burckhardt recently completed the acquisition of US based assets – bolstering their ability to rapidly service equipment in the US.
Both companies are pursuing similar strategies in some segments, both are meeting with success. I’ve heard that some of the others in compression in the hydrogen space are finally producing hardware that is more reliable – providing further depth in the supply chain. Supply chain depth is important in any space, because variation between companies allows for project specialization – some hardware will be much more fit-for-purpose while being productized instead of being an expensive one-off.
Take-aways for investors and project developers
The following must-have traits are demonstrated here:
Focus on reliable hardware
Deep experience in this industry or a very closely related industry
Engineering focus, commercial relevance
The company isn’t “marketling led” (Nikola, Nel) but is instead has a balance of engineering and commercially relevant bizdev
The bizdev team understands product-market fit and commercial relevance – many companies make products that are technically better but commercially unfeasible
Theory of maintenance and practice – a focus on system reliability as the core function – while ensuring that reliability is cost effective. This includes local maintenance teams and expertise, IE not flying repair teams in from EU or East Asia
Productization – developing a product that fits many use cases so it can be brought down in cost
The last point is very important. Let’s take an example of a bus depot that only needs 100kg/day of fueling at a small bus pilot. A one-off refueling station with a compressor fitting exactly that fueling profile would probably cost $4M-$10M with upstream hardware costs of another $2M. A Maximator station would be at least 2x oversized, probably more like 4x oversized for buses, but would cost closer to $2M (note that 1.2MW of commercial BEV charging would cost about $12M at the station and another $20M in grid upgrades– making H2 fueling far less expensive).
Hydrogen transport – US specific
I mentioned earlier that the US Department of Transportation is hostile towards development of new hydrogen hardware. They don’t have a clear certification process in place, so it’s bespoke, expensive, and built around denying any changes or improvements. It leaves little in the way of competitive means to move H2 in the US. A few that have passed through don’t have great hardware and have passed insane costs onto the customers – making a potential buyer or investor wade through endless expensive junk. Here are some exceptions for both large scale and small scale.
Catec/Hydria
CATEC (now Hydria) stood out for similar reasons as the compressor companies – experience in the space. CATEC was founded much more recently in 2014 – but their hardware is used across the natural gas and related industries. They have large 200-300 bar carbon tubes that hold ~50kg of H2. They are modular can stack together – a 53’ trailer holds 1.2 tons of H2. The hardware is productized across several similar industries with only minor changes for H2– allowing the product to reach scale and lower production cost by using core component in many spaces. It’s been tested, certified, and is sold in enough quantity to bring the price down for H2.
This leads to Hydria to have the lowest $/kg (IE specific cost) gaseous trailers on the market. Later this year Hydria plans on offering an updated trailer 40’ trailer design with potentially lower costs per kg.
Amazingly, Hydria also leases hydrogen trailers – allowing some projects with infrequent needs to cost-effectively operate with H2.
Steelhead Composites
An alternative option for smaller scale h2 storage and movement is Steelhead Composites – they have productized a racked storage system that can hold almost 50kg of H2 in their type III tanks (aluminum core, composite overwrap). While heavier, type III tubes are more robust to mistakes – like completely draining the tank. Many of these can be stacked together before hitting trailer weight limits.
One important feature of Steelhead’s systems is that they are modular and easy to stack – so as a project grows the hydrogen storage/transport can simply purchase another rack. This allows a project to be more CapEx efficient.
One consideration of Steelhead is the weight of the system – these won’t get nearly a ton of H2 on a 40’ trailer – making them more viable for projects that aren’t using hundreds of kg of H2 per day.
Major takeaways for storage for investors and developers
In both cases, the core hardware has been productized to greatly bring down costs. They may not be the exact size for a project, but they will almost certainly cost less than doing all the engineering required for a perfect fit. They have set a form factor, sell hundreds, and have brought costs down. Again, supply chain depth of competent suppliers is critical to the future success of the industry.
Bringing the learnings together
All four of the companies are doing some core things that we don’t see in most OEMs in a new and growing sector like H2 (or clean energy in general, or really any startup-y sector):
1. Productization. Selling one-offs takes too much engineering time for too little payoff. Being “pilot projected” to death is a real problem in this industry. In productizing a company can can sell equipment for such a lower cost compared to one-off designs that they can actually engage small-scale companies and projects – provided those smaller projects can build around existing products.
Corollaries for investors: Do not invest in projects that want bespoke hardware. Those projects will fail. Do not invest in products that don’t have product-market fit or that push complexity onto other parts of the value chain.
2. A laser focus on engineering and continual improvement combined with a commercial team that is smart enough to find product-market fit. Most companies have much larger commercial teams than product development and engineering teams, and the sales team sell hardware specs that don’t exist.
All of the companies here are engineering forward – developing a product that works, and then focusing on improving it and expanding capabilities before moving to an entirely new product.
3. Commercial teams that build a strategy around the company core capabilities and their engineering expertise – rather than companies that come up with changing commercial ideas that are created in absence of engineering realities. In other words – a lot of companies make promises that they can’t deliver on – sometimes offering things that are physically impossible with current supply chains.
4. Adjacency. Most of these companies are either some of the top OEMs in adjacent fields or can take a product from an adjacent field and alter it to work well with hydrogen. Keep in mind that hydrogen is finicky – an adjacent sector’s equipment often can’t be changed to work with hydrogen. Pressure vessels can be changed to work with H2 more easily.
While there will be successful companies that don’t embrace these strategies, in H2 hardware these are quick signs for success. Whether you’re procuring for a project or investing, look for these traits in your company and partners.
What next?
I’ve been doing a lot of due diligence on investments in the H2 space, and I’ve saved investors a lot of losses in time and money. In addition, I’ve helped several companies focus on their product-market fit and find the perfect niche for them to grow – so that they can exhibit the traits I’ve mentioned above.
I’ve also recently done EPC on smaller projects and regularly help with procurement. Reach out if you have a legitimate project and need help.
