How Hydrogen’s $46B Surge Will Fuel Real Estate

Investment in North American hydrogen production jumped by nearly two-thirds year-over-year to $46B in 2023, driven by the federal government’s march toward clean energy and private industry’s simultaneous efforts to power commercial fleets with electrification.

With those billions in investment come opportunities for commercial development to deliver both the manufacturing capabilities and the distribution hubs for this unconventional, but growing, fuel source.

“The momentum around the world is to consider ways in which hydrogen can be used as a fuel,” Fuel Cell & Hydrogen Energy Association President Frank Wolak said.

“There's two real estate thrusts you're going to see in the creation of hydrogen fuel facilities — the facilities themselves, with power infrastructure, land and permits,” Wolak said. “Then you're going to see the production of the equipment in new factories that are being considered by a number of U.S. companies, as well as new companies coming from Europe and Asia.”

In North America, 170 hydrogen projects were underway at the beginning of 2023, according to the Hydrogen Council and McKinsey & Co., representing $46B in direct investment in the sector, up from $29B in 2022.

The continent is well behind other parts of the world in terms of hydrogen production, with just 15% of the global project tally, but it is rushing to make up for lost time. Since 2021, the report notes, the total announced production capacity in North America has grown 1.5 times faster than the rest of the world.

Although hydrogen is the most common element in the universe, it doesn’t occur naturally on Earth in large enough quantities for industrial use. That’s where hydrogen production facilities come in, using a variety of methods to create hydrogen that can be used as fuel.

With subsidies in place under the Inflation Reduction Act, which authorized $369B of clean energy investment, as well as the 2021 infrastructure bill that channeled $8B to hydrogen development, there is a land rush for sites to build hydrogen production facilities.

The most commonly needed mechanisms are electrolyzers, which separate the components of water to release hydrogen. Existing facilities are scattered nationwide, though they tend to be in existing energy belts and markets with heavy concentrations of manufacturing.

“It's easy to convert industries to hydrogen for a number of reasons,” Calnetix Technologies Executive Vice President and Industrial Business Unit Leader Venky Krishnan said. “One is that you can actually produce the hydrogen where the demand is, instead of having to distribute it.”

Metro Boston is among the U.S. cities that have already seen hydrogen activity in their real estate markets.

“There are certainly a handful of hydrogen energy companies entering into the Boston market,” Nordblom Co. Senior Vice President Crosby Nordblom told Bisnow by email. “Two that come to mind are Envision Energy, which just leased 35K-plus SF of [research and development] space in Northwest Park, and Electric Hydrogen, which has leased 180K SF in Devens earlier this year. There are likely more.”

Electric Hydrogen has an R&D facility in metro Boston with the goal to develop better electrolyzers and make the components on-site, bringing down the cost of hydrogen. The company just raised $380M in a Series D round of funding that made it the industry's first unicorn by pushing its valuation over $1B, The Wall Street Journal reports.

California is in the running to be a hydrogen hub as well. In August, the state rolled out a hydrogen energy strategy with similarities to its EV strategy, according to California GO-Biz Director Dee Dee Myers.

“We've been building out hydrogen and in a variety of different formats over the last many years,” Myers told local television news station KTXL last month. “But to get to our clean energy goals, we need to scale our hydrogen market by 1,700 times. As you know, the governor has mandated that California reach a carbon-neutral economy by 2045, and hydrogen is a key, key part of that process.”

California already has the distinction of being home to the first municipal government to commit to hydrogen power. In June, the city of Lancaster inked a deal with solar energy specialist Heliogen to produce hydrogen Lancaster will buy. Earlier this year, the city approved the development of a hydrogen facility by SGH2 Energy that uses mixed-paper waste and other biomass to create hydrogen.

Hydrogen refueling stations in the U.S. are almost all in California, though there is one in Hawaii, according to Suzanne Mattei, an energy policy analyst for the Institute for Energy Economics and Financial Analysis. The infrastructure for the stations is already moving in a similar direction of vehicle battery recharging stations, she said.

In 2022, the global production of hydrogen stood at about 82.3 million metric tons, according to Wood Mackenzie data, with virtually all of that produced in nonsustainable ways. Demand for hydrogen was up 28% over the last 10 years, the company reports.

Wood Mackenzie predicts that by the end of this decade, production will be 98 million metric tons, about 9% of which will be sustainably produced. After that, it forecasts a steep rise in production by 2050 to 253.8 million metric tons.

New hydrogen facilities are in the works elsewhere, such as the announcement in September of a major new electrolyzer facility in Plymouth Township, Michigan, by Norwegian company Nel Hydrogen, a 507K SF facility that represents a roughly $400M investment. Manufacturer Cummins has started using electrolyzers at a factory in Minnesota.

Bosch, a German company that makes hydrogen energy equipment in Germany and China — and that is also planning to make hydrogen fuel cells for mobile applications in its U.S. plant in Anderson, South Carolina — predicts that by 2030, one in five new trucks weighing 6 tons or more will feature a hydrogen fuel-cell powertrain.

Other facilities are up and running. Electrical equipment manufacturer Plug Power operates a $125M gigafactory making electrolyzers and other hydrogen tech in greater Rochester, New York. The company sells its products globally, and also has installed electrolyzers at its hydrogen plant in Georgia. It is planning to do the same at plants under development in New York, Tennessee, Texas and California.