Danish manufacturer Topsoe has paused work on its $400 million electrolyzer factory in Richmond, Virginia, citing the poor demand for green hydrogen due to the early sunsetting of a federal tax credit that promised to jumpstart this sector.
Topsoe, which last year received $135 million in advanced manufacturing tax credits, has “paused” its work on the Virginia plant ahead of reaching a final investment decision, spokesperson Gabe Martinez confirmed; the company is evaluating market conditions, such as demand and supply chain constraints before deciding if and when to move forward.
“Looking ahead, increased demand will be critical as the hydrogen industry matures,” Martinez told Latitude Media. “Unlocking that demand will require strong policy support, infrastructure investments, and continued cost reductions as production scales.”
The firm’s decision echoes a move made earlier this year by the Norwegian Nel Hydrogen to cancel its planned electrolyzer factory in Michigan. Together, they underscore the risk a nascent cleantech sector faces when priorities change under a new administration.
Martin Tengler, head of BloombergNEF’s hydrogen research, told Latitude Media that he is “not surprised” by Topsoe’s pull-back: “If there is no demand for green hydrogen, then there’s no demand for electrolyzers, the machines used to produce green hydrogen.”
When President Biden signed the Inflation Reduction Act in 2022, Tengler said, “everyone was super excited that the U.S. will have massive amounts of green hydrogen with this super generous tax credit, but then nothing happened.”
This is largely due to the Biden administration’s long delay in issuing the final 45V guidance, leaving it until just before leaving office. The months that the industry spent without clarity about what projects would be considered “green” and therefore eligible for the tax credits left many companies in limbo. And though the hydrogen sector mounted a largely successful lobbying effort this summer and ultimately came out ahead of wind and solar in the GOP’s “One Big Beautiful Bill Act,” the credit’s two-year sunset has nonetheless compromised the U.S.’ appeal as a place to do business.
Hydrogen made with renewable-powered electrolyzers was dependent on the tax credit for making economics work. Now, the U.S. market is primed for cheaper blue hydrogen made with natural gas equipped with carbon capture and storage, which retained tax credits under OBBB.
Last year, BNEF reported a 94% plunge in green hydrogen investments, while spending on electrolyzer deployment tanked by orders of magnitude.
The shift across the pond
Topsoe, operating in the U.S. since 1940, announced plans in 2023 to build the country’s first and largest solid oxide electrolyzer factory in Richmond, Virginia, a move welcomed by Republican Governor Glenn Youngkin and Democratic Senators Mark Warner and Tim Kaine. The company was one of a half dozen to announce U.S. electrolyzer factories, banking on the $3 per kilogram tax credit to spur demand, as Latitude Media reported.
Now Topsoe is shifting its focus to Europe, where it will launch a 500 MW factory in Denmark on October 30. Its first customer, Texas-based First Ammonia has already signed an agreement for a 5 MW electrolyzer. Martinez emphasized that the company is “optimistic about the market” despite the global slowdown at present.
It is unclear if and when Topsoe will secure a final investment decision for its Richmond factory. For now, it has paused work on site design, supplier arrangements and financing. The firm says it welcomes the extension of the clean hydrogen tax credit to 2027, “which is one of several important signals supporting the growth of clean hydrogen in the United States” — but notes that’s not the only factor driving their decision.
“Our decision to pause pre-Final Investment Decision activities in Virginia reflects broader global market conditions — including the pace of global demand development, tightening financial conditions, and supply chain complexity — not a single policy outcome,” Topsoe said.
It’s not just European companies reconsidering their U.S. plans. With an absence of green hydrogen demand and a glut of electrolyzers, U.S.-based manufacturers are also eyeing exports, mainly to Europe and the Middle East and to a lesser extent to Asia Pacific, said Tengler. “It is such a difficult environment for electrolyzer manufacturers everywhere, but especially now in the United States.”
That is certainly true of the 10 currently operating factories in the U.S. and three still under construction today tracked by the Clean Investment Monitor, a joint project of the Rhodium Group and MIT CEEPR. New York-based Plug Power, which runs three of those factories, exported most of its electrolyzers to Europe last year, according to Tengler.
The California-based EvoloH, unlike Topsoe, is forging ahead with a single production line of half a gigawatt of electrolyzers in 2028 at its Center of Excellence in Lowell, Massachusetts, northeast of Boston. EvoloH has a few domestic clients, but it also is scouting for clients in Europe and Asia — but is excluding China, which already is mass-producing its own alkaline electrolyzers.
“The absence of a clean hydrogen tax credit has cast a cloud over U.S. demand for green hydrogen, but fortunately our business model was not based on government subsidies,” Scott Blanchet, EvoloH chief operating officer, told Latitude.
