AES, Air Products investing $4B for Texas green hydrogen plant

Air Products and AES are investing $4 billion to build and run a green hydrogen plant in Texas, the companies announced this morning.

Why it matters: The Texas-sized investment will make the planned plant the largest green hydrogen producer in the U.S., according to the release.

What's happening: The plant, in Wilbarger County in northern Texas, will use electrolyzers to produce about 200 metric tons of hydrogen per day, or about 73,000 metric tons per year.

Details: Air Products and AES will jointly own the renewable energy and electrolyzer assets.

• Air Products will be the exclusive off-taker under a 30-year take-or-pay contract.  

The intrigue: The plant is relying entirely on renewables to power the electrolyzers that will produce the hydrogen: about 900 MW of wind and 500 MW of solar.

• The companies are putting a lot of faith in the energy sources' negative correlation: that wind tends to blow most consistently at night, and that solar, of course, only works during the day.
• On the occasions when there is a shortfall in power, the plant may simply halt operation. The companies are also considering installing a battery system, AES president and CEO Andrés Gluski tells Axios.

Driving the news: The mega-investment seems at least partly driven by hydrogen incentives in the Inflation Reduction Act signed by President Biden in August.

• Air Products expects to receive a credit of about $5 per kilogram, the company told the Wall Street Journal.

• Even with the incentive, the resulting hydrogen would still need to be sold at a premium — but not a prohibitive one.

Of note: The plant is not one of the eight "hydrogen hubs" being backed by the Department of Energy.

• It's being built on the site of a decommissioned coal-fired power plant.

Meanwhile: Air Products says it's the world's largest hydrogen producer, at about 3.5 million metric tons per year.

• It aims to produce low-carbon hydrogen from all its facilities by 2035.

What they're saying: "It puts Texas on the map as the leader in green hydrogen — which is interesting, because Texas is the leader in fossil energy and the leader in renewable energy in the country," Gluski tells Axios.