Cummins Inc. Withdraws from Electrolyzer Business amid Uncertainty

Experts indicate that Cummins Inc.’s recent withdrawal from its electrolyzer business signifies an increasing amount of uncertainty in the U.S. regarding hydrogen technologies, which were previously regarded as essential for decarbonizing heavy industries and long-haul transportation.

On Thursday, the Columbus-based company announced its decision to cease all future commercial endeavors within its electrolyzer division. Officials cited a “continuing deterioration” in the U.S. green hydrogen market. This downturn followed recent reductions in government incentives that previously supported such initiatives.

The Role of Electrolyzers in Decarbonization

Electrolyzers are pivotal devices that leverage electricity to split water molecules into hydrogen and oxygen. The resultant hydrogen can fuel various energy-intensive sectors such as trucking, steel manufacturing, and maritime transport, where reliance solely on renewable resources like solar and wind remains insufficient.

Defining “green hydrogen,” the U.S. Department of Energy states that it is produced by utilizing renewable electricity to dissociate hydrogen atoms from oxygen atoms in water. However, it’s noteworthy that the majority of hydrogen produced currently is not regarded as “green”; rather, it is extracted from natural gas, a process that emits carbon dioxide. In contrast to fossil fuels, the combustion of hydrogen results solely in water vapor as a byproduct.

Changes in Policy Affecting Demand for Green Hydrogen

“Frankly, the policy shifts regarding green hydrogen have dramatically reduced demand,” stated Cummins Chair and CEO Jennifer Rumsey during an analyst call on Thursday. “This has prompted us to reassess our role in this market. While we are committed to honoring existing customer obligations, we have accordingly decided to halt all future commercial endeavors. Although some elements within the current commitments may take time to unfold, we have substantially decreased our involvement in hydrogen initiatives.”

Despite stepping back from electrolyzer production, Rumsey assured stakeholders: “We remain dedicated to our multi-solution approach, carefully pacing our investments as the landscape for zero-emissions technology evolves.”

This announcement represents a significant pivot for Cummins, a company that has heavily invested in and promoted its electrolyzer division and other hydrogen technologies in previous years.

A Shift from Optimism to Reassessment

Back in 2020, the company organized a “Hydrogen Day” event during which executive projections indicated a bright future for hydrogen technologies, especially electrolyzers. Former Chairman and CEO Tom Linebarger had estimated that by 2025, the electrolyzer segment could generate approximately $400 million in annual revenue.

In fact, just under three years ago, former President Joe Biden celebrated Cummins’ electrolyzer innovations during a visit to the company’s facility in Minnesota. He expressed confidence that, thanks to the Inflation Reduction Act, Cummins would manufacture electrolyzers domestically for the first time, effectively shifting production back to America.

The Impact of Political Change on Green Technologies

However, the landscape for green hydrogen has dimmed significantly due to policy shifts initiated during the Trump administration. Trump’s derogatory characterization of low-emissions technologies, labeling them a “green scam,” contrasted sharply with his strong support for fossil fuels, encapsulated by his catchy phrase, “Drill, baby, drill.”

This administration also enacted substantial funding cuts for clean energy initiatives, including billions directed to green hydrogen projects.

Recently, the Energy Department revealed that it is looking into reviewing or even canceling over $83 billion in loans previously allocated for clean energy technologies under the Biden administration. Furthermore, Trump’s signature legislative initiative, dubbed the “big, beautiful bill,” also reduced the tax incentives tied to green hydrogen endeavors.

A Cautious Outlook for Hydrogen Technologies

“The rhetoric ‘Drill, baby, drill’ is not suggesting that green hydrogen is on the horizon,” remarked Steven Mohler, Assistant Professor of Management at IU Columbus. He added, “The current administration is retreating from environmental priorities. The electrolyzer business, by design, was centered around addressing environmental issues and transitioning away from fossil fuels. As interest wanes in these environmental concerns, it raises valid doubts about the viability of this segment for Cummins.”

Experts assert that technologies related to green hydrogen, including electrolyzers, remain in their nascent stages, particularly when compared to wind and solar power, which have already achieved broad implementation. The retreat by Cummins doesn’t necessarily reflect technological limitations but rather the absence of robust policy backing, according to Gabriel Filippelli, Professor of Earth Sciences and Executive Director at the Indiana University Environmental Resilience Institute.

The Call for Infrastructure Development

Filippelli noted, “Cummins’ step back from electrolyzers is purely a consequence of the prior administration’s lack of support, which is regrettable. We possess effective solutions to many pressing issues, yet the administration seems preoccupied with outdated perceptions rather than forward-thinking solutions, leaving us stuck in a bygone era.”

He elaborated on the complexities associated with hydrogen technology, noting, “Unlike wind and solar, which can easily be installed in many locations, hydrogen demands a comprehensive infrastructure for extraction, transport, and conversion into usable systems.” This intricacy underscores why hydrogen technology is appealing to firms like Cummins: hydrogen is a high-density fuel source that can be utilized continually, irrespective of weather conditions.

Challenges of Infrastructure Investment

Company officials have pointed out in the past that the lack of supporting infrastructure presents a significant dilemma—a classic “chicken-and-egg problem.” Without necessary infrastructure, the adoption of hydrogen technologies remains stagnant, and conversely, inadequate demand results in insufficient investment in the required infrastructure. It’s noted that federal intervention could play a pivotal role in catalyzing this cycle through incentives for initial investments.

“One must ponder where the impetus for advancing hydrogen technology will come from,” Mohler reflected. “Physics dictates that objects remain in equilibrium until acted upon by an external force, and that encapsulates the current state of hydrogen technology.”

He further emphasized, “There needs to be a significant catalyst to drive progress. Personally, I do not foresee this shifting in the upcoming three years, and the timeline for substantial advancements remains uncertain. The potential for a breakthrough may need to coincide with an acknowledgment of the imminent ecological crises we face.”

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