Houston has a ton of potential to be a major hub for hydrogen — but who's to pick up the tab on the progress that is needed to advance the alternative energy source? A panel at a recent event sat down to talk it out.

The Hydrogen Technology Expo, a two-day conference at NRG Center last week, brought in dozens of companies and hundreds of attendees to Houston to discuss the most pressing topics of the energy transition. One panel — moderated by Brett Perlman, CEO of the Center for Houston's Future — looked specifically at the challenges for the hydrogen economy.

The biggest challenge: Money. Perlman starts the conversation asking panelists if Wall Street is showing up to back hydrogen projects.

"Everyone talks about investing in hydrogen, and very few people actually do it," says Sean Shafer, managing partner of Energy and Industrial Advisor Partners, "outside of the big strategics and some technology plays — electrolyzers, fuel cells, and stuff like that."

Timing is an issue, adds Brian Hodges, partner at Aurum Capital Connect. Hodges, who previously was at Bank of America, saw first hand the money that a bank was willing to put into clean energy and decarbonization. But, when presenting options to deploy this funding, Hodges hears a familiar refrain — it's too early, it's too small, the pieces aren't in place yet.

"There is a gigantic pool of capital out there — whether its traditional banks, financial institutions, sovereign wealth funds," he says. "Literally everyone and their dog is interested in the space. ... We're right on the cusp of this, but when you look at Europe, they're 10 years ahead of us."

And that decade of experience is what attracts more funding, Hodges says. And it's not just Europe when it comes to markets getting ahead. Texas can't compete with the likes of California, says Roxana Bekemohammadi, founder and executive director of US Hydrogen Alliance, especially when it comes to policy. The state has had legislation addressing zero-emission vehicles since 1989.

"California policies are unique beasts, and I like to explain this because it's really important when I talk to other state legislators," Bekemohammadi says, explaining that the state mandates action and has larger teams to put policy into place. "You're looking at such a mature industry, if you want to call it an industry, but it's really a policy institution."

The panelists agree on the obstacle of policy. Tanya Peacock, managing director of EcoEngineers, works directly with project developers looking for financing and investment funds and financiers looking for projects.

"Everybody is waiting for the guidance on the IRA 45V Production Tax Credit," she says. "I think that's really the game changer for the industry, but the uncertainty around how the credit is going to be implemented is what's holding back a lot of the investment at the moment."

Texas doesn't have state incentives, Shafer points out, but the work is easy to get done with the workforce in the region, so that's also a missed opportunity. Some other factors, he adds, include offtake and lack of debt providers. He says the demand hasn't been established yet to provide a good opportunity for offtake negotiations — it's a chicken and egg problem. Meanwhile, project finance tends to have a debt provider involved, but there aren't providers willing to underwrite debt hydrogen projects.

"One of the other big things is there seems to be a lack of middle capital to get smaller companies to get their projects more backed," Shafer continues his list. "People want to write the big checks. They don't want to write the small checks — and I think one of the reasons is they don't want to lose all their capital. There's no downside protection in this industry."

Perlman, who addressed the crowd in a presentation about Texas as a hydrogen hub earlier in the day, remains bullish on the city's future in the space. Last year, CHF and several other organizations worked together to create the plan for the HyVelocity Hub — and a pitch to receive U.S. Department of Energy Regional Clean Hydrogen Hub funding to make it a reality.

"What we want to do in Texas is jumpstart the market," Perlman says, adding that HyVelocity can help accomplish this goal. "This market can happen in Texas because we are the right place with the right resources. ... What we need to do as an industry is accelerate development."