Investors have historically been skeptical of green hydrogen. High production costs, expensive infrastructure builds, competition with batteries and minimal government support have made the green hydrogen sector a risky bet. But at least one company, Electric Hydrogen, seems to have found a way to convince investors that its tech is a bet they should take.

Electric Hydrogen (EH2), a Massachusetts-based green hydrogen technology company, has just become green hydrogen’s first unicorn, with a $380 million Series C raise that brought its valuation up to $1 billion. That round also brought EH2’s total funding to roughly $600 million, per Crunchbase data. The startup is backed by heavy hitters like Microsoft’s Climate Innovation Fund, United Airlines, BP and Fortescue Metals.

The funds will be used to expand production capacity of its electrolyzers, according to a spokesperson for the company. Electrolyzers are devices that use a process called electrolysis to split water (H₂O) into its constituent elements, hydrogen (H₂) and oxygen (O₂). They are expensive and consume tons of renewable energy to make a small amount of hydrogen.

EH2 says it has figured out a way to produce more hydrogen at a cheaper price.

Part of that apparent success is the company’s technology. EH2’s engineers designed and built all critical electrolyzer components in-house in the company’s Massachusetts lab. They increased performance to decrease costs, a move that came from Raffi Garabedian, EH2’s CEO and former chief technology officer at First Solar. Garabedian’s co-founder, Dave Eaglesham, was also a previous First Solar CTO.

EH2 is also striking while the iron is hot. The startup is able to leverage its performance gains to get the most out of the incentives on offer with the Biden administration’s Inflation Reduction Act. EH2 says those offers will help to make green hydrogen that is actually competitive in today’s market and doesn’t use cheap natural gas to generate greenhouse-gas emissions. In parts of the country where renewables are cheap and tax credits outpace production costs, hydrogen could even be free to buyers.

Much of the transportation world is embracing the battery-fueled revolution. But for big vehicles like trucks and planes, as well as industrial sites like steel mills, fertilizer factories and chemical plants, batteries aren’t the right fit. Green hydrogen is increasingly being seen as the solution to moving green power over long distances.

EH2 is rapidly working to build out its electrolyzer factory in Massachusetts for launch in 2024. The startup plans to deliver and commission 100 megawatt electrolyzer systems, each capable of producing nearly 50 tons of green hydrogen per day at a low cost, according to the company.

By 2030, EH2 hopes to allow customers to produce hydrogen in states with plenty of renewable energy, like Texas, for about $1.50 per kilogram, which is about how much it costs when it’s made from natural gas.

Electric Hydrogen seems to be on a roll. Last month, the company was selected to equip New Fortress Energy’s green hydrogen plant in Texas. NFE is expecting first hydrogen production in Q4 2024, with full commercial operation in 2025.