Green Hydrogen Demand Spurs Push to Build Electrolyzers

Clean-energy technology suppliers are positioning themselves to meet an expected surge in global demand for electrolyzers, as policy incentives and an increasing urgency to decarbonize industries fuel potentially rapid development of “green” hydrogen projects worldwide.

The list of planned electrolyzer “gigafactories” — those capable of producing at least a gigawatt (GW) of electrolyzer stacks annually — continues to grow. Global capacity has more than doubled since 2021 to around 8 GW per year and could expand to over 60 GW/yr by 2030, according to the International Energy Agency (IEA). About 80% of the world’s electrolyzers are built in Europe and China. Big names in the space like Cummins, ITM Power and Plug Power are already operating electrolyzer gigafactories, with plenty more in the pipeline.

This comes even as current electrolyzer manufacturing capacity is more than sufficient to meet demand today, according to the IEA. But manufacturers across the board say they are preparing for an onslaught of electrolyzer orders in the months and years to come and want to be ready to quickly meet that demand when it arrives, even at the risk of overbuilding. Plug CEO Andy Marsh said he is already seeing a rise in electrolyzer demand after the US’ Inflation Reduction Act (IRA) was signed into law last August. Of Plug’s nearly three-dozen orders for its five-megawatt electrolyzer system due for delivery in 2023, about half were placed in the last two months of the year. “I think you're beginning to see some of the power of the IRA,” he told analysts last week. “Our goal there is how to fabricate faster.”

Lowering Costs

Electrolyzers make up the largest portion of capital expenditure costs for projects that use clean power and electrolysis to produce hydrogen. Manufacturing costs differ based on the specific electrolyzer technology, but mass production enabled by building more gigafactories, for example, could help lower costs more quickly.

Energy Intelligence Research and Advisory (R&A) estimates that average electrolyzer costs will fall to around $585 per kilowatt (kW) by 2050, from just under $1,250/kW in 2020. That would cut green hydrogen costs to less than $2 per kilogram. However, the pace at which electrolyzer costs fall is a “key unknown,” R&A says, with an assumption that costs could drop to $600/kW by 2030 in a “fast” scenario.

Lowering the cost of green hydrogen and expanding electrolyzer-production capacity will be critical if the carbon-free fuel is to have a meaningful impact on global emissions. The IEA says that while the announced manufacturing capacity of electrolyzers could be enough to meet some current national decarbonization strategies, it is “insufficient” to meet the electrolysis capacity in the agency’s Net Zero Scenario, which would require more than 700 GW of installed electrolyzer capacity by 2030 — almost three times as much as the high end of what's been announced to date.

Alkaline vs. PEM

Most electrolyzers on the market today are based on either traditional alkaline technology or newer proton exchange membrane (PEM) technology. Alkaline units comprise almost two thirds of the electrolyzer market today while PEM stacks make up about a fifth, according to the IEA. Other more advanced technologies such as solid oxide electrolyzer cell are emerging but are not yet at the same readiness level as alkaline or PEM.

Alkaline electrolyzers have been in use for many decades, primarily in the chlor-alkali industry until relatively recently. PEM costs more than alkaline, largely due to its reliance on expensive metals like platinum and iridium. But PEM proponents have managed to drive down costs in recent years to make the technology more competitive.

Beyond cost, the two technologies have some other key differences. Alkaline-based hydrogen plants are generally larger than PEM-based facilities, so the physical footprint to produce hydrogen is bigger. PEM is typically more efficient than alkaline, but also does not last as long, with a lifetime of around 40,000 hours versus 90,000 hours for alkaline, according to consultancy Thunder Said Energy. Importantly, alkaline units work best when they have a constant supply of clean energy like nuclear or hydropower. That makes PEM technology better suited for more intermittent supplies from things like wind and solar power.

Diverging Views

A diverging view of these technologies appears to have contributed to the end of at least one partnership aimed at increasing global electrolyzer supply. US-based Plug and Australia’s Fortescue Future Industries (FFI) recently ended a joint venture announced in 2021 in which the companies planned to build a gigafactory in Queensland together.

Plug said the plant’s economics were not good enough and that it thinks it can build electrolyzers more efficiently on its own. But FFI CEO Mark Hutchinson said technology was at the root of the partnership's end. Plug is focused exclusively on PEM technology, while FFI is developing both alkaline and PEM solutions. “The feeling really was that we were advanced on our own [in-house] technology. The [intellectual property] was ours, we can do it at scale,” Hutchinson said, adding that he expects demand for electrolyzers "to be huge.” He said the gigafactory in Queensland will still go ahead as planned. “Nothing changes,” he said.

For its part, Plug is still focused on partnerships, particularly within the supply chain, to help drive down electrolyzer costs and smooth out production bottlenecks. This week Plug announced a long-term strategic partnership with technology firm Johnson Matthey covering the supply of components for electrolyzers and fuel cells like catalysts, membranes and catalyst-coated membranes (CCM). The two plan to jointly build what could be the largest CCM manufacturing facility in the world in the US, with startup due in 2025.