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7 September 2022

Decentralization key to hydrogen development, says Fusion Fuel

Fusion Fuel, an Irish-Portuguese electrolyzer designer, has obtained a €10 million grant from the Portuguese government to develop a 6.6 MW green hydrogen project in Sines, Portugal. While small, the project could mark the start of a new push towards decentralization in the hydrogen sector, as much of the industry continues to ponder over how to skirt around excessive distribution costs.

The project, called HEVO-Industria, will take the Final Investment Decision in the first half of 2023, requiring an additional €15 million to be completed.

The HEVO-Industria project consists of 300 HEVO-Solar Units along with a hydrogen refuelling station and associated balance of plant to support local industries. Fusion Fuel states that the electrolysis capacity of a single HEVO Solar generator is only 25kW, but each unit can provide 1 ton of green hydrogen per annum using only solar power.

An estimated 764 tons of green hydrogen will be generated at the plant every year, used for mobility and industrial applications in Sines or blended in the natural gas grid.

The importance of the operation is not based on its scale but rather on its fundamental proprietary design which consists of two integrated sub-systems that will allow customers to produce on-site green hydrogen. The systems include a miniaturized Proton Exchange Membrane (PEM) electrolyzer and a Concentrated Photovoltaic Cell (CPV).

The working principle is straight forward enough. The sunlight is being first concentrated and absorbed by the photovoltaic cell only to be converted into electricity that runs the PEM electrolyzer. Just add water and the result is decentralized green hydrogen.

Why is that important? The hydrogen industry is expected to grow rapidly with nearly 40 GW worth of electrolyzers set to be installed in the next 5 years alone, most of which will be coming from a few early integrated hydrogen hubs. This means that transportation of hydrogen, an already troublesome layer of the hydrogen dilemma, will become even more of a problem.

This is where Fusion Fuel sweeps in. The company claims that being able to provide customers with an integrated system that produces and uses its own renewable energy in order to output green hydrogen in a decentralized location will cut the LCOH (levelized cost of hydrogen) by $1 to $2 per kilogram because of the avoidance of transportation costs.

The question on our minds is then how can Fusion Fuel make the business case work given the added cost of the CPV system? On this note, Co-head, Zach Steele, argues that the company will have a technology ready to produce green hydrogen at a low $3 per kilogram as soon as next year. When combined with the customer not having to pay for transportation, because the hydrogen they use was made in their back garden, the added cost of the CPV system won’t represent a hindering point.

Another benefit of this design is the heat generated as a by-product of the CPV. Electrolyzers run more efficiently when the water used as a feedstock is pre-heated. There are also no losses due to transmission of electricity since the CPV sits next to the PEM electrolyzer.

Of course, the geographical limitations of an electrolyzer that uses a solar cell to produce its electricity can’t be omitted. Currently, Fusion Fuel is focused on exploring opportunities around the Mediterranean Sea and Australia, regions rich in solar irradiation.

On the electrolyzer front, the company is exploring a partnership with Toshiba to develop membranes for PEM electrolyzers. Head of investor relations, Ben Schwarz, said that between 15% and 18% of the CAPEX of the HEVO technology is represented by the membrane electrode assembly and thus the company is looking to reduce that. As a long-term prospect, Fusion Fuel and Toshiba have also discussed collaborating on a Solid Oxide electrolyzer design, which will pair well with distributed industrial facilities.

Fusion Fuel is aiming for the small to medium scale market of green hydrogen production by both selling its PEM CPV technology and providing green hydrogen itself. With a fully automated PEM electrolyzer manufacturing facility in Southern Portugal on the horizon, the company seems unfazed by the prospect of electrolyzer Gigafactories approaching and is confident in its market position.

The concept of decentralized green hydrogen production is one that at least seems to make sense for a lot of businesses and industries in the near future until the demand for hydrogen will increase. And even in the long term, if the company can maintain a competitive LCOH, the reduced transportation costs of its technology can prove pivotal for many customers.