Manufacturers across the world could be producing more than 100 GW of electrolyzers per year, according to an upcoming research paper from Rethink Energy. A flurry of announcements over the past three years has seen the factory pipeline swell to levels that put the industry on track to satisfy demand over the next five years. Maintaining this momentum will be crucial for the surge in green hydrogen to follow thereafter.
In 2020, the production capacity for electrolyzers sat at just 2 GW globally, sitting substantially higher than the world’s total installed capacity of 300 MW. This was at a time when the conversation around hydrogen was dominated by doubt. Echoes of the Hindenburg disaster, and greenwashing attempts to push ‘blue hydrogen’ as the solution for hard-to-decarbonize industry clouded the industry’s potential in uncertainty.
But now, things have changed. Hydrogen has been identified as a key technology for the decarbonization of heavy-duty transport, heating, industry, feedstocks, and long-duration energy storage. Rethink Energy’s latest report anticipates that by 2050, global hydrogen demand will have grown ten-fold to 735 million tons, with almost all of this being produced using electrolysis.
The boom has already started, with nearly 40 GW of electrolyzers set to be installed in the next 5 years alone.
A herculean effort will be required to build enough factories to support such a build out – but the market leaders are ready. As are a handful of new-entry innovators.
ITM Power completed the world’s first electrolyzer Gigafactory in January 2021 in the UK, and announcements have snowballed since. Over the past two years, western electrolyzer manufacturers have committed to building factories that can produce over 42 GW of electrolyzers per year by 2030. Locations have already been secured for nearly two-thirds of this.
Such factories only take around two-years to build, and at the current rate of these announcements, Rethink Energy predicts that developments will keep pace with electrolyzer demand over the next 10 years. New plants, with a combined capacity of around 12 GW per year, will have to be announced and added every year between 2026 and 2032, giving electrolyzer manufacturers several years of runway in their pipeline factories. In total, around $6 billion will have to be invested in the construction of these new factories.
Fourteen different manufacturers now have plans for an electrolyzer Gigafactory, across twelve different countries. There will be space for different chemistries – PEM, AEM, and SOE to name a few – as the specific requirements for electrolysis plants varies from site-to-site.
Such gigafactories will be crucial in reaching the much-needed economies of scale for green hydrogen. By 2024, several OEMs will be providing systems than can produce green hydrogen at a lower cost than ‘grey’ hydrogen, produced using natural gas.
The ability to produce small-scale, modular electrolysis cells, at scale, will make hydrogen accessible for swathes of industries that need it to decarbonize. Just as solar modules have in power generation, and batteries have in the EV space, electrolyzers will outperform expectations.
In the four years after Tesla brought online the world’s first Gigafactory for batteries, the cost of lithium-ion batteries has fallen by more than 35%, providing a driving force behind Tesla’s market lead and stock price. Such approaches, (in contrast to project-based tech, which seldom moves the needle), are the key element in the global fight against climate change.
If electrolyzer manufacturers can match the learning rate of the solar sector, units will fall in cost by 23% every time the installed capacity doubles from the current total of just 300 MW. This optimistic scenario for expansion would see the cost of electrolyzers fall by more than 95%, with global electrolysis capacity topping 250 GW by the end of the decade.
Rethink Energy predicts that even without any sudden disruptions in technology – of which several are almost certain – the learning rate for electrolyzer units will be approximately 14%. This will see the capital cost of electrolyzer units will fall from around $1,400 per kW to $340 per kW by 2030, as global capacity rises to nearly 100 GW.
Incremental improvements in efficiency and capacity factor will also see a reduced demand for electricity, which itself will be falling in price. With similar economies of scale, the cost of solar power in particular will fall below $20 per MWh by the end of the decade, accounting for 37% of the overall cost reduction of green hydrogen. By 2030, the global average cost of green hydrogen will have fallen to $1.50 per kilogram.