© HydrogenPro
© HydrogenPro

Electrolyser manufacturing capacity could be 2x greater than demand in 2030: report

Electrolyser manufacturing capacity could be around two times greater than demand in 2030, according to a new report by Clean Energy Associates (CEA).

The report forecasts global manufacturing capacity to reach 54GW by 2027, with China expect to continue to account for “almost half.” But as capacity grows, CEA has said the actual usable capacity is expected to be “less than the nameplate capacity.”

To determine its demand estimates, CEA applied capacity factors of 40% and 65% to the International Energy (IEA) STEP green hydrogen demand scenario. In both scenarios, CEA said, “there is a gap between nameplate capacity and the annual demand.”

Furthermore, CEA said only the “most mature” technologies have credible expansion plans, saying alkaline electrolysers lead capacity volume due to low costs.

It said, “Alkaline electrolyser will remain the most produced technology in the next ten years due to their cost advantage and potential efficiency improvements.”

H2 View’s own analysis of the IEA’s 2021 Hydrogen Projects Database revealed of the 123 electrolytic hydrogen production projects at final investment decision (FID), 31 were PEM and 21 were alkaline – with average output of 2,000 tonnes/year and 3,000 tonnes/year – representing 54,000 tonnes of PEM-produced hydrogen and 73,000 tonnes of alkaline-produced hydrogen.

Read more: Meeting scale: PEM and alkaline leading the electrolyser charge

Due to the complete supply chain and low costs, CEA’s report said China currently holds around 61% of capacity and will continue to account for about half by 2025 and 2027.

Previously writing for H2 View, Hack Heyward, said despite Chinese capacity expansion announcements, they “may not be as impressive in reality,” with capacity not translating to actual production.”

Read more: Electrolysers in China and global hydrogen markets

Heyward said, according to China National Technology Hydrogen Equipment (CNTHE), bigger factories do not necessarily mean higher outputs, with the potential for more shifts in the same factory boosting production.

The CEA report said electrolyser demand remains uncertain, with factors such as policy implementation, downstream industry developments, low-cost renewable availability and operation of existing products, affecting outcome.

But the report has predicted with support from the US’ Inflation Reduction Act (IRA), North American capacity will start to grow rapidly from 2023.

However, as H2 View wrote earlier this week, numerous electrolyser manufacturers have suggested, if the proposed stringent IRA 45V Production Tax Credit (PTC) rules are adopted, many capacity expansions could be halted.

Read more: US Treasury reveals three pillar requirements for IRA clean hydrogen tax credit

As Norway’s Nel plans major electrolyser factory expansions in Connecticut and Michigan, H2 View was told by Christopher Van Name, Director Corporate Marketing, “If 45V kills a lot of electrolyser projects, demand is going to drop, and the plant will be built later. On the other hand, the electrolyser projects stay in force.”

Analysis: Are we really on the brink of electrolyser oversupply?

© McPhy EnergieDienst

It seems incredible that in the space of two years discussions have moved from rapidly scaling electrolyser manufacturing to the potential oversupply of the hydrogen production equipment.

We’ve come a long way from the European calls in May 2022 to “remove all obstacles,” as EU electrolyser manufacturers and the Commission committed to increase annual manufacturing capacity to 17.GW by 2025.

In recent months, however, more alarm bells have started ringing to suggest the global electrolyser market could be oversaturated by 2025.

Research house BloombergNEF (BNEF) and Citigroup has reported that 71GW of electrolyser manufacturing capacity is scheduled to be online globally by the end of 2024. However, the research said demand is only projected to reach 10GW in 20251 – a potential oversupply of 61GW.

Growing manufacturing capacity has also been highlighted by the IEA’s Energy System Tracker, which said in 2022, capacity increased by more than 25% from the previous year – reaching nearly 11GW per year in 20222.

But, amid the wide ranging manufacturing expansion announcements, the subject appears more complex than adding up nameplate capacity numbers…

Click here to keep reading.

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