State of the Hydrogen Industry

Green hydrogen in Europe, produced by electrolysis of water powered by renewable electricity, is already competitive with hydrogen produced from fossil fuels in the current natural gas market environment, leading companies in the sector said.

Tight gas supplies have sent European prices soaring in recent weeks, feeding into the costs of producing hydrogen by steam methane reforming, so-called grey hydrogen.

Norway’s Aker Clean Hydrogen said in a results statement Oct. 22 that the cost of hydrogen production from its projects under development in Norway were now competitive with grey hydrogen production.

“We have made further progress to make hydrogen affordable,” Aker Clean Hydrogen CEO Knut Nyborg said in a statement.

“Some of our Norwegian projects under development show hydrogen cost levels of $3.5-$4.5/kg,” Nyborg said.

“In the current market environment, with very high gas prices, this matches the cost levels for grey hydrogen.”

S&P Global Platts assessed the cost of producing hydrogen from unabated fossil fuels at Eur4.93/kg ($5.74/kg) Oct. 21, including capex and carbon.

CEO of electrolyzer producer ITM Power Graham Cooley told S&P Global Platts that power purchase agreements locking in lower prices for renewable electricity were making renewable hydrogen production cost-competitive with fossil fuel-derived production.

“The cost of green hydrogen is now lower than the cost of grey hydrogen in most places around the world, because of the increase in the cost of natural gas,” Cooley said in an interview Oct. 21. “If you link an electrolyzer to a PPA with a wind farm, [the power price] doesn’t fluctuate at all, for the whole of the duration of the PPA.”

Conventional hydrogen producers are unlikely to be directly exposed to the sharp rise in natural gas prices, though any sustained rise in prices will be passed through in the longer term.

Speaking ahead of a planned January hydrogen auction, Portuguese Environment Minister Joao Pedro Matos Fernandes said current gas prices made renewable hydrogen theoretically cheaper, meaning green hydrogen projects would not necessarily need financial support. The comments came in an Oct. 21 interview with Portuguese publication ECO.

Project pipeline

Aker Clean Hydrogen, an integrated clean hydrogen producer that develops, builds, owns and operates facilities, has a project and prospect portfolio of over 1.8 GW of capacity, with projects and prospects in Norway, Chile and Uruguay.

It is targeting 5 GW of installed clean hydrogen capacity by 2030, reducing CO2 emissions by 9.4 million mt/year.

In the third quarter, the company secured a long-term power agreement for its 40-MW Rjukan project in Norway. It expects to take a final investment decision in the second half of 2022, and is in discussions with potential customers for offtake agreements.

It also signed a memorandum of understanding with TuNur to establish a commercially viable clean hydrogen and ammonia value chain in Tunisia, and is exploring ammonia opportunities for offshore supply vessels with Aker BP.

Aker Clean Hydrogen is partnering with Yara and Statkraft to develop a 480-MW green ammonia facility at Yara’s fertilizer plant in Heroya, Norway, with a final investment decision expected in early 2024.

The company said the project would remove around 800,000 mt/year of CO2, and help establish decarbonized value chains in shipping and agriculture.

Norwegian electrolyzer manufacturer Nel has more than doubled its pipeline of potential orders since January to over $6 billion, representing over 11 GW of renewable hydrogen production capacity, the company said in a third quarter results presentation Oct. 21.

Nel CEO Jon Andres Lokke said the single largest potential order was for a 1.6 GW project. The largest electrolyzer currently operating in Europe is just 10 MW, though scale is expected to build rapidly, with announcements of projects of over 100 MW.

“We remain confident in the long-term potential of the green hydrogen industry and reiterate the strong growth outlook,” Lokke said in a statement.

The company is backing the anticipated growth in electrolyzer demand with its new 500 MW/year factory in Heroya, Norway.

“With the new production facility at Heroya up and running, we remain confident that Nel is well suited to capitalize on the opportunities, he added.

Company revenues rose by 55% on the year to NOK229.3 million ($27.5 million) in the third quarter, but the company continued to post losses overall as it invests in ramping up production and one-off expenditure.

The order pipeline constitutes around 800 projects, with 60% of potential revenue from the 20 largest ones, Lokke said.

Existing projects

Nel aims to start a 20-MW electrolyzer in Spain by the end of the year, which will produce hydrogen for ammonia production in partnership with power company Iberdrola and fertilizer company Fertiberia.

Nel also produces hydrogen fueling stations, and Lokke noted particular interest from taxi fleet operators and truck refueling operations, where refueling times were comparable to filling a diesel truck.

The company produces proton exchange membrane electrolyzers from a plant in the US, and Lokke said the hydrogen outlook there was also positive.

The US was “closing the gap with their ambitions to the Europeans,” Lokke added.

He noted interest in the US to couple Nel’s electrolyzer technology with nuclear power generation, to provide an outlet for steady power production at times of low demand.

Lokke also said the potential for hydrogen to link with offshore wind was a key area of focus for the company.

Nel is involved in three offshore wind projects: ERM Dolphyn, a renewable hydrogen from floating offshore wind project; Deep Purple, which combines the same approach with subsea storage; and PosHYdon, which plans to blend hydrogen with natural gas to pipe to shore.

Production expansion

The Heroya alkaline electrolyzer plant is ramping up production to 500 MW/year, and has the potential to expand to 2 GW/year.

Lokke said the company could add production capacity “relatively quickly,” starting another line within 12 months, but said that Nel wanted to run the first line for some time in order to capture any learning and efficiency gains from the process before expanding.

He also said the company would look to monitor where demand was developing before responding with increased production, to potentially locate future additional production elsewhere.

Nel was also looking at introducing PEM electrolyzer production in Europe. Its production of the technology is currently based in the US.

Cost reductions

The recent spikes in power and gas prices did not concern Lokke. He said the cost of installing renewable power production, not the price of electricity, was the key factor in driving down renewable hydrogen production costs, and noted these continued to fall rapidly.

The company is targeting $1.5/kg hydrogen production costs by 2025 for its customers, based on electricity at $20/MWh.

S&P Global Platts assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur12.38/kg ($14.40/kg) Oct. 20 (Netherlands, including capex), based on month-ahead power prices. PEM electrolysis production was assessed at Eur14.76/kg, while blue hydrogen production by steam methane reforming (including carbon, CCS and capex) was Eur6.10/kg.

Chief Financial Officer Kjell Christian Bjornsen noted that steel and iridium costs had risen, but said the company generally matched customer commitments with its sourcing of materials, limiting the impact of price rises.

The United Nations Climate Change Conference in Glasgow at the start of November was an opportunity to focus minds on the potential for hydrogen to help decarbonize the global economy, Lokke said, but did not expect specific targets or commitments on hydrogen to emerge from the meeting.

That, he added, would be left to individual countries and regions such as the EU.