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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The European Union (EU) is looking forward to an explosion in demand for electrolysers to support the rapid growth of the green hydrogen sector but is facing a range of obstacles ranging from manufacturing capacity and project funding to supply of critical materials.
As it stands, the industry will not be able to produce enough electrolysers in Europe to meet demand, according to the latest state-of-play update from the European Clean Hydrogen Alliance (ECHA). The group, comprising the leading manufacturers, civil groups and research groups, works with the European Commission (EC's) to track the sector's development, and last year the capacity of electrolyser manufacturing in Europe was estimated at 2.5 gigawatts (GW). Today in Europe there is approximately 3.1 GW of production, and this is expected to grow rapidly to 21 GW by 2025 over the next two years. This will still fall short of the EC's target of 25 GW of capacity by 2025. Europe has a stated target to produce 10 million tonnes of the renewable fuel by 2030, and import 10 million more.
The three main barriers that today prevent an even faster upscaling, according to the ECHA, are:
The sector is also suffering uncertainty on the investment front, the ECHA noted. Despite EU approval on its renewable energy directive, it has yet to be transposed into national law in many Member States. Combined with unfinished certification schemes for renewable hydrogen and political debates over hydrogen infrastructure, final investment decisions between hydrogen producers and off-takers are being "postponed in most cases", which is reducing the visibility of demand for electrolyser manufacturers.
Major funding changes in the U.S. and China's improving economy and cheaper electrolyzer technology are adding greater pressure to the market. The introduction of the Inflation Reduction Act (IRA) by the U.S. last year--the most sweeping financial boost to the renewable energy sector to date--will help the country jumpstart its nascent clean hydrogen sector with massive incentives for projects and electrolyzer manufacturers. "The IRA presents both an opportunity for European electrolyzer manufacturers and a risk to the manufacturing objectives set in the Joint Declaration, should it divert investments to the U.S.," the ECHA stated. Norwegian manufacturer Nel Hydrogen (Oslo, Norway) has been one of the biggest players attracted by the incentives and is planning to build a 4-GW electrolyzer plant in Detroit, Michigan. The plant would have more capacity than all of Europe currently.
With regard to critical raw materials, the ECHA fears that the supply chain restrictions and goals to diversify will hinder expansion. "The objective of the Critical Raw Materials Act (CRM Act) is to ensure EU access to a secure and sustainable supply of critical raw materials. Platinum group metals (PGM) and all critical materials used in electrolysers are within the scope of this act, providing reassurance to industry that governments will dedicate efforts to building additional capacities and strengthening resilience measures. The 65% target for diversification of imports set per Strategic Raw Material will be however extremely challenging to meet for some of the metals used in hydrogen technologies, as PGMs in fuel cells and electrolysers are mostly sourced from one or few supplier countries. Large dependency from South Africa for those metals cannot be avoided (71% for Platinum and 93% for Iridium)."
It added that there are other critical materials in the electrolyser value chain that face high regulatory uncertainty, such as fluoropolymers that are widely used in electrolyzers core components (PEM membranes, AWE electrolysers), in auxiliary systems, storage tanks, pipes, gaskets, welding and more. "Any electrolyser manufacturing expansion needs to be mirrored by capacity expansion on the materials and components it relies on. However, fluoropolymers belong to the larger PFAS family of chemical substances (up to 10,000 different chemicals), whose prohibition is today being assessed by the European Chemicals Agency, following the request by four Member States and Norway. The current uncertainty about their continued use in Europe is freezing possible investment in capacity expansion for these advanced materials, which in turn could massively disrupt the ramp-up of electrolyser manufacturing capacity in Europe."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
As it stands, the industry will not be able to produce enough electrolysers in Europe to meet demand, according to the latest state-of-play update from the European Clean Hydrogen Alliance (ECHA). The group, comprising the leading manufacturers, civil groups and research groups, works with the European Commission (EC's) to track the sector's development, and last year the capacity of electrolyser manufacturing in Europe was estimated at 2.5 gigawatts (GW). Today in Europe there is approximately 3.1 GW of production, and this is expected to grow rapidly to 21 GW by 2025 over the next two years. This will still fall short of the EC's target of 25 GW of capacity by 2025. Europe has a stated target to produce 10 million tonnes of the renewable fuel by 2030, and import 10 million more.
The three main barriers that today prevent an even faster upscaling, according to the ECHA, are:
- Along with a strict definition of renewable hydrogen, gaps persist in the regulatory framework and the speed of implementation, which is holding back future hydrogen producers and off-takers from making firm commitments.
- Secondly, there is a huge gap between the deployment ambitions and allocated funds in Europe that are needed to attract private investment, uneven levels of financial support for green hydrogen between the main global markets, driving investor interest away from Europe.
- Thirdly, there are challenges related to building and scaling up integrated supply chains and the availability of components and critical raw materials at the required scale.
The sector is also suffering uncertainty on the investment front, the ECHA noted. Despite EU approval on its renewable energy directive, it has yet to be transposed into national law in many Member States. Combined with unfinished certification schemes for renewable hydrogen and political debates over hydrogen infrastructure, final investment decisions between hydrogen producers and off-takers are being "postponed in most cases", which is reducing the visibility of demand for electrolyser manufacturers.
Major funding changes in the U.S. and China's improving economy and cheaper electrolyzer technology are adding greater pressure to the market. The introduction of the Inflation Reduction Act (IRA) by the U.S. last year--the most sweeping financial boost to the renewable energy sector to date--will help the country jumpstart its nascent clean hydrogen sector with massive incentives for projects and electrolyzer manufacturers. "The IRA presents both an opportunity for European electrolyzer manufacturers and a risk to the manufacturing objectives set in the Joint Declaration, should it divert investments to the U.S.," the ECHA stated. Norwegian manufacturer Nel Hydrogen (Oslo, Norway) has been one of the biggest players attracted by the incentives and is planning to build a 4-GW electrolyzer plant in Detroit, Michigan. The plant would have more capacity than all of Europe currently.
With regard to critical raw materials, the ECHA fears that the supply chain restrictions and goals to diversify will hinder expansion. "The objective of the Critical Raw Materials Act (CRM Act) is to ensure EU access to a secure and sustainable supply of critical raw materials. Platinum group metals (PGM) and all critical materials used in electrolysers are within the scope of this act, providing reassurance to industry that governments will dedicate efforts to building additional capacities and strengthening resilience measures. The 65% target for diversification of imports set per Strategic Raw Material will be however extremely challenging to meet for some of the metals used in hydrogen technologies, as PGMs in fuel cells and electrolysers are mostly sourced from one or few supplier countries. Large dependency from South Africa for those metals cannot be avoided (71% for Platinum and 93% for Iridium)."
It added that there are other critical materials in the electrolyser value chain that face high regulatory uncertainty, such as fluoropolymers that are widely used in electrolyzers core components (PEM membranes, AWE electrolysers), in auxiliary systems, storage tanks, pipes, gaskets, welding and more. "Any electrolyser manufacturing expansion needs to be mirrored by capacity expansion on the materials and components it relies on. However, fluoropolymers belong to the larger PFAS family of chemical substances (up to 10,000 different chemicals), whose prohibition is today being assessed by the European Chemicals Agency, following the request by four Member States and Norway. The current uncertainty about their continued use in Europe is freezing possible investment in capacity expansion for these advanced materials, which in turn could massively disrupt the ramp-up of electrolyser manufacturing capacity in Europe."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
