Electrolyzer Prices

25/04/24, 09:05 Electrolyzer prices – what to expect – pv magazine USA
Electrolyzer prices – what to

expect
In addition to the cost of electricity, the price of hydrogen depends
largely on the up-front investment cost of the electrolyzer. The lower
the full-load hours, the greater the impact. Analyst BloombergNEF
(BNEF) sees a number of different possible pathways for the market to
develop.
MARCH 20, 2024 CORNELIA LICHNER
COST AND PRICES WORLD
Image: pv magazine USA
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From pv magazine print edition 3/24
All electrolyzers have a technology-specific stack at their center, in which

water is split into hydrogen and oxygen. This consists of carefully layered,
gas-tight, welded bipolar plates and plastic membranes – among the main
cost factors in every electrolysis plant. Xiaoting Wang, an analyst at
BloombergNEF, spoke to 20 companies worldwide as part of the
company’s “Electrolysis System Capex [capital expenditure] could drop
30% by 2025” study. This gave her an insight into the cost structure for 30
projects and made it possible to determine the price components for a 10
MW alkaline electrolysis plant in China in 2021, as an example.
The stack accounted for around 33% of the total costs, said Wang, with
40% of the costs coming from the other technical equipment, including
power electronics, gas and liquid separation, and gas purification (see
chart below). A further 27% of the costs were attributable to other project
expense, such as civil engineering, equipment installation, and housing.
Chinese alkaline
The BNEF report stated a 10 MW alkaline system often consists of two

stacks of 5 MW that deliver hydrogen at 16 bar. The manufacturer usually
offers a complete solution with all accessories and installation. Chinese
developers received such an offer in 2021 for as little as $303/kW – that is,
a total of around €3 million ($3.2 million). This did not include the grid-
connection fee, high-voltage transformers, or other “soft” costs such as
expenses for development, approvals and financing agreements.
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Wang said that the project costs in Western markets with domestically
produced electrolyzers are around four times as high. Investment costs
averaged €1,200/kW for alkaline electrolyzers and €1,400/kW for proton
exchange membrane (PEM) electrolyzers.
Cheaper offers, such as €180/kW, from Peric for an 80 MW plant in China;

or €521/kW, from Thyssenkrupp for a 2 GW plant in Saudi Arabia, do not
include all project costs and are, therefore, not comparable. They do
include electrolysis stacks, gas liquid separation and purification, and the
water supply. However, power electronics and control cabinets are
excluded.
Wang attributed this large price difference to low labor costs and the
established supply chains in China, where manufacturers of electrolyzers
can source materials and components at much lower prices than in the
West. Thus far, the production of most electrolyzers is not automated.
Chinese manufacturers were producing megawatt-scale electrolyzers for
other industries before there was demand from green hydrogen
producers, meaning they benefited from scaled production. Existing
customers included manufacturers of polysilicon for photovoltaic cells.
The Bloomberg analysis, from September 2022, claimed that Western

manufacturers could achieve similarly low costs. To do so, they would have
to utilize highly automated production. Wang said she anticipates
significant price reductions by as early as 2025 (see main chart above).
Prices for 2021 also still included adequate margins for engineering,
procurement, and construction (EPC) companies. Long-term development
shows that prices for electrolysis projects will converge worldwide from
2035.
Western investors tend to entrust an EPC company with the handling of an

entire project for a lump sum, and to rely on large, well-known companies.
Such companies usually have little experience in the construction of
electrolysis plants, however, so the safety premiums in the price of the
overall offer are high. With increasing experience and the entry of
specialized project planners, which leads to more competition, these
surcharges should decrease.
Prefabricated containers
Equipment suppliers are also endeavoring to offer products that reduce

the workload on the construction site, and thus cut costs. One trend that
supports this is the development of containerized systems. This means
that the various system components do not have to be assembled on site
but are instead prefabricated in a factory, tested, and delivered to the
intended location. This minimizes sources of error and reduces the
deployment time of specialist personnel on site.
In an update to its market analysis, Bloomberg reported on offers for such

container solutions for $1,000/kW. Industry insiders have even reported
offers as low as $700/kW, said Wang. One such container solution was
presented in a pv magazine Germany webinar in February 2023. The PEM
electrolyzer from German supplier H-Tec has an output of 1 MW and
produces 450 kg of hydrogen per day. Recordings of pv
magazine webinars are available at pv-magazine.com/webinars.
Those who want to reduce costs by purchasing an electrolyzer from China

need to consider that exported products are usually sold at a premium of
around 20% to 30%, compared to prices on the domestic market, said
BloombergNEF, meaning that development and project planning costs
would still be higher. It is important to consider that choosing a Chinese
brand to supply the core equipment could reduce a project’s chance of
receiving local subsidies and could affect financing.
The first green hydrogen projects were, and still are, mainly designed to
draw electricity from the grid, with the electrolyzers’ electricity
consumption balanced monthly or annually against the suppliers’
renewable electricity generation. In this case, the technical disadvantage
of alkaline electrolysis in terms of flexibility would not bother operators.
However, after 2030, most new green hydrogen projects will need to
ensure an hourly match between power generation and power
consumption for grid-connected electrolysis systems, which will lead to
more off-grid projects being developed, said Wang. This trend is not only
due to the need for a clearer definition of green hydrogen. A direct
connection to renewables generation plants should also improve
economic feasibility in the future. After all, using the grid to shift huge
amounts of electricity will cost more in the future. Electrolysis with stable
grid electricity will, therefore, not be able to produce cheaper hydrogen in
the future than with solar and wind energy, with their low electricity
generation costs.
Cost reduction
This is where PEM electrolyzers come into play. These can better follow
the fluctuating electricity supply and also work efficiently in partial load
operation or off-grid. However, this technology still needs to significantly
reduce its dependence on expensive platinum group metals, especially
iridium, in order to gain a dominant market share, said Wang. Plug Power,
from the United States, and ITM Power, from the United Kingdom, use 200
grams to 300 grams of iridium per megawatt of capacity.
Current worldwide production of iridium is around seven metric tons per

year. Even if the entire volume were used to produce catalysts for PEM
electrolysis, this supply chain could only support a maximum of 35 GW per
year. PEM can only dominate the green hydrogen market if manufacturers
manage to significantly reduce the consumption of iridium per unit this
decade or achieve an equivalent effect in parallel with improved metal
recycling. Wang said Electric Hydrogen, a new United States-based
manufacturer of PEM electrolyzers, has already reported using significantly
less iridium than competitors.
There is also a chance that anion exchange membrane (AEM) electrolysis

could replace PEM after 2030 because it does not use expensive metals.
This means manufacturers must succeed in developing stacks that are
suitable for large scale projects. Enapter is an AEM pioneer, building small
stacks and assembling them into larger 1 MW units which are still small
compared to other electrolyzers. California-based company Verdagy is just
starting to sell 20 MW modules, each consisting of two 10 MW stacks.
Larger stacks
Producing more hydrogen from a single stack is another route to cost

reduction. One way to achieve this is by increasing the size of the stack
itself. The largest commercial stack, with 15 MW, which came onto the
market in September 2023, comes from Longi, according to Wang.
Although increasing the size of the stack sounds straightforward, it has
several disadvantages. First, it becomes more difficult to move large units,
especially for international sales. Second, with larger units, mechanical
forces and stresses become more uneven, which affects safety and is
associated with lower efficiency.
More yield can be achieved by increasing the current density. Put simply,
the more electrons that pass through the stack, the more hydrogen can be
produced. Simply applying a higher voltage can increase the current
density but has a detrimental effect on efficiency. The strategy to maintain
or even increase efficiency is to revise the internal structures and introduce
advanced catalysts and membranes.
Over the long term, it is preferable to increase the current density, said
Wang. Plug Power and ITM Power are in the lead here with a current
density of more than 3A/cm2 (amperes per square centimeter) followed by
AEM manufacturer Verdagy, with 2A/cm2. Most Chinese alkaline
electrolyzers have only 0.3A/cm2. Wang, in turn, has learned from Electric
Hydrogen that their product would have an even higher current density
than Plug Power and ITM Power. She estimated that, by 2030, current
densities close to 10A/cm2 will be typical for the remaining manufacturers
of PEM electrolyzers.
More competition
The costs of Western products could initially fall by around 30% by 2025.
In addition to technological progress, competition is also likely to increase.
Manufacturers worldwide have announced a production capacity of 52.6
GW for this year while deliveries are optimistically only 5 GW, according to
BloombergNEF’s forecast. In China, where there is already fierce
competition for orders from project developers, manufacturers’ margins
are small. In addition, developers hedge their risk against the
manufacturer by paying only up to 85% of the agreed price on delivery
and the rest once commissioning has been completed and performance is
still good after 18 months.
The pressure is not yet as high on Western markets, as investors and

project developers in Europe and the United States can reckon with
relatively high subsidies. However, production capacities are also
increasing here and factories need to be fully utilized. If Chinese
manufacturers also seek their salvation in exports, it is foreseeable that
the price war will increase in all markets.
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CORNELIA LICHNER
Cornelia Lichner has been writing for pv magazine

since 2008 and regularly reports on a wide range
of topics with a focus on innovative concepts for
the coupling of solar power with other sectors. She
also organizes webinars and publishes podcasts.
More articles from Cornelia Lichner
 cornelia.lichner@pv-magazine.com
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25/04/24, 09:05 Electrolyzer prices – what to expect – pv magazine USA

Electrolyzer prices – what to

MARCH 20, 2024 CORNELIA LICHNER

COST AND PRICES WORLD

Image: pv magazine USA

From pv magazine print edition 3/24

All electrolyzers have a technology-specific stack at their center, in which

The BNEF report stated a 10 MW alkaline system often consists of two

Cheaper offers, such as €180/kW, from Peric for an 80 MW plant in China;

The Bloomberg analysis, from September 2022, claimed that Western

Western investors tend to entrust an EPC company with the handling of an

Equipment suppliers are also endeavoring to offer products that reduce

In an update to its market analysis, Bloomberg reported on offers for such

Those who want to reduce costs by purchasing an electrolyzer from China

Current worldwide production of iridium is around seven metric tons per

There is also a chance that anion exchange membrane (AEM) electrolysis

Producing more hydrogen from a single stack is another route to cost

The pressure is not yet as high on Western markets, as investors and

Cornelia Lichner has been writing for pv magazine

How large-scale solar

BP to take full control of

Notify me of follow-up comments by email.

Notify me of new posts by email.

LEGAL NOTICE TERMS AND CONDITIONS PRIVACY POLICY © PV MAGAZINE 2024

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