The latest green hydrogen production projection for 2030 is 24 million tonnes from 212 GW of electrolysers, fueled by the latest round of incentives.
If 2022 turbocharged the green hydrogen economy, then 2023 is the start of a long trap for this nascent sector that will be the backbone of decarbonisation, transition and energy security strategies. Research by Rystad Energy has found that electrolyzer capacity is expected to grow by 186% from 2022 to 2023.
Attention is therefore directed to the supply chain capacity required for the production of electrolyzers. While many of the raw materials required for the sector’s growth have been high priced in recent years, Rystad Energy expects a 10-15% decline in electrolyser service price inflation between 2022 and 2027 , as green hydrogen adoption grows and cost cuts take hold.
Currently, the two most common electrolyzer technologies are alkaline water electrolysis (AWE) and polymer electrolyte membrane (PEM).
Both PEM and AWE have experienced particularly high inflation in the past two years: on average, PEM electrolyzer component prices have increased by around 30%, while AWE costs have increased by around 21% over the period 2020-2022. Volatility in platinum and iridium prices between January 2021 and January 2023 contributed to the recent inflation seen affecting catalyst-coated membranes and highlights the significant challenges involved in using iridium and platinum catalysts in PEM electrolyzers.
Unfortunately, price volatility is not a thing of the past, as both commodities are some of the rarest in the world. Iridium is only found in two parts per billion (ppb) in the Earth’s crust and platinum in five ppb.
South Africa is responsible for 83% of the world’s iridium supply and 70% of its platinum supply today. Prices of these metals are likely to rise in 2023 as South Africa’s aging and failure-prone coal-fired power plants threaten output amid power outages. However, the International Renewable Energy Agency reported that the expected future use of iridium and platinum in catalyst-coated membranes may be limited to 0.4 g/kW and 0.1 g/kW, respectively.
In addition, researchers from the Netherlands Organization for Applied Scientific Research have already been able to develop a method that will require 200 times less iridium in the production of PEM electrolyzers, while improving efficiency. Recycling of iridium and platinum could also help meet the growing demand for these precious metals from the hydrogen sector. In the long term, Rystad Energy finds that the pace of PEM deployment will not be limited by the supply of platinum and iridium if future technologies can make it possible to reduce their use by 70-80%, thereby helping to reduce significant costs associated with the catalyst. coated membranes (CCM).
“In the short term, electrolyser prices will begin to decline as key raw materials see their prices stabilize after a volatile period. In the medium to long term, technological innovation and gains in efficiencies will reduce the need for iridium, resulting in significant cost reductions However, unexpected jumps in costs could occur as iridium faces supply pressures as key producer South – Africa faces power cuts.
“This shows how the energy transition will not be predictable with many betting that green hydrogen will take a similar path to photovoltaics, which saw investment costs fall by around 80% between 2010 and 2020 ” says Selena Remmen, supply chain analyst at Rystad Energy.
Impact of nickel and stainless steel
Over the past year, the global price of nickel has increased by an average of 30%, with a much higher peak in June. This is largely attributed to lower-than-usual Chinese production associated with the country’s Covid-19 lockdowns and sanctions against Russian raw materials. As AWE uses Raney nickel as a catalyst and nickel for porous transport layers, bipolar plates and end plates, the metal contributed to significant inflationary pressures from the start of 2020, with an average increase of 10% between 2021 and 2022.
In addition, stainless steel production accounts for approximately two-thirds of global demand for nickel. Nickel is used as an alloying material in the production of stainless steel to increase the formability, weldability and ductility of the steel, while increasing its corrosion resistance.
Because of the importance of nickel in the production of stainless steel, nickel prices are a large driver of the cost of stainless steel. Stainless steel is a common material used in electrolyzers, including PEM stack components such as bipolar and terminal plates, as well as balance of plant (BOP) components such as piping, valves, tanks and pumps.
According to research by Rystad Energy, the price of nickel is expected to continue its downward price trend and is estimated to fall towards $25,000/tonne (or below) in 2023, due to the relaxation of Chinese zero covid policies and additional supply from Indonesia that will affect the market. In addition, global steel prices are expected to fall as the US increases steel production and begins importing more from Europe, where prices are significantly lower. These price reductions should help reduce the cost of electrolyzer components that contain stainless steel and nickel.
There are many ways to reduce electrolyser costs: reducing the presence of precious metals, increasing electrolyser efficiency, increasing production volumes, and automating manufacturing processes. In addition, there is real government support to make these pathways a reality.
For example, the Important Project of European Common Interest “Hy2Tech” of 5.8 billion dollars of funds released in 2022 or the recently announced Green Deal Industrial Plan where the bloc’s Innovation Fund will focus on increasing the manufacturing of components of ‘electrolyzers, among others.
Overall, Rystad Energy expects these cost cuts to help reduce electrolyzer service price inflation by 15% by around 2027 and thus improve the economics of green hydrogen production.
To contact the author, send an email to bojan.lepic@rigzone.com
