Australia’s national science agency suggests Australia could create an industry making green hydrogen electrolysers worth around $2.9 billion.
CSIRO’s latest report outlining the potential opportunity comes amid a reassessment of the green hydrogen promise, and a market rout one German CEO predicts will see a dramatic reduction in the number of companies in the space.
In Australia, however, CSIRO is much more optimistic, and says there are big opportunities from the local companies looking to establish their own electrolyser technologies.
It says that if the country can rally strong support for local procurement it suggests revenue just from electrolysers made in Australia could touch $1.7 billion, and an assembly and installation sector could be worth another $1.1 billion, both by 2050.
And despite the struggles being faced by electrolyser makers internationally, it says the window has not closed.
“Hydrogen electrolyser manufacturing (HEM) is a significant opportunity because of the rapid scale-up in installed capacity needed to meet net zero scenarios and the potential for innovative designs and manufacturing processes to generate cost-competitive advantages,” the report says.
“These factors create a window of opportunity for new entrants to influence a market that is still nascent at scale.”
The massive proposed demand for green hydrogen at home, to decarbonise industries such as steel and transport, and an electrolyser industry in its infancy mean Australia could develop its own electrolyser supply chain from scratch.
Three paths
Under the low scenario, the total market opportunity come 2050 for making and installing Australian electrolysers is a paltry $282 million. It foresees minimal hydrogen production and just under 400 jobs created in a new industry.
The central scenario, where local procurement is a strong policy tenet, is more optimistic.
Under this thesis the total market opportunity is $2.9 billion and employs almost 4000 people.
If policymakers were able to set up a strongly supportive industrial policy framework, electrolyser manufacturing could become a $5.5 billion market opportunity, or a little more than Microsoft promising to invest in cloud computing in Australia during 2023 and 2024.
Australia currently has a handful of early stage electrolyser manufacturers in Fortescue, Hysata, Hadean Energy, Endua, and Cavendish Renewable Technology.
The report advocates for a “good hard think” about what can be done to secure the opportunities in the global and domestic supply chain for Australian companies, says Dr Patrick Hartley, leader of CSIRO’s Hydrogen Industry Mission.
“The challenge is that a lot of the projects that want electrolysers cannot get to FiD [final investment decision] at the moment,” he told Renew Economy.
“Creating the demand for hydrogen is creating a problem in the actual projects are not getting to FiD. If we can crack that then the demand for electrolytes is here. There’s demand, but it’s not ready to realise.”
Hartley says options for local companies could be to service the local market, or to partner and use larger global companies to scale up and commercialise innovative technologies.
“The strong starting position that Australia has in the industry is we’ve got the emerging companies, we’ve got a great strength in research and innovation in this space, and we have the raw materials that you use to make electrolysers,” he says.
“It is the potential for a large domestic market as well as growing global demand.”
No green shoots yet
But these scenarios must play out against a ruthlessly competitive global backdrop.
In March, BNEF head of hydrogen research Martin Tengler did not go so far to call a bubble, but highlighted the massive overcapacity problem that is just getting larger.
“Green hydrogen’s potential has attracted many investors to the electrolyzer manufacturing industry – perhaps too many,” he said on LinkedIn following a BNEF piece of research called Electrolyzer Manufacturing 2024: Too Many Fish in the Pond.
The report counted 31 gigawatts (GW) of electrolyzer factory capacity in operation, versus demand of just under 2 GW. It assumed factory capacity to rise to 54 GW this year, to meet demand of just 4GW.
This rises to 75 GW in 2025.
“Despite this severe overcapacity, large existing players and new entrants are still building factories. Not all manufacturers will survive,” Tengler said.
“Even if you apply a 50 per cent discount to the total nameplate value, overcapacity is clearly an issue at the global scale. The financials of most listed electrolyzer manufacturers reflect this reality based on Bloomberg Terminal data.”
That overcapacity is unlikely to abate soon, as China and India go toe to toe with investments in the space, as they attempt to dominate the new industry.
ydogThe carnage among non-Indian or Chinese companies, as reported by Renew Economy in February, continues to play out.
Plug Power continued to record significant losses in the third quarter and its stock is down 97 per cent from its 2021 highs.
Norwegian electrolyser manufacturer Nel is down 92 and France-listed Enapter is down 91 per cent.
Demand has risen more slowly than expected, as producers and their offtakes have been slow to bring sites to financial close and as subsidies in the US and Europe have flowed more slowly than promised.
Only one pure-play electrolyser maker, Thyssenkrupp Nucera, reported a profit in 2023 and that was thanks to filling a massive 2.2 GW order for the Neom project in Saudi Arabia.
The estimated 150 electrolyser companies around the world will see radical consolidation – especially the 100 in China – soon, believes Nils Aldag, the CEO of German electrolyser maker Sunfire.
He told Hydrogen Insight earlier in 2024 there is not room for them all and to expect collapses and mergers.
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