Main Organizations’ Low Price Estimates On Hydrogen Electrolyzer Methods Indefensible

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Final Up to date on: twenty fifth February 2025, 10:46 am

Just lately, I printed a abstract and growth of critiques by Visa Siekkinen, an vitality transition researcher now with Häme College of Utilized Sciences in Finland, and Andrew Fletcher, Adjunct Business Analysis Fellow at Griffith College in Australia, on hydrogen electrolyzer system capital expense estimates. Projections by organizations like IRENA, IEA, LUT, BNEF, and Europe’s trade affiliation Hydrogen Council from 5 years in the past had been far too low initially, they’ve crept up yearly, but the projections are nonetheless far too low.

Somebody tried to defend these organizations for these truly fairly horrible estimates, claiming that electrolysis programs weren’t properly understood and there weren’t good prices obtainable in 2020, however the estimates and projections are indefensible. Let’s step by means of this.

The primary industrial-scale alkaline electrolyzer was manufactured in 1869, marking the start of large-scale hydrogen manufacturing utilizing electrolysis. These early programs, developed primarily for chemical and industrial functions, relied on liquid electrolyte options and nickel-based electrodes to separate water into hydrogen and oxygen. Over the next a long time, enhancements in supplies and engineering refined their effectivity and sturdiness, enabling wider adoption in sectors resembling ammonia manufacturing, petroleum refining, and steelmaking.

Alkaline electrolyzers have been working constantly for over a century in industrial settings, with some particular person items operating for many years. They’re generally utilized in functions the place a gradual, large-scale provide of hydrogen is required, resembling ammonia manufacturing, petroleum refining, and steelmaking.

One of many longest-running examples is the Norsk Hydro electrolyzer plant in Norway, which operated from 1927 till the early 2000s to supply hydrogen for ammonia synthesis utilizing hydroelectric energy. Equally, industrial hydrogen manufacturing services in Germany, the Netherlands, and Canada have relied on alkaline electrolyzers for many years, notably in chemical crops the place uninterrupted hydrogen circulate is essential. These programs are recognized for his or her sturdiness, with many operating constantly for 20–30 years with routine upkeep.

Proton alternate membrane (PEM) electrolyzers have been in industrial manufacturing for the reason that Sixties, initially developed for house functions just like the Apollo program, the place they offered each hydrogen for gasoline cells and oxygen for all times help.

Siemens launched one of many first large-scale PEM power-to-gas tasks in 2015 at its WindH2 facility in Germany. The system was designed to transform surplus wind vitality into hydrogen, which might then be saved or injected into the pure gasoline grid.

Since 2014, Japan has deployed PEM electrolyzers in hydrogen refueling stations as a part of its nationwide hydrogen technique. Corporations like Iwatani and Toyota have led the trouble, putting in stations throughout main cities to help gasoline cell autos such because the Toyota Mirai. Not like alkaline electrolyzers, PEM programs can effectively function at excessive pressures, making them better-suited for automobile refueling infrastructure. Their purported capability to shortly ramp up and down aligns with the unpredictable demand at fueling stations, suggesting a dependable hydrogen provide for Japan’s anticipated fleet of gasoline cell automobiles.

California has been on the forefront of PEM electrolyzer deployment for gasoline cell autos since 2015, rolling out hydrogen refueling stations to help the transition to zero-emission transportation. A number of tasks, together with these funded by the California Power Fee, have integrated PEM know-how to supply clear hydrogen onsite utilizing renewable electrical energy.

In Norway, PEM electrolyzers have been deployed in off-grid renewable vitality tasks to retailer extra wind and solar energy as hydrogen. One initiative, launched within the late 2010s, integrates electrolyzers with distant wind farms, permitting vitality to be saved and transported to areas with excessive electrical energy demand.

That’s all to say that hydrogen electrolyzers as a technical part of a hydrogen manufacturing chemical plant are properly understood, and whereas not absolutely commoditized had been manufactured objects by the mid-2010s. By 2020, the price of the electrolyzer part was properly established, though the long run price was topic to debate.

One of many graphics I included within the earlier article was this one. It’s an amalgamation of a 2020 framework by Malhotra and Ramboll views on the way it applies to electrolysis programs and a few extra materials referenced by Fletcher.

There may be precisely one distinctive part on this in comparison with a number of different sorts of chemical manufacturing crops, the electrolyzer. The remainder of elements had been both absolutely commoditized in 2020 and often a lot earlier, or had been already very mature with low prices of adaptation for hydrogen functions. That’s why their studying charges — the discount in price on account of doubling of producing volumes, additionally known as Wright’s Legislation — are a lot decrease.

Making use of Wright’s Legislation to chemical manufacturing crops requires an understanding of how price reductions happen as manufacturing scales. Not like mass-produced items like photo voltaic panels or batteries, chemical crops mix each manufactured elements and large-scale infrastructure, every with totally different studying charges. Defining the correct studying unit is essential, whether or not it’s megawatts of electrolyzer capability, metric tons of annual manufacturing, or whole put in plant capability.

Completely different elements of a plant comply with distinct studying curves. Core course of items resembling reactors, electrolyzers, and separation programs might profit from effectivity enhancements and higher supplies. Stability-of-plant elements like compressors and warmth exchangers are already commoditized, which means price reductions will come from standardization reasonably than steep studying results. Advances in automation and digital controls might additional cut back prices by means of course of optimization.

Studying-by-doing should even be distinguished from economies of scale. Modular chemical crops, resembling small-scale ammonia items or electrolyzer farms, might even see quicker price declines as they’re repeatedly manufactured. Massive custom-built crops expertise extra gradual reductions, as their price financial savings rely on scaling reasonably than iterative manufacturing enhancements. Course of improvements, resembling higher catalysts or high-efficiency membranes, can drive price declines unbiased of scale.

Massive crops, nevertheless, usually have optimum scale for particular person processes, which drives down prices considerably. Modularity requires getting the module scale proper. Professor Bent Flyvbjerg, whose 2023 guide How Massive Issues Get Executed was on the high of or on most greatest enterprise books of the 12 months and included a few of my materials in chapter 9, What’s Your Lego?, extols the virtues of modularity. Paul Martin, who I referenced in my article that drew the protection of IEA et al and somebody who has been within the enterprise of designing and constructing modular chemical course of engineering crops together with for hydrogen functions for many years, provides a really insightful nuance on this level in his piece WHY Massive Issues Get Executed, which focuses on scaling the modules appropriately. Principally a bunch of unnecessarily tiny issues aren’t optimum in comparison with a smaller variety of appropriately scaled issues.

Provide chain constraints also can influence studying charges. Restricted availability of key supplies, resembling iridium for PEM electrolyzers or nickel for catalysts, might sluggish price reductions. Manufacturing bottlenecks and regional price variations additional complicate international studying curves. Coverage incentives, financing circumstances, and regulatory hurdles may affect price trajectories, both accelerating or distorting true studying results.

Validating projected price declines requires evaluating them to real-world information. Historic traits in petrochemicals, refining, and industrial gases present helpful benchmarks. Early pilot tasks needs to be assessed towards modeled studying curves, making certain that projected price declines match precise deployment charges. In the long run, significant price reductions will rely on each technological progress and actual market adoption, not simply theoretical expectations.

The price construction of chemical manufacturing crops has advanced alongside their technological developments, with early industrial services setting the stage for contemporary price concerns. The primary large-scale chemical crops, resembling these primarily based on the Leblanc course of for soda ash within the 1790s, had been capital-intensive as a result of want for custom-built furnaces, batch processing, and inefficient materials dealing with. These early crops had excessive uncooked materials and labor prices, making scaling troublesome.

By the mid-Nineteenth century, price efficiencies improved with the Solvay course of, which changed the costly Leblanc technique. Steady processing diminished labor prices, whereas the power to get better byproducts improved materials effectivity. The shift from batch to steady operations marked a key second in chemical plant price discount, setting a precedent for contemporary economies of scale.

The Haber-Bosch ammonia plant, in-built 1913 in Oppau, Germany, revolutionized chemical manufacturing economics. This facility launched high-pressure, high-temperature synthesis, requiring specialised supplies and engineering experience, which elevated capital prices. Its capability to function constantly and at scale considerably lowered per-unit manufacturing prices, justifying the upfront funding. This shift towards course of intensification continues to outline trendy chemical plant economics.

As we speak’s chemical crops combine superior automation, modular development, and digital controls, additional optimizing prices. Uncooked materials pricing, provide chain constraints, and regulatory compliance stay main price drivers. Whereas trendy crops profit from studying curves and economies of scale, their capital depth means correct price assessments should distinguish between real price reductions and exterior market fluctuations.

That is all to say that we’ve been costing chemical manufacturing crops for actually centuries and there’s completely nothing unique about determining what elements to incorporate within the costing and for hydrogen electrolysis crops there’s nothing troublesome to determine. It’s only a matter of asking the companies that are manufacturing electrolyzers, together with PEM electrolyzers, the one remotely new part, what their record value of the manufactured elements was, and the entire different chemical manufacturing crops that had been related to determine the surface view.

As soon as once more, that’s 2003, 17 years earlier than the ‘visionary’ projections of actually low electrolysis manufacturing services and their future prices had been being projected and used as the premise of coverage choices.

By 2020, electrolyzer know-how was already properly understood, with 150+ years of operational historical past for alkaline electrolyzers and a long time of economic PEM deployments. The balance-of-plant elements, together with compressors, storage, and energy electronics, had been already commoditized industrial tools with established studying charges. Analysts additionally had entry to price information from previous electrolysis tasks, chemical manufacturing crops, and broader industrial scaling traits.

RFC had been established for practically 20 years, offering a confirmed technique to counteract the planning fallacy and optimism bias in price projections. Historic expertise with price overruns in renewable vitality, industrial gasoline crops, and infrastructure tasks ought to have been integrated into hydrogen electrolysis estimates. But, many price fashions adopted wishful back-calculations, assuming hydrogen needed to attain a aggressive value after which shaping price curves to suit that assumption—a transparent violation of RFC and the surface view.

The elemental situation was not a scarcity of instruments or information, however a failure to use them accurately, pushed by policy-driven narratives, mannequin optimism, and overconfidence in studying curves. If analysts had grounded their projections in historic price information, industrial studying charges, and RFC rules, estimates in 2020 would have been considerably extra practical.

So why had been so many organizations and analysts blinded by cognitive biases? For over 20 years, techno-economic analyses have highlighted the elemental limitations of hydrogen scaling, but optimistic projections persist. As an alternative of beginning with practical industrial price traits, analysts start with the worth hydrogen wants to achieve for competitiveness after which manipulate assumptions to justify that end result—breaking the legal guidelines of physics and economics within the course of.

I’ve tracked price projection after price projection, and the identical sample emerges. Organizations like JRC, ICCT, and PIK have repeatedly produced flawed estimates, pushed by collective biases and blind adherence to mannequin outputs. Somewhat than grounding forecasts in historic industrial price traits, they depend on theoretical studying charges that don’t align with the realities of large-scale chemical manufacturing. Electrolyzers will not be client electronics; they comply with industrial scaling rules, not Moore’s Legislation.

This situation has been clear for many years. I offered technical edits to Joe Romm’s Twentieth-anniversary version of The Hype About Hydrogen, which debunked lots of the identical exaggerated claims that persist right now. I’ve mentioned related analyses with Bruce McCabe, PhD, who did the serviette math across the identical time, and my first deep dive into the topic was printed final decade. Specialists like Paul Martin had been absolutely conscious of those challenges way back to 2000. The obstacles to price discount—capital depth, materials constraints, and slow-moving industrial processes—have by no means been a thriller.

Organizations predicting steep declines in hydrogen electrolysis capex haven’t any protection as a result of that they had a long time of historic price information, established industrial studying charges, and confirmed forecasting methodologies like RFC at their disposal however failed to use them accurately. Electrolyzer know-how has been commercially deployed for over a century, and its balance-of-plant elements are mature industrial tools with well-understood price buildings, leaving little room for the form of speedy price declines seen in rising applied sciences like photo voltaic or batteries.

Regardless of this, teams like JRC, IEA, CSIRO, HC and PIK ignored these realities, as an alternative counting on model-driven assumptions that begin with the worth hydrogen wants to achieve for competitiveness after which work backward to justify it—violating each financial rules and historic precedent. Their projections will not be simply overly optimistic however essentially flawed, pushed extra by coverage targets than by grounded industrial evaluation.