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Electrolyzer manufacturers have vowed to help the EU use
hydrogen to reach net-zero and improve energy security, despite
expressing concerns about raw material availability.
The European Commission (EC) concluded an electrolyzer
manufacturing joint declaration with 20
companies and others in the sector on 5 May.
Producing more green hydrogen from electrolyzers should help the
EU to become independent from Russian natural gas supplies as
foreseen under the 8 March RePowerEU
proposals, and also deliver on its Paris-Agreement-linked
carbon neutrality goal.
Under the deal, the EC will open a cleantech manufacturer
financing round for its existing EU Innovation Fund, prioritize
approvals for member state contracts-for-difference subsidies to
reduce hydrogen investment risk, and carry on planning regulations
that support hydrogen markets and infrastructure.
New partnerships that lie ahead include electroylzer raw
materials partnerships with non-EU countries. The EU also plans a
supply chain partnership on components and raw materials within the
European Clean Hydrogen Alliance, the EC's grouping of over 1,500
public and private sector members.
In return, the manufacturers must aim to increase their combined
electrolyzer manufacturing capacity tenfold to 17.5 GW per year by
2025, and to increase that further through 2030, to meet expected
demand.
Danish electrolyzer manufacturer Topsoe, with plants in Denmark
and the US and a signatory, was happy with the plan. "It's great to
see that the EC is willing to support clean tech manufacturing,
including electrolyzer manufacturing projects, in its third call
under the EU Innovation Fund stated in the Joint Declaration,"
Media Relations Manager Ulrik Møller Frøhlke told Net-Zero
Business Daily by S&P Global Commodity Insights.
In other words, manufacturers will make more electrolyzers to
allow green hydrogen output in the bloc to ramp up to 10 million
metric tons (mt) alongside 10 million mt of imported blue and green
hydrogen by 2030 under RePowerEU.
These goals require 320-400 GW of electrolyzers to be installed
by 2030, said Topsoe, but global installed electrolyzer
manufacturing capacity is only 3 GW, of which 1.7 GW is in
Europe.
China, Japan, and South Korea dominated the total number of
patents filed between 2000 and 2016 for the hydrogen, electrolyzer,
and fuel cell groupings, the EC found in 2020. Electrolyzer
producers are also located in the UK, Norway, Switzerland, the US,
Canada, and Russia.
The EU has a relatively small manufacturing base for
electrolyzers, but output is expected to grow in the coming years,
according to a 2021 EC report. "If the EU doesn't want
to be dependent on cheap and inefficient Chinese electrolyzers, the
ramping up of manufacturing of electrolyzers in the EU is
critical," said Frøhlke.
However, "the availability of affordable raw materials
constitutes a challenge for upscaling the production of
electrolyzers in Europe," according to the joint declaration.
Nickel, platinum, iridium prices
There are not enough hydrogen regulations, investments, and
supplies of required components and raw materials, according to
electrolyzer manufacturers.
Making matters worse, prices for nickel, platinum, and iridium
used in the most popular electrolyzers have increased in the wake
of the invasion of Ukraine.
Russia's Nornickel, a supplier of refined nickel and palladium
to Europe, said on 25 April that as the
geopolitical situation challenged its deliveries of consumables, it
was seeking new suppliers and logistical deals. Earlier in April,
it announced plans to ramp up
nickel output at its plant in Finland to meet growing European
battery sector demand.
S&P Global assessed spot battery-grade nickel sulfate with
minimum 22% nickel content and maximum 100 ppb magnetic material at
Yuan 46,400/mt ($6,911.55/mt) DDP China 9 May, up 36.9% since the
start of the year, before declining slightly to Yuan 46,000/mt on
13 May.
While iridium prices have not soared to the levels seen during
last year's supply crunch,
Platts' New York Dealer iridium price rose to a range of
$3,650-$4,850/oz in the 24 February through 10 March period, and
remained stable as of 13 May.
Platts' New York Dealer platinum rose briefly to $1,122.50/oz on
10 March, which was its highest level so far this year, before
declining to pre-invasion levels. Europe is the largest consumer of
platinum in industrial products.
The price spike came following the US and the UK's announcements
of bans on Russian oil imports on 8 March, escalating a trade war.
The UK also boosted tariffs on Russian goods, including platinum
and palladium, on 8 May.
The EU isn't the only government in need of these metals to meet
goals. ICRA Ratings and Research analyzed India's target to
produce 5 million mt of hydrogen by 2030. Surging metal prices mean
that electrolyzer costs won't decline until to closer to 2030, it
said.
"I think we can all agree that without primary and secondary raw
materials there will be no EU green transition," EC internal market
commissioner Thierry Breton said during an event last month
hosted by metal producer trade body Eurometaux.
Electrolyzers' metal demand
About 30 materials are needed for producing electrolyzers,
hydrogen storage units, and hydrogen fuel cells, the EC said.
The EU has producers of all three main electrolyzer
technologies: AEM and PEM, and SOEC. SOEC has the highest
efficiency, but remains in a demonstration phase, and about 70% of
electrolysis capacity installed in the EU was PEM in 2019, noted the EC.
Metals used as electrocatalysts for PEM include Iridium and
platinum. These so-called platinum group metals are relatively
scarce.
Even before the invasion of Ukraine, iridium as well as scandium
supply risks for electrolyzers were predicted in a report from the minerals agency
of Germany's Federal Institute for Geosciences and Natural
Resources.
The International Renewable Energy Agency (IRENA) in 2020 found that insufficient iridium
production might be a bottleneck for scaling up manufacturing of
PEM electrolyzers. South Africa is the main producer of the world's
iridium (80-85%) followed by Russia.
AEM and SOEC manufacturers both require nickel. Russia is among
the top three producers of both nickel and platinum, IRENA
said.
The global drive to adopt green hydrogen as a fuel depends in
part on a decline in electrolyzer costs of about 50% by 2030, wrote
IRCA.
While most of green hydrogen's production costs come from the
electricity used, catalysts typically make up about 8% of the purchase price
of a PEM electrolysis stack.
A decrease in the cost of hydrogen produced can help foster
adoption. "Currently, the high production cost for less
carbon-intense hydrogen—for instance about $6/kg for renewable
hydrogen from electrolysis—is hindering adoption," said industry body Hydrogen
Council in a report.
On average, green hydrogen's cost levels are between two and
three times those of fossil fuel hydrogen, but this must decrease
in order for it to compete, according to IRENA.
S&P Global assessed the cost of renewable hydrogen
production via alkaline electrolysis in Europe at €11.92/kg
($12.53/kg) 4 May (Netherlands, including capex), based on
month-ahead power prices and double fossil-fuel sourced hydrogen at
€6.64/kg.
Posted 13 May 2022 by Cristina Brooks, Senior Journalist, Climate and Sustainability
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
