Electrolyzer-maker Nel targets green hydrogen at $1.50/kg

Norwegian electrolyzer-maker Nel ASA wants to reduce the cost of green hydrogen, produced with renewable electricity, to $1.50 per kilogram by 2025 in a bid to outcompete fossil fuel alternatives.

Cost reductions will be made by bringing the technology to multi-gigawatt scale and growing production capacity, the company said Jan. 21. Nel is building a large-scale electrolyzer manufacturing plant in Norway and looking to roll out the first 500 MW of equipment in the second quarter, with commercial production beginning in the third quarter.

The company has already linked up with Iberdrola SA to develop and deploy large-scale electrolyzer projects and promote the technology's supply chain in Spain, and has signed a letter of intent with Statkraft AS to build a 50-MW green hydrogen electrolyzer in Norway.

Elsewhere, Nel focuses on the transport market, selling road-side hydrogen fueling stations and solutions for trains and ferries, and is also developing an offshore hydrogen production unit for transport use case applications with Ørsted A/S in Denmark.

Green hydrogen currently costs between €2.50/kg and €5.50/kg, or between $3.02/kg and $6.65/kg, according to the European Commission's hydrogen strategy announced July 2020. Nel did not respond to a request about its current cost estimate for green hydrogen.

For comparison, fossil-based hydrogen costs about €1.50/kg, or $1.81/kg, and the estimated cost for blue hydrogen — produced from natural gas with carbon capture — is €2/kg, or $2.42/kg, the commission said.

Nel CEO Jon André Løkke expects current policy momentum to continue to funnel cash into the green hydrogen sector and bolster demand.

"The hydrogen market is already large, but with only a fraction served by electrolysis, there are significant opportunities to turn the existing market green. In addition, we see a regulatory landslide across the globe, with the EU and the U.S. pledging hundreds of billions of dollars into their zero-emission programs where hydrogen serves a vital part as the energy carrier of choice," he said.

Interest in Nel from investment managers has skyrocketed over the past year, with its share price increasing more than 200% in 2020.