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Nel doubles electrolyzer order pipeline since January as hydrogen interest grows

Highlights

Sees project pipeline of over $6 billion

Represents over 11 GW of hydrogen production

Largest single potential project of 1.6 GW

Norwegian electrolyzer manufacturer Nel has more than doubled its pipeline of potential orders since January to over $6 billion, representing over 11 GW of renewable hydrogen production capacity, the company said in a third quarter results presentation Oct. 21.

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Nel CEO Jon Andres Lokke said the single largest potential order was for a 1.6 GW project. The largest electrolyzer currently operating in Europe is just 10 MW, though scale is expected to build rapidly, with announcements of projects of over 100 MW.

"We remain confident in the long-term potential of the green hydrogen industry and reiterate the strong growth outlook," Lokke said in a statement.

The company is backing the anticipated growth in electrolyzer demand with its new 500 MW/year factory in Heroya, Norway.

"With the new production facility at Heroya up and running, we remain confident that Nel is well suited to capitalize on the opportunities, he added.

Company revenues rose by 55% on the year to NOK229.3 million ($27.5 million) in the third quarter, but the company continued to post losses overall as it invests in ramping up production and one-off expenditure.

The order pipeline constitutes around 800 projects, with 60% of potential revenue from the 20 largest ones, Lokke said.

Existing projects

Nel aims to start a 20-MW electrolyzer in Spain by the end of the year, which will produce hydrogen for ammonia production in partnership with power company Iberdrola and fertilizer company Fertiberia.

Nel also produces hydrogen fueling stations, and Lokke noted particular interest from taxi fleet operators and truck refueling operations, where refueling times were comparable to filling a diesel truck.

The company produces proton exchange membrane electrolyzers from a plant in the US, and Lokke said the hydrogen outlook there was also positive.

The US was "closing the gap with their ambitions to the Europeans," Lokke added.

He noted interest in the US to couple Nel's electrolyzer technology with nuclear power generation, to provide an outlet for steady power production at times of low demand.

Lokke also said the potential for hydrogen to link with offshore wind was a key area of focus for the company.

Nel is involved in three offshore wind projects: ERM Dolphyn, a renewable hydrogen from floating offshore wind project; Deep Purple, which combines the same approach with subsea storage; and PosHYdon, which plans to blend hydrogen with natural gas to pipe to shore.

Production expansion

The Heroya alkaline electrolyzer plant is ramping up production to 500 MW/year, and has the potential to expand to 2 GW/year.

Lokke said the company could add production capacity "relatively quickly," starting another line within 12 months, but said that Nel wanted to run the first line for some time in order to capture any learning and efficiency gains from the process before expanding.

He also said the company would look to monitor where demand was developing before responding with increased production, to potentially locate future additional production elsewhere.

Nel was also looking at introducing PEM electrolyzer production in Europe. Its production of the technology is currently based in the US.

Cost reductions

The recent spikes in power and gas prices did not concern Lokke. He said the cost of installing renewable power production, not the price of electricity, was the key factor in driving down renewable hydrogen production costs, and noted these continued to fall rapidly.

The company is targeting $1.5/kg hydrogen production costs by 2025 for its customers, based on electricity at $20/MWh.

S&P Global Platts assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur12.38/kg ($14.40/kg) Oct. 20 (Netherlands, including capex), based on month-ahead power prices. PEM electrolysis production was assessed at Eur14.76/kg, while blue hydrogen production by steam methane reforming (including carbon, CCS and capex) was Eur6.10/kg.

Chief Financial Officer Kjell Christian Bjornsen noted that steel and iridium costs had risen, but said the company generally matched customer commitments with its sourcing of materials, limiting the impact of price rises.

The United Nations Climate Change Conference in Glasgow at the start of November was an opportunity to focus minds on the potential for hydrogen to help decarbonize the global economy, Lokke said, but did not expect specific targets or commitments on hydrogen to emerge from the meeting.

That, he added, would be left to individual countries and regions such as the EU.