Higher-than-expected costs for producing renewable hydrogen are deterring developers from building plants, delegates heard at the Investing in Green Hydrogen 2023 conference in London this week.
Panellists were unanimous that the industry is seeing a spike in costs, driven by macroeconomic headwinds and the price of materials. But opinion was divided as to how much and how fast costs might fall in the future.
"People expected — especially for green hydrogen — that costs will come down tremendously but the costs are rather going up," said Andreas Bieringer, director of business development and commercial at UAE renewables firm Masdar. "We see an increase in interest rates, capital costs, people think there may be a shortage of electrolyser capacity," he said.
"Everybody is a bit afraid to lock themselves too early into this technology," Bieringer said, adding that market participants are hesitating in case production costs decline at the same pace as they did in the solar industry a few years ago. But "I don't think you'll see such a deep drop in cost", he said.
Bieringer's view was backed by other panellists who noted that some electrolyser technology is dependent on scarce metals. "The production costs of these electrolysers will not follow the kind of curve one expects in solar, it's a different economics there," according to Ganapathy Swamy, industrial gas firm Linde's vice-president of large projects development EMEA. "There's obviously a shortage" of metals like titanium and iridium, Swamy said.
Renewable hydrogen costs could "taper off" but would "not likely fall dramatically" as there is little room to bring down the power consumption of electrolysers, Swamy said. "Today maybe there's some spikes due to supply and demand, but still it is going to be difficult to bring down the costs."
Other panellists were optimistic that technological innovation could cut costs. Many electrolyser companies are automating their manufacturing processes to reduce costs, according to German utility RWE Generation's chief operations officer Sopna Sury, while French firm Engie's executive vice-president Didier Holleaux suggests electrolyser firms could follow the example of other industries that have found ways to trim the need for certain materials when faced with scarcity. Reducing electrolyser downtime is even more important, Holleaux added, as the reliability of electrolysers "is not yet where it needs to be", he said.
