Sales abroad to soon surpass China business: Hygreen

Chinese electrolyser maker Hygreen is increasingly making inroads abroad as it builds on 17 years of experience in China. The firm reached 2 GW/yr of manufacturing capacity at its factory in Shandong in 2023 and aims to expand to 5 GW/yr in 2025. The company primarily makes alkaline electrolysers, but is also developing proton exchange membrane (PEM) equipment and is in final preparations for commercialisation of anion exchange membrane (AEM) technology. Argus spoke to Hygreen's global marketing director Ethan Hugh about the firm's outlook and ambitions as well as questions of cost and reliability. Edited highlights follow:

How do you see hydrogen developments in China and elsewhere?

China has had quite a bit more development in the hydrogen sector, especially in the electrolyser space, over the past years. So in some ways, the world could be looking at China as a glimpse of what the future could look like in terms of next steps or how the industry develops. The rest of the world has really caught up in terms of knowing the importance of hydrogen as a key element of the clean energy transition and the economic potential it can have. At Hygreen, we're forecasting the business for our sales abroad to surpass our China business over the next year or two. When I look at our current database of customers and leads, I am seeing a very strong growth in some key markets around the world. A lot of that is focused on regions that have more advanced regulations or incentives that push adoption.

Are there regions where you are finding it harder to break into?

There are factors that make certain regions look like they're harder to get into. One is the project scale and others are financing and subsidy deadlines. Smaller projects can definitely move a lot faster. I've seen projects come to us and their first attempt is to go to a very, very large output level and I always think about how they're going to reach their financing and FID [final investment decision]. We can pick up smaller projects very quickly because the financing is easier. Projects that are reaching almost GW [gigawatts] levels are just not going to have aggressive timelines that we can believe in. If we have to make room for a very large project, that is a significant consideration from our side and for supply chain purposes.

Are technical and safety standards an issue for overseas sales?

It does take more time to get stamps, [but] that is just a little bit of a timeline difference issue. I don't think the certification is a barrier — not to Hygreen at least because we are able to be compliant globally for basically all markets. Compliance takes a very small amount of time compared with the entire project execution timeline, so it hasn't come up as more than a question. Of course, we have to show proof, we have to show a plan on how we get all of that. But it's not something that doesn't get us past to the next step. Our manufacturing plant in Shandong is able to make products that comply [with global standards]. It's not like we can't be nimble and just handle all those certifications from one location.

Will manufacturing stay in China? Could parts like stack assembly move abroad?

From a management perspective, we have transitioned ourselves to a much more global set-up. While the headquarters remain in Beijing, we have senior management across Europe and North America now. We have offices in Spain, Canada, Hong Kong and Dubai. Going forward, we're watching very closely regional customisations or regional policies, incentives and regulations on things such as local content. So that will drive decisions on assembly or manufacturing of some kind in different regions around the world. We have significant interest from potential partners around the world.

What about after-sales and servicing?

We already announced two after-sales agreements in Europe. That is part of our bigger strategy because localised after-sales and maintenance services or technical support [are] a very important part of our customers' purchase decisions. For many customers, it's a new technology and it's their first time doing implementation and commissioning. And it's not just their decision, it's the success of their projects. The localised support will create more confidence in the timeliness of support and in the level of communication.

How do you decide on your capacity expansion plans?

We are making decisions based on demand. We are looking at the number of customers that are interested in working with us and how they're moving through the process of procurement with us. Our capacity expansion is based on a projection and on confidence levels in our pipeline.

So it's based on anticipation?

There's more certainty than anticipation. When a customer places an order in 2023-24, it takes an X number of months to deliver depending on the size of the project. There are [orders for] projects placed in 2024 that we know are being executed and delivered for 2025-26. So from that regard, it's not anticipation because we know that these are coming.

So it's based on firm orders to some extent?

Yes, exactly.

What gives Chinese manufacturers an edge over others in terms of costs?

One is experience and scale. And for Hygreen specifically, we're able to achieve lower costs with automation. Our manufacturing facility is strategically in the right location in China. Shandong is a manufacturing hub, so with everything from labour all the way to automation, we're able to drive manufacturing efficiency and that in turn drives down our cost. We [also] have strong supply chain relationships.

Some say that Chinese kit is less reliable and durable. What do you say to that?

Hygreen has a clean record and we don't experience the reliability question maybe as much as it seems. Hygreen has executed more than 300 projects, so for us our reliability is from the proof that we have so many projects executed and them performing well. As for our manufacturing capabilities, automation is a very key indicator of the fact that we can achieve the highest reliability. Because what removes human error more than automation?

So you've not had issues with durability so far?

We actually design our products quite conservatively. What I mean by that is what we put on our specification sheets are very confident numbers that have stood the test of time. We have learned for over 17 years and from more than 300 projects and we continue to evolve and design our products so that they are more high-performing, more efficient and more durable. And Hygreen is not just a stack manufacturer. We also manufacture a lot of our BOP [balance-of-plant] components ourselves and we can design the integration and engineering for the whole system using our own products. We're not reliant on external supplier quality.