'Severe Overcapacity' | The Global Supply of Electrolysers Far Outstrips Demand from Green Hydrogen Projects: BNEF

by Polly Martin (Hydrogen Insight) Research firm warns that new firms are flooding an already oversupplied market -- Electrolyser manufacturers have invested too quickly into new factories, with “severe overcapacity” compared to actual demand from green hydrogen project developers in the coming year, warns research firm BloombergNEF (BNEF).

In its new analysis, entitled Electrolyser Manufacturing 2024: Too Many Fish in a Tiny Pond, BNEF notes that factories around the world could produce up to 31.7GW of electrolysers per year at the end of 2023 — nearly 17 times what was delivered that year and more than seven times the capacity expected to be delivered in 2024.

Despite this, manufacturers have announced further expansions, bringing annual stack assembly capacity to more than 50GW by the end of this year, rising to nearly 75GW in 2025.

On the surface, this rapid scale-up could be good news for green hydrogen project developers, ensuring that gigawatt-scale orders can actually be met, with economies of scale potentially reducing the price per unit.

However, developers have not placed the major orders expected in 2023, mostly due to slower-than-expected rollout of subsidies in the US and EU — leaving electrolyser manufacturers with little to no income from their high-cost investments.

According to BNEF, only one pure-play electrolyser maker reported a profit in 2023 — Thyssenkrupp Nucera, which saw a positive net income of $23m. This was mainly due to the ongoing fulfillment of a 2.2GW order from the world's largest under-construction green hydrogen facility, the Neom project in Saudi Arabia.

This has significantly diluted the alkaline electrolyser market, with the top ten manufacturers representing only 50% of capacity at the end of 2023, compared to 84% in 2021.

The market for proton-exchange-membrane (PEM)) electrolysers is much more concentrated, with five companies likely to account for 72% of production capacity by the end of this year.

BNEF also notes that alkaline electrolyser manufacturing remains dominant over PEM at 75-80% of market share.

The research firm also warns that both alkaline and PEM equipment — produced by both Chinese and Western manufacturers — has not performed properly in the field.

The report highlights the 260MW Kuqa project in Xinjiang, China, (which used alkaline machines) as the most high-profile underperforming facility, as well as equipment problems at: