Electrolyzer Market Trends

Market Driver - Huge investments in hydrogen production and storage technologies

With the rapidly rising focus on developing cleaner and greener fuel alternatives, hydrogen is emerging as one of the most promising options to reduce emissions from transportation and various industries. Even though hydrogen is still in a nascent stage of adoption, global efforts to cut carbon pollution are driving significant capital towards building the necessary infrastructure for a future hydrogen economy. Electrolyzers play a pivotal role in this ecosystem as they split water into hydrogen and oxygen through an electrochemical reaction.

Over the past few years, governments and large corporations have pledged billions of dollars towards establishing hydrogen hubs, demonstration projects as well as building production facilities for low-carbon hydrogen. For instance, the European Union recently allocated €1 billion to develop regional clean hydrogen valleys before 2030 under its flagship innovation fund. Several countries like Germany, France and Korea have each committed over $1 billion for expanding domestic electrolyzer and renewable hydrogen capacity. Automakers too have joined the movement, with Toyota investing heavily to deploy fuel cell electric vehicles and establish complementary hydrogen refueling stations worldwide. Such substantial investments from both public and private sector are expected to ramp up electrolyzer deployment substantially to deliver large volumes of clean hydrogen on an industrial scale.

Market Driver - Growing Enthusiasm for Fuel Cell Electric Vehicles

With an increasing push for electrification of personal transportation to reduce urban air pollution, zero-emission fuel cell vehicles are garnering significant attention from governments and consumers alike. Several global automakers have unveiled ambitious plans to introduce FCEVs in key markets over the next 5 years backed by supportive policies. For example, Korea and Japan have set aggressive targets to massively enhance the number of hydrogen refueling stations and fuel cell vehicles by the end of this decade. Similarly, in Europe various nations have launched purchase incentives and initiatives to strengthen the surrounding infrastructure. This rapid policy progress and model introduction timeframe is raising hopes of FCEVs finally reaching mainstream adoption.

The establishment of filling stations remains crucial for wider consumer acceptance of fuel cell cars. As such, oil companies are getting involved and teaming up with hydrogen suppliers to put up the initial network of pumps needed. Their expertise, scale and capital towards building fueling forecourts can be highly consequential. Furthermore, improving performance and falling costs of fuel cells and lithium-ion batteries are also making dual-fuel vehicles -capable of running on hydrogen or batteries - more attractive. If automakers deliver on their goals, demand for cleaner hydrogen from electrolyzers to fuel these zero-emission vehicles will undoubtedly see strong growth ahead.

Market Challenge - High Cost of Electricity Required for Electrolysis

One of the major challenges currently facing the electrolyzer market is the high cost of electricity required for the electrolysis process. Electrolysis requires a significant amount of power as it involves using electricity to split water into hydrogen and oxygen. The typical efficiency of electrolysis is around 70-80%, which means that a lot of electricity is needed to produce usable volumes of hydrogen.

With current industrial electricity prices in many regions, the cost of producing hydrogen through electrolysis far exceeds delivery via traditional production methods such as steam methane reforming. For electrolyzer market players to make their products economically viable in the long run, the cost of electricity needs to come down substantially.

This remains one of the biggest roadblocks in the electrolyzer market inhibiting mass commercialization of electrolysis technologies. Considerable research and investment is still needed to improve cell design and material technologies to enhance energy efficiency during electrolysis and ultimately bring down overall production costs.

Market Opportunity - Shift from Gasoline to Electric Vehicles Provides Growth Potential

The transition occurring in the automotive industry away from traditional gasoline vehicles towards electric vehicles provides huge opportunities in the electrolyzer market. As electric vehicles become more mainstream, there will be a growing need for infrastructure to produce and deliver hydrogen as a transportation fuel.

Electrolysis can be used to produce the hydrogen needed to Fuel Cell Electric Vehicles (FCEVs), using renewable energy sources like wind and solar. This creates a massive potential for electrolyzer market players making electrolyzers suitable for large-scale hydrogen production.

Electrolyzer manufacturers that can deliver efficient products on a commercial scale stand to greatly benefit. The demand is likely to ramp up substantially in the coming years as governments introduce supportive policies and more automakers launch FCEV models. By positioning themselves to supply this emerging demand, electrolyzer market players have a major opportunity to enjoy high growth.