The market ramp-up of electrolysis is a significant constraining factor for the mass production of green hydrogen. In an article that appeared recently in Nature Energy we analyzed possible pathways for expanding electrolyzer capacity in the European Union and around the world (Odenweller et al., 2022). Using a technology diffusion model we showed that the market ramp-up needs time in spite of initial exponential growth. Even if electrolysis expands as rapidly as photovoltaics and wind energy – the reigning growth champions – there will still be a short-term lack of green hydrogen and its availability in the long run remains uncertain. Nevertheless, it is important to accelerate the ramp-up now in order to ensure ambitious 2030 expansion targets can be reached and to guarantee long-term availability.
Because electrolysis is a key technology for the production of green hydrogen, the market ramp-up of electrolyzer capacity represents a critical area of constraint (IRENA, 2020). The magnitude of the scaling required is enormous, since at the end of 2021 only around 600 megawatts of electrolyzer capacity were in operation worldwide. To meet the 3,670-gigawatt figure in 2050 that the International Energy Agency (IEA) says is needed to achieve net-zero, capacity must be increased 6,000-fold (IEA, 2022b), thereby dwarfing the tenfold expansion in renewable energy capacity that will likewise be required.
Furthermore, electrolysis expansion poses a coordination challenge in terms of ensuring that not just the hydrogen supply but also the demand and infrastructure for hydrogen are driven up simultaneously. This is the proverbial “three-sided chicken-and-egg problem” of ramping up the hydrogen market (Schulte et al., 2021).
In the following we summarize the key results of our recently published article on scaling up electrolysis (Odenweller et al., 2022). Our synopsis shows updated figures and results based on the most recent version of the IEA Hydrogen Projects Database as of October 2022 (IEA, 2022a).
Announced electrolyzer projects
The years ahead are due to see a pronounced upswing in project announcements (see fig. 1). If all the projects announced come to fruition, electrolyzer capacity in the European Union will increase by a factor of 28 by the year 2024 compared with the year 2021; globally it will grow by a factor of 23. However, this positive outlook comes with the caveat that final investment decisions have yet to be made for over 80 percent of these project announcements. Consequently there is a large degree of uncertainty about how many projects will be realized in the short term and therefore whether sufficient green hydrogen will be made available in time to reach net-zero.
We therefore asked the following question in the main scenario outlined in our article: “What would happen if electrolysis expands as quickly as photovoltaics or wind energy in its boom phase?” To cover unavoidable uncertainties we used a model to simulate and then aggregate the technology diffusion of electrolyzers in response to thousands of different parameter constellations (see box).
In the event that electrolyzer capacity expands just as rapidly as photovoltaics and wind energy once did – the two greatest success stories for the energy transition thus far – the primary outcome can be encapsulated as follows: short-term scarcity, long-term uncertainty.
Methodology: technology diffusion model
New technologies usually penetrate markets in the form of an S-curve. In this situation, there is an initial period of exponential growth which is followed by a virtually linear increase in the growth phase before growth diminishes in the saturation phase and approaches the peak. In our article we extended this standard model of technology diffusion by deploying a stochastic uncertainty analysis. We considered uncertain parameters to be (i) the electrolyzer capacity in the near future, specifically in the year 2024, (ii) the initial exponential growth rate and (iii) the demand for green hydrogen, for which we assumed a continuous increase based on policy targets and net-zero scenarios. The combined propagation of these independent uncertainties finally resulted in what we called the “probabilistic area of possibility”.
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Reading the recent (very detailed) Hydrogen Europe report ‘Clean Hydrogen Monitor 2022’ the issue of green hydrogen production within Europe by 2030 does seem to be mostly resolved. Under the REPowerEU strategy, 10m tons is planned to be built within Europe by 2030, and 10m tons is planned to be imported. The electrolyser manufacturing capacity is actually oversubscribed for 2030, so the question is whether there will be enough hydrogen produced outside Europe to make up the remaining 10m tons. About half this figure is so far in planning stages. So altogether, this is 15m tons, which is certainly impressive. In TWh terms, this is equivalent to 495TWh. Final energy consumption in the EU in 2021 was 11,258TWh, so this means we will see 4.4% of final energy being met by hydrogen by 2030. If the full target for 2030 is met (20m tons, or 660TWh) this will be 5.8% of final energy demand by 2030. This is really good news, and if energy ministers at the EU Council can agree to adopt what the Parliament and Commission have set out (the REPowerEU strategy), then there is a good chance of achieving this objective. The problem is with these ministers – more ambition is needed to fully achieve the 20m ton goal. I am optimistic, but I think it is important to recognise that it is individual member state energy ministers that need to be persuaded to see the value of fully adopting this goal.
Realistically, I believe it will be necessary to import blue hydrogen in addition to green hydrogen to fully replace fossil fuels. I don’t believe electrification will occur at the speed necessary to decarbonise; and more than this, establishing a global market for hydrogen is absolutely the next step in decarbonising globally, after gains so far made regarding solar and wind in decarbonising electricity.