Electrolyser manufacturer Nel is to spend €35m ($36.2m) to double the capacity of its alkaline electrolyser factory in Herøya, Norway, to 1GW, on the back of rising demand for green hydrogen production equipment and favourable political winds that extend beyond Europe to the US, Nel’s CEO Håkon Volldal told investors this morning.

In fact, the North American market will be increasingly important to Nel in the wake of the US Inflation Reduction Act and its hydrogen tax credits, and the company is now looking to expand its operations there, Volldal said.

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In Norway, the new fully automated production line at Herøya will come on line in April 2024, just as production is finishing on the company’s largest ever order for 200MW of electrolysers, which it bagged last month from a mystery US customer.

But the €35m decision to expand is based on the calculated assumption that demand will continue to grow, Nel said, noting that the Herøya factory is designed for further scale up to up to 2GW.

“The Herøya expansion supports what we have previously communicated: when demand is present, we will add capacity,” said Volldal. “The recent 200 MW contract will not be a one-off, and as we see a potential for additional large orders in the foreseeable future, we have decided to expand our production capacity.”

Nel’s order book is bulging, according to the company’s quarterly results. Second-quarter orders — which do not include the 200MW order announced in July — were up by 61% year-on-year, and the company’s order backlog is currently sitting at $151m, up 12% on the previous quarter and 33% year-on-year.

When the fully-automated facility opened in April this year, it was billed by Nel as a ticket to cutting the cost of green hydrogen by up to 75%. Nel has an ambition to enable a levelised cost of green hydrogen production of just €1.50/kg — with half of the cost savings coming from scale-up and increased efficiency in electrolyser manufacture.

“Nice to see”

Nel’s outgoing CEO Jon André Løkke repeatedly warned green hydrogen developers about the risk of a gigafactory capacity bottleneck, and in June called for firm orders from customers to support further expansion.

But new CEO Volldal was optimistic about the demand for electrolysers from Europe and North America, especially since the passage of President Biden’s $433bn Inflation Reduction Bill through the US Senate over the weekend, which includes a green hydrogen tax credit equivalent to $3/kg.

This would not only make US green hydrogen competitive with grey H2 made from fossil gas, it could make the US the cheapest place in the world to produce any form of the gas.

Nel is now looking to expand its operations in the US, Volldal told investors, and is currently in the process of site selection for a facility there.

“The US will be increasingly important for hydrogen production and also for Nel,” he said. “We see a lot of accelerated plans for hydrogen production in America and that is nice to see.”

The EUand the UK are also planning major subsidies for green hydrogen production, with their own contracts for difference schemes.

He added: “Europe and America are leading the way now on hydrogen and we will capitalise on that development.”