The global supply of electrolysers will not be large enough to meet demand for green hydrogen by 2030, even in the least bullish scenarios, according to analysis by US investment bank and financial services firm Jefferies.
In a 45-page report for clients, entitled Plugging into the Hydrogen Ecosystem, the New York-headquartered company estimates that the worldwide supply of electrolysers by 2030 will reach 47GW, but “could sit somewhere in the 30-40GW range”. This compares to 54GW of announced projects and 94GW of what it calls “pledged” projects.
“The conclusion is that there is unlikely to be sufficient supply even for the proposed projects out to 2030 even in the lowest demand scenario,” the document states.
It also points out that the International Energy Agency expects to see 180GW of electrolysers in use by 2030 under its Announced Pledges Scenario, while its Net Zero Emissions by 2050 scenario requires a whopping 850GW.
Current global installed capacity of electrolysers — which split water molecules into hydrogen and oxygen — is currently 200MW, according to Aurora Energy Research.
The Jefferies note recommends that investors buy shares in the electrolyser manufacturers ITM Power and Nel due to “our preference for PEM [polymer electrolyte membrane electrolysers], partnerships and track records”.
The report also states that Jefferies sees the initial demand for green hydrogen coming from existing H2 users, rather than new sectors such as transport.
“We see the nearest use cases as those industrial applications that already use hydrogen: oil refining, methanol, ammonia, steel making,” it says.
“Beyond that, we believe that there is scope for heavy vehicles, with [battery] EVs winning the passenger vehicle race, and beyond that, stationary power… mobility and power look to be medium to longer term aspirations.”
Green v blue
Jefferies is unenthusiastic about blue hydrogen produced from fossil fuels with carbon capture and storage (CCS), the report says, explaining that while it expects the nascent sector to grow this decade, its share of the H2 market will be far smaller than green’s — partly due to cost and partly due to issues with CCS.
The financier expects the cost of green hydrogen to fall from $3.00-6.55/kg today to $1.50/kg by 2030, with blue H2 at $1.25-2.00/kg by decade’s end.
“In our view, CCS doesn’t work at scale,” the report says, pointing to the following reasons:
1) 80% of carbon captured to date has been pumped into oil wells to help extract more hydrocarbons;
2) Capture rates are low, at around 65%;
3) Less than 0.1% of all carbon emissions are currently captured and stored (40 million tonnes v 35-40 billion tonnes);
4) There are “limited accessible sealed underground wells suitable for CO2 sequestration”.
The study also points to a report by Ars Technica, which found that “even the cleanest blue hydrogen projects had emissions just 12% less than their grey hydrogen equivalents, mainly because of increased need for natural gas to power carbon capture, also adding that it is unrealistic to assume carbon can be stored indefinitely”.
Oil & gas industry skewing policymakers
The Jefferies report also warns investors that “politically influential oil and gas companies” are distorting policy and debate over clean hydrogen.
It states that Big Oil is “keen to avoid electric taking over” and “keen to avoid their assets such as pipelines becoming unusable”.
“Such influence can distort the debate on the best path forward for clean energy as well as skew policymakers towards favouring a fossil-fuel based approach to hydrogen production.”