Norwegian electrolyser maker Nel has unveiled plans to cut the cost of its electrolysers by about 75% in a new 2GW factory — set to be the world’s largest — and to reduce the price of green hydrogen to $1.50 per kg by 2025, roughly the same cost as grey H2 derived from unabated fossil fuels.
In his Nel Capital Markets Day presentation on Thursday, chief executive Jon André Løkke explained that the company will complete its first 500MW production line at its new fully automated alkaline-electrolyser factory in Herøya, Norway, in the second quarter of this year.
“By installing the first 500MW line, we will cut the cost approximately in half, and when we add additional lines and we optimise the design further and work on the technology, we should be able to cut the cost almost in half again,” he said.
“And on that journey, we will see that green renewable hydrogen is going to outcompete the fossil solutions.”
Løkke unveiled a new target for producing green hydrogen with a levelised cost of $1.50/kg by 2025, based on “a large-scale Nel [electrolyser] facility”.
“That is basically on par with fossil hydrogen,” he said, adding that costs would fall further after 2025, making green H2 cheaper than grey.
The small print in his presentation showed that the $1.50/kg price was based on renewable electricity at $20/MWh, including lifetime costs over 20 years — the cost of land, civil works, installation, commissioning and operations and maintenance.
The price of electricity represents 70-80% of the cost of green hydrogen, and $20/MWh is a pretty low cost for any renewable energy. Lazard puts the levelized cost of energy (LCOE) at $26-54/MWh for wind and $29-42/MWh for solar power, while the cheapest price seen on the global market being €11.14 (£13.54) per MWh for a solar project in Portugal.
Nel did not say when its Herø ya factory would be ramped up to 2GW, but Erik Løkke-Øwre, vice-president of operations, told the Capital Markets Day event that “we will add capacity as needed by the market”.
One of Nel’s biggest competitors, ITM Power, began operations at its new 1GW PEM electrolyser factory in Sheffield, England, earlier this month, starting with a production line of 350MW, which will be scaled up as orders come in.
ITM is also planning to build a second gigawatt-scale factory that “could be 2GW in size”, chief executive Graham Cooley recently told Recharge.