Electrolyser Market

The electrolyzer market is witnessing substantial growth owing to its rising usage across various applications. The increasing push towards reducing carbon emission and rising use of electric vehicles are some of the key factors driving the growth of electrolyzer market. Further, growing application of electrolyzer in energy storage and increasing green hydrogen projects are creating significant opportunities for the electrolyzer market, which will further positively influence its market demand in the estimated timeframe. However, fluctuation in the prices of raw material may hamper the market growth of the electrolyzer. FIGURE 4 GLOBAL ELECTROLYZER MARKET: MARKET GROWTH FACTOR ANALYSIS (2018-2032) Impact Type Impact Analysis Market Factors Index Base (2023) 2018–2023 2024–2026 2027–2032 Growth Inhibiting Factor MACRO FACTORS Growth Promoting Factor Push towards reducing carbon emission ` Growth Steading Factor Increase in use of electric vehicles Note: Increasing use in ➢ The Impact indicated the measure of metallurgical processes influence on market growth Fluctuation in the prices of raw material ➢ Each Factor is graded based on historic impact and estimated influence on the MICRO FACTORS market. Increasing focus on market development activities by industry players Disruptions in supply chain Source: MRFR Analysis Copyright © 2024 Market Research Future 44

4.2.1 PUSH TOWARDS REDUCING CARBON EMISSION The growing global effort to combat the problem of climate change has driven various nations to reduce carbon emissions significantly. Electrolyzers, which are the devices that split water into hydrogen and oxygen using electricity, are becoming critical to this transition. This hydrogen, especially when produced using renewable energy, is generally referred to as green hydrogen and is considered vital in achieving a low-carbon economy. The transition from fossil fuels to renewable energy sources is one of the significant components of global decarbonization efforts. Renewable energy sources such as wind and solar power are intermittent, and this creates a need for efficient energy storage solutions. Green hydrogen, obtaining using electrolyzers, is emerging as a viable solution for storing excess renewable energy. By converting renewable electricity into hydrogen, electrolyzers allows the long-term storage and transportation of clean energy. This capability supports the global net-zero targets, thereby increasing demand for electrolyzers in sectors aiming to decarbonize energy systems. Industrial sectors such as cement, steel, and chemicals are some of the significant carbon emitters and thus these sectors are increasingly inclining towards green hydrogen. For instance, the steel industry, which relies substantially on coal for blast furnaces, is increasingly using hydrogen-based Direct Reduced Iron (DRI) technology. Electrolyzers are highly used for producing the massive quantities of hydrogen required for such processes. The push for cleaner industrial operations has, therefore, positioned electrolyzers as a pivotal technology in achieving lower emissions in several industrial sectors. Further, the transportation industry contributes significantly towards global emissions, thus, to reduce this, the industry is undergoing a transformation towards zero- emission solutions. Hydrogen-powered fuel cell vehicles (FCEVs), particularly in heavy-duty and long-haul applications, are gaining huge popularity. Electrolyzers are highly used in producing the green hydrogen required to fuel these vehicles. Moreover, the establishment of hydrogen refueling stations, often equipped with on-site electrolyzers, has expanded the scope of hydrogen in decarbonizing transportation. Electrolyzers are also being used in decentralized energy systems in order to support local grids and provide grid-balancing services. By consuming surplus electricity during periods of high renewable energy generation, electrolyzers prevent grid congestion and help in stabilizing energy networks. This capability is especially valuable in regions where renewables, such as wind and solar power are highly used. With the increasing adoption of electrolyzers for grid flexibility, their demand continues to rise, further fueled by the push for reducing emissions from conventional grid operations. Also, technological advancements in electrolyzer designs, such as proton exchange membrane (PEM) and solid oxide electrolyzers (SOE), have substantially enhanced scalability and efficiency while reducing costs. Copyright © 2024 Market Research Future 45 FIGURE 5 GLOBAL RENEWABLE ELECTRICITY GENERATION, 2023(IN TERAWATT-HOURS) 4,500.00 4,240.01 4,000.00 3,500.00 3,000.00 2,500.00 2,325.31 2,000.00 1,641.58 1,500.00 1,000.00 781.50 500.00 - Hydropower Wind Solar Other Renewables Source: Our World in Data and MRFR Analysis The rising awareness regarding environmental problems is encouraging various nations around the world to increase dependency on renewable energy sources. For instance, in September 2023, the European Parliament backed a new target of 42.5% of renewable energy sources by 2030. The renewable energy sector in Europe is strongly driven by its climate goals and regulatory frameworks. Under the European Green Deal, the European Union aims at achieving climate neutrality by 2050, further implying a significant acceleration of emission reductions. Such initiatives play an important role in driving the need for renewable energy. Further, the Renewable Energy Target (RET) is an Australian Government scheme that aims to reduce greenhouse gas emissions in the electricity sector and increase renewable electricity generation. The RET sets a target to deliver an extra 33,000 gigawatt-hours (GWh) of electricity from renewable sources every year from 2020 to 2030. Thus, the increasing share of the electricity generated from renewable energy sources is expected to fuel the growth of electrolyzers market. 4.2.2 INCREASE IN USE OF E LECTRIC VEHICLES Green hydrogen which is produced through electrolyzers powered by renewable energy has become an essential energy carrier within the electric vehicle market. While various electric vehicle relies on lithium-ion batteries, green hydrogen serves as a complementary solution, especially for applications requiring long-range energy or rapid refueling, such as commercial fleets and heavy-duty vehicles. Hydrogen is also vital for sectors that are challenging to electrify directly, making electrolyzers crucial in the diversified energy strategy. As the electric vehicle market expands, the need for a robust hydrogen infrastructure is also propelling, thereby accelerating the demand for advanced electrolyzer technologies that are capable of large-scale hydrogen production. The market of hydrogen fuel cell vehicles is gaining traction within the electric vehicle market, especially in regions that are focussing on zero-emission transportation. Fuel cell electric vehicles rely on hydrogen as a primary energy source, making the availability of green hydrogen crucial for their adoption. The increase in fuel cell electric vehicles positively impacts the demand for electrolyzers, as green hy

4.4.1 ANNOUNCEMENT OF LARGE CAPACITY GREEN HYDROGEN PROJECTS Renewable hydrogen is rapidly emerging as a key enabling technology with significant potential to decarbonize various sectors, in line with global efforts to meet net zero emission targets. Renewable hydrogen is hydrogen produced using renewable energy sources via electrolysis, a process that splits water molecules into hydrogen and oxygen. This hydrogen can be stored, transported, or used on-site as a clean and flexible fuel for a wide range of applications. Thus, its demand and usage are witnessing significant growth. The increasing hydrogen projects all over the world is creating high growth opportunities for the electrolyzer market. In 2022, more than 112 million tonnes of new low-carbon hydrogen capacity was announced, mainly in the US, Denmark, Egypt, Canada and Portugal. Hydrogen strategies are being developed and implemented worldwide, for instance, the Chinese government has laid out a medium- and long-term development plan for hydrogen (2021-2035), with the goals of bringing 50,000 fuel cell electric vehicles on the road by 2025; producing green hydrogen using renewables to reach 100,000 to 200,000 tonnes annually by 2025; and using clean hydrogen in energy storage, electricity generation and industry. Further, in 2021, India announced a National Hydrogen Energy Mission to develop a roadmap for using hydrogen as an energy source; the aims are to create a global hub for the manufacturing of hydrogen technologies; to facilitate demand creation in industries such as fertilizers, steel and petrochemicals; and to demonstrate the use of hydrogen in transport applications. In 2020, the European Commission adopted “hydrogen strategy for a climate-neutral Europe”. The strategy aims to support the deployment of clean hydrogen in various sectors, including industry, transport, and power generation, as part of EU efforts to achieve climate neutrality by 2050. Also, Germany's National Hydrogen Strategy intends to expand the role of hydrogen to decrease national dependence on coal. The government plans to invest USD 7.5 billion to achieve a hydrogen production capacity of 5 GW by 2030 and another 5 GW during 2035-2040, allowing exemption from the green power surcharge (EEG levy). Further, in 2022-2023, Germany signed a landmark agreement with Denmark to build a 1 GW electrolysis plant in Denmark that will produce green hydrogen using offshore wind power, at a total project cost of USD 32.6 billion. Spain released a strategy in 2020 that provides a vision for Copyright © 2024 Market Research Future 50 developing a favourable environment for the supply and demand of renewable hydrogen. Key milestones of the strategy are commissioning 300-600 MW of electrolysers by 2024 and 4 GW by 2030, and reducing 4.6 million tonnes of CO2 emissions, through mobilising USD 9.6 billion of investments. In February 2022, four grant programmes totaling USD 267 million were deployed to address innovation in the hydrogen value chain. This included USD 108 million for large electrolysers, USD 86 million for piloting fuel cell electric vehicles, USD 43 million for industrial and experimental research, and USD 32 million for capacity building. The US released its draft National Clean Hydrogen Strategy Roadmap in late 2022. The plan sets out three key priorities: targeting strategic, high-impact uses of hydrogen; reducing the cost of clean hydrogen to USD 1 per kilogram by 2031; and deploying at least four regional clean hydrogen hubs through an unprecedented USD 7 billion in funding. Australia released its green hydrogen strategy in 2019, laying out a comprehensive plan to position the country as a major global player in the hydrogen industry by 2030. The strategy aims to develop a clean, innovative, safe and competitive hydrogen industry that delivers significant economic, social, and environmental benefits, with a set of ambitious targets. The Australian government is providing USD 526 million towards the establishment of eight hydrogen hubs through the Regional Hydrogen Hubs programme and other commitments, including nine feasibility studies to support potential future hydrogen hubs. Brazil published a resolution in 2022 establishing the National Hydrogen Program (PNH2), which aims to promote the development of a competitive hydrogen market in the country. The programme seeks to encourage the production, distribution and use of hydrogen as a clean energy source, with a focus on renewable hydrogen. Chile's national strategy was released in 2020 and has three main strategic pillars: commissioning 5 GW of electrolysis by 2025, ensuring the most competitively priced green hydrogen in the world by 2030 and becoming among the world's top exporter of green hydrogen by 2040. Thus, the increasing green hydrogen projects worldwide are playing a vital role in creating substantial growth opportunities for electrolyzer market. 4.4.2 GROWING APPLICATION IN ENERGY STORAGE The energy landscape globally is rapidly shifting toward renewable sources such as wind, solar, and hydropower, significantly driven by the propelling need for cleaner and sustainable energy solutions. However, one of the significant challenges faced by renewable energy sector is its intermittent nature as sunlight and wind are not always available, and this factor creates high need for efficient energy storage systems. Energy storage, particularly through technologies such as batteries and hydrogen storage, is essential for ensuring a reliable and consistent energy supply. Electrolyzers, that helps in generating hydrogen through water electrolysis using electricity, are emerging as a pivotal technology for energy storage solutions. Hydrogen is increasingly valued as an ideal solution for large-scale energy storage. Electrolyzers use electricity to obtain green hydrogen and oxygen from water. This hydrogen can then be stored for later use, either by converting it back into electr

4.3.1 FLUCTUATION IN THE PRICES OF RAW MATERIAL Electrolyzers play a vital role in the production of green hydrogen by splitting water into hydrogen and oxygen with the help of electricity, thus it is increasingly adopted as part of the transition towards cleaner energy systems. But the fluctuations in raw material prices are posing substantial challenges to the growth of the electrolyzer market. The volatility in prices of key raw materials affects the overall cost structure, scalability, and competitiveness of electrolyzers. Raw material costs constitute a significant portion of the total manufacturing costs of electrolyzers. Metals such as iridium and platinum, which are highly used as catalysts in PEM (proton exchange membrane) electrolyzers, are particularly prone to price volatility. Further, these metals are rare, with limited sources of supply, also their prices are significantly impacted by factors such as mining disruptions, geopolitical instability and fluctuating global demand. Thus, the fluctuations in their costs directly translate into higher production costs, making electrolyzers less competitive compared to traditional hydrogen production methods such as steam methane reforming (SMR). Fluctuating raw material prices negatively influences the market of electrolyzers by creating uncertainty in the production costs, further making it challenging for the manufacturers to obtain economies of scale and increase profit margine. For PEM electrolyzers, the reliance on platinum group metals not only increases the production cost but also limits the scope for cost reduction through large-scale manufacturing. The high and unpredictable prices of these materials hinder the efforts to make green hydrogen cost competitive. The fluctuating costs of raw materials impacts the financial viability of hydrogen projects, where electrolyzers are a vital component. Developers of green hydrogen projects faces uncertainties regarding the long-term cost of electrolyzers. This uncertainty can result in delays in project implementation or a reduction in project scope, further impacting the demand for electrolyzers. Thus, all these factors together are contributing towards restraining the market growth of electrolyzers. 4.3.2 REQUIRES HIGH INITIAL INVESTMENT Electrolyzers are manufactured using specialized materials and advanced technologies, and this makes their production highly capital-intensive. For instance, proton exchange membrane (PEM) electrolyzers and solid oxide electrolyzers (SOE) rely on high- performance components such as membranes, catalysts and ceramics. The catalysts generally include precious metals which are expensive as well as difficult to source. The fabrication of the components used for manufacturing electrolyzers requires sophisticated production techniques, further increasing the overall production costs. Moreover, the need for high precision and durability in electrolyzers requires rigorous quality control measures, further adding to the overall manufacturing expense. This capital-intensive production process results in high unit costs, especially for smaller scale companies, where economies of scale are harder to achieve. Furthermore, electrolyzers needs specialized infrastructure, including cooling systems, power sources, and gas handling equipment. Integrating electrolyzers into existing systems, such as renewable energy plants or industrial facilities, generally involves significant retrofitting and engineering work and these additional requirements increases the initial investment needed for electrolyzer adoption. Furthermore, the installation of large-scale electrolyzers for industrial or utility-scale hydrogen production is a complicated process that requires skilled labor, advanced engineering expertise, and substantial time. This complexity ultimately incraeses the installation costs, making electrolyzers less appealing compared to alternative hydrogen production technologies which have lower upfront costs. Copyright © 2024 Market Research Future 49 FIGURE 8 RESTRAINT IMPACT ANALYSIS (2024-2032) Restraint 1 Fluctuation in the prices of raw material Restraint 5 Restraint 2 Fluctuations in demand from end use industries Requires high initial investment Restraint 4 Restraint 3 High production complexities Disruptions in supply chain Note: The Impact indicated the measure of influence on market growth.