Electrolyser manufacturer Nel is increasingly focusing its operations on the US as the hydrogen market starts to accelerate in North America.

Nel noted in its Q3 results forecast that two of its biggest ever contracts, signed during the most recent quarter, were for projects in the US.

One was for a 200MW electrolyser for an undisclosed customer and the other was with Australian energy company Woodside. Woodside will buy NOK600mn ($56.5mn) of alkaline electrolyser equipment for its H2OK liquid hydrogen project in Oklahoma.

“The EU wanted to lead in hydrogen… but to be frank the US has taken the lead due to the Inflation Reduction Act (IRA),” said CEO Hakon Volldal on the results call.

Developers in the US can qualify for subsidies of up to $3/kg under the scheme set out under the IRA. The EU is still finalising its rules on hydrogen as part of its revised Renewable Energy Directive.

The two large contracts were both for alkaline electrolysers, despite the traditional focus in North America on proton-exchange-membrane systems.

“The EU wanted to lead in hydrogen… but to be frank the US has taken the lead,” Volldal, Nel

The Woodside deal is particularly valuable because it fits with Nel’s strategy of dealing with customers that have a good potential of reaching FID. “They have the industrial background and experience that we are looking for,” says Volldal.

Woodside plans to build a further five or six similar facilities in the US, presenting “lots of opportunities for repeat business”, he adds.

Coming down the pipe

In the past, Nel has consistently given investors and analysts an indication that large orders are in the pipeline during results presentations, even if they are not yet confirmed. Volldal notes that these large orders have always materialised two or three quarters later, and he continued the trend on the recent call.

“More large orders are coming,” he says. “As a consequence of this, we are accelerating our site selection process for a US manufacturing facility.”

Voldall did not give a timeline for the establishment of a new US manufacturing facility but says the company is still seeking the right location as well as some government incentives.

The firm has said it wants to develop 8-10GW/yr of manufacturing capability by 2030. It has recently expanded its Norwegian Heroya plant to 1GW/yr and expects to expand further to 2GW/yr by 2025. It has a facility in Connecticut in the US that it is expanding to 200MW/yr in capacity, and which has the potential to reach 500MW/yr. The new US facility will be 4GW/yr in size, taking the total currently planned to 6.5GW/yr—4.5GW/yr of which will be in the US.

A fourth plant for the remaining 1.5GW/yr of anticipated capacity will be sited either in the EU or Asia, depending on how markets develop.

Revenue down, orders up

Nel reported revenues of NOK183mn, down by 20pc year-on-year—largely due to poor performance in its fuelling division.

But order intake was well up in Q3, at NOK775mn—the highest in any quarter in the past two years and almost double the second-highest quarterly amount of NOK418mn in Q4 2021. Furthermore, Nel’s guidance is that orders will be more than NOK600mn in Q4 2022. These orders will start to contribute to the firm’s balance sheet from 2023-24.

“We are moving from 10-20MW projects to 150-250 MW projects and, over time, to even bigger ones,” says Volldal. “It is a learning curve that fits into our strategy of selecting high-quality customers.”

Revenues were also impacted by the need to frontload training and R&D costs to service the recent large orders that have yet to be monetised.

Volldal casts doubt on external market research that said the global electrolyser market could reach 40-50GW/yr of capacity by 2025.

“What is actually under construction is 30-40pc of that number,” he says.

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Author: Tom Young