Electrolyser manufacturers are confident of converting order backlogs into revenues despite difficult market conditions, according to recent company results announcements.

Higher inflation, interest rates and electricity prices in the US and Europe are making it harder for green hydrogen projects to take FIDs, while normalising gas prices have reduced the cost of manufacturing grey hydrogen.

Green hydrogen project developers are becoming more cautious with their electrolyser orders as a consequence of the difficult operating conditions, according to Nel CEO Hakon Volldal.

“Some months ago, customers were willing to place advance purchase orders on equipment prior to doing FEED studies and prior to taking FID,” he said. “Now people are a bit more careful. They would like to… secure financing before they place the contract with Nel for electrolysers.”

This means the firm is going through a transition period that is reducing order intake. Nel’s order intake amounted to NOK352m ($31.5mn) in Q3, down 55% year-on-year.

“The strongest market dynamics are currently seen in North America” Ponikwar, Thyssenkrupp Nucera

But Volldal was keen to emphasise demand would still be there in the medium and long term. “It does not change the fundamentals,” he said. “Despite some negative market sentiment in hydrogen, this is a good development for Nel… when money is cheap and free, everybody can do things. When it is more difficult, only the best can do things.”

Like many electrolyser manufacturing firms, Nel has set its sights on the US as the biggest near-term growth market, following the passing of the Inflation Reduction Act (IRA). Earlier this year, the firm took the decision to site its next gigafactory in Detroit, Michigan after evaluating locations around the world.

When fully developed, the Michigan facility will have a production capacity of up to 4GW of alkaline and proton-exchange-membrane electrolysers. The factory will be built in steps to match supply with demand, and the firm is still waiting before it takes an FID on the project.

“We would like to see the orders materialise before we invest,” he said. “That is why we do not give an exact schedule for when we start the construction work.”

US focus

Similarly, newcomer Thyssenkrupp Nucera—which held its IPO in July—sees the US as the most likely location for orders in the near term.

“The strongest market dynamics are currently seen in North America,” said CEO Werner Ponikwar, who also referenced India as a “very attractive” market.

The manufacturer also saw its order intake for the first nine months of the fiscal year down on last year—falling from €1.2b ($1.27b) to €535m—although it noted that last year’s figure was inflated by a large order from the Neom green hydrogen project in Saudi Arabia.

Despite this, Thyssenkrupp Nucera stands by its growth targets and expects to break-even for EBITDA by 2025. “We are very much convinced there is significant upside potential in the long term driven by our strong market position in a dynamically growing industry,” said CFO Arno Pfannschmidt.

The electrolyser division of US-based Cummins, Accelera, has similarly not changed its growth plans. “We are on the same trajectory we have talked about previously, building up manufacturing capacity here in the US and Europe, and continuing to have our backlog growing,” said Cummins CEO Jennifer Rumsey.

Accelera saw sales of sales of $259m for the first nine months of the fiscal year, up from $106mn for the same period the previous year.

UK-based electrolyser manufacturer ITM Power also announced in October that it would start bidding for US projects.

The firm has had a difficult 12 months, beginning a year-long scheme to cut costs after reporting significant adjusted EBITDA losses of £54.1m ($65.9m) in the first half of 2023, caused by inventory losses stacking on investment outlay. The firm’s next trading statement is due in December.

A recent study by the German Council of Economic Experts confirmed that IRA subsidies are increasing the attractiveness of the US as a production location and thus strengthening the incentive to invest in the region.

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Author: Tom Young