Realising Australia’s green hydrogen production targets could yield an electrolyser manufacturing opportunity worth more than $1.7 billion a year by 2050 if government delivers support for local procurement, according to a new report from the national science agency.
Published on Wednesday, the CSIRO report highlights existing advantages in critical minerals as well as existing manufacturing capability that could form the base of an electrolyser manufacturing industry.
Given that only 13 per cent of announced hydrogen projects reached a final investment decision (FID) or commenced construction, the report calls on government to seriously consider supporting domestic manufacturing before the “window of opportunity” closes.
To size the market for hydrogen electrolyser manufacturing in Australia by 2050, CSIRO’s central modelling scenario assumes that “strong support” for local procurement from government would enable local producers to capture 55 per cent of the domestic market.
Under this scenario, hydrogen electrolyser manufacturing could generate annual revenue of $1.7 billion in revenue. The opportunity could reach as much as $3.9 billion if “Australia commercialises a unique, IP-protected electrolyser product that is in demand internationally”.
The modelling builds on previous CSIRO estimates included in the 2024 National Hydrogen Strategy on the volume of green hydrogen required to help meet the country’s decarbonisation needs and seize export opportunities.
Existing manufacturing capability from the aerospace, defence, and medical technology sectors align well with electrolyser assembly and moderately for component manufacturing. The report also highlights several companies that are commercialising novel electrolyser technologies.
However, there is currently low alignment with cell fabrication and stack assembly at industrial scale due to a lack of local expertise in creating “highly efficient, automated assembly lines required for production”.
CSIRO Hydrogen Futures Lead Dr Patrick Hartley told InnovationAus.com the green hydrogen sector continued to face the “chicken and egg” problem between demand and supply faced by new technologies sectors.
The report calls for further analysis to aggregate manufacturing demand across CleanTech opportunities, provide stakeholder visibility across the value chain, assess cost-effective manufacturing locations, and to investigate potential international partnerships.
These pathways were identified by stakeholders as underpinning successful electrolyser manufacturing support in other countries, including Spain and China, the latter which accounts for 60 per cent of global capacity.
In the hydrogen electrolyser market, some analysis has identified a “severe overcapacity” of nearly 17 times the amount of electrolyser capacity installed in 2023.
Dr Hartley said “there is demand, but it is yet to be realised”. The report says 96 per cent of global hydrogen projects announced for 2030 are at the feasibility stage or lower.
“To say there’s a huge oversupply, it’s true now, because there’s more electrolysers right now that are waiting for customers to get to that final investment decision. But that’s part of the chicken and egg problem of new technology generally,” Dr Hartley said.
The report says that “a steady progression of projects to FID in the near term will be critical to enable and sustain a domestic electrolyser manufacturing opportunity”.
In Australia alone, the hydrogen project pipeline is estimated to be around $225 billion, although there have been a number of high-profile projects that have been axed, including Origin Energy’s government-backed Hunter Valley Hydrogen Hub.
Dr Hartley acknowledged that it is taking longer than anticipated for the massive global pipeline of hydrogen projects to reach FID, partly owing to capital and electricity costs not coming down fast enough.
When asked about the cost of production that Australian electrolyser manufacturers would need to be competitive, Dr Hartley said there remains a lot of uncertainty, given “there’s quite a lot of modelling and you get different answers depending on who you talk to”.
But costs must come down to facilitate the “growing scale of electrolysis projects for hydrogen production and the need to compete with low-cost hydrogen from fossil fuel-dependent pathways,” according to the report.
“Electrolyser systems optimised for increased performance and lower capital costs will be needed and represent a pathway for emerging manufacturers to enter the market.”
Do you know more? Contact James Riley via Email.