The Electrolyzer Tech Business Is Booming

While the latest hydrogen hype cycle may be waning, investment in the fundamental technologies needed to power the green hydrogen economy is holding strong. This past week, two major players in the space secured significant funding: $100 million in credit financing for Massachusetts-based Electric Hydrogen and $111 million for the Australian startup Hysata’s Series B round. Both companies manufacture electrolyzers, the clean energy-powered devices that produce green hydrogen by splitting water molecules apart.

“There is greater clarity in the marketplace now generally about what's required, what it takes to build projects, what it takes to actually get product out there,” Patrick Molloy, a principal at the energy think tank RMI, told me. These investments show that the hydrogen industry is moving beyond the hubris and getting practical about scaling up, he said. “It bodes well for projects coming through the pipeline. It bodes well for the role and the value of this technology stream as we move towards deployment.”

Here are the quick facts on each company:

Electric Hydrogen

• Uses a newer electrolyzer tech called proton exchange membrane electrolysis, which is easy to integrate with renewables due to its ability to ramp up and down in tandem with intermittent energy supply, though it’s generally more expensive and technically complex than alkaline electrolysis. That’s the primary tech used in China, which is home to over half of the world’s installed electrolysis capacity.
• Raised $380 million in a Series C round of funding last year, becoming the industry’s first “unicorn.” So far, the company has secured at least 2 gigawatts of conditional orders for its electrolyzers, 1 gigawatt from U.S. utility company AES and 1 gigawatt from the Australian mining giant Fortescue.
• HSBC led its latest round of financing, with J.P. Morgan, Stifel Bank, and Hercules Capital also participating. The four banks joined existing big-name backers from across an array of industries, including climate tech giant Breakthrough Energy Ventures, mining companies Fortescue and Rio Tinto, oil and gas major BP, American Airlines, Microsoft and Amazon. “Those markets are the pieces of the puzzle where a very large volume of hydrogen is required, and also where the need for decarbonization is both most pressing and probably most constrained,” Molloy said of the investor mix.
• Opened a new factory in Massachusetts just a few weeks ago. When fully operational, the facility will have the capacity to produce 1.2 gigawatts of electrolyzers annually — more than double the current global installed electrolysis capacity.
• Prices for the electrolyzers aren’t yet available, although Electric Hydrogen does boast that they’re “designed to deliver the lowest cost green hydrogen on earth.”

Hysata

• Unsurprisingly, also claims that its tech will create the world’s cheapest hydrogen. It touts its electrolyzer’s 95% efficiency, which is about 20% higher than most existing electrolysis processes. The company achieves this by putting a spin on traditional alkaline electrolysis, using a very low-resistance separator between the electrodes and eliminating the formation of gaseous hydrogen and oxygen bubbles. This increases the system’s efficiency and generates about 10 times less heat than most standard electrolysis methods, thereby lowering the amount of energy required to cool the system.
• May also have achieved a funding milestone, as the company touted its $111 million round as the largest Series B in Australian cleantech history. Hong Kong private equity firm Templewater and BP led the round, with participation from the South Korean steel company POSCO, among others.
• Opened its first manufacturing facility in New South Wales, Australia, last August. There, it produces 5 megawatt units at an initial scale of 100 gigawatts per year. “We will ramp up rapidly to gigascale capacity thereafter,” Hysata CEO Paul Barrett said in a statement last year.

Uncertainty in the domestic hydrogen industry remains, however, as the U.S. awaits final 45V tax credit rules. The proposed rules released in December lay out stringent requirements for clean hydrogen, primarily that it be produced from a recently built source of carbon-free electricity, generated in the same hour and in roughly the same location that it’s used. Some in the industry are pushing back against these standards, though, and whatever makes it into the final set of regulations will greatly influence the future of the U.S.’s hydrogen industry. The Biden administration has yet to set out a timeline for releasing finalized guidance, so for now, many potential hydrogen customers are taking a wait-and-see approach. Thus far, demand for clean hydrogen has not kept pace with planned supply. And according to BNEF, only one electrolyzer manufacturer turned a profit last year.

“We need to start seeing more deals,” Molloy admitted, though he sees these funding announcements as a step in the right direction. “That also starts to open up the door for more specific conversations around need and help move the technology down the cost curve,” he said.