Cumulative installation of electrolytic cells is expected to exceed 15GW by 2025, with a potential market size of over $30 billion
Energy storage for power, steel making for industry and transportation are the biggest applications for hydrogen from electrolytic water. Hydrogen is produced from a wide range of sources, including hydrogen by-products from the chlor-alkali industry, hydrogen from electrolytic water, hydrogen from chemical raw materials and hydrogen from fossil resources. The application of hydrogen in energy storage is to reduce the volatility of renewable energy sources and therefore hydrogen for energy storage must be produced from electrolysis of water. The industrial and transport sectors are the key areas for carbon reduction in the future. Hydrogen production from chlor-alkali, chemical feedstock and petrochemical resources will inevitably lead to carbon emissions, so in the long term hydrogen for the industrial and transport sectors will also inevitably be produced by electrolysis from renewable energy sources.
The cumulative installed capacity of electrolysers will exceed 15GW by 2025, with a potential market size of over RMB 30 billion. The calculation logic and assumptions are as follows:
Based on the above estimation of the demand for green hydrogen in power storage, industrial steelmaking and transportation, assuming that the electrolysers are coupled with wind power and photovoltaic to produce hydrogen, the electrolysers will produce 200 bcf/MW of hydrogen from 2022 to 2025, working 4.5-6 hours a day, 365 days a year, and according to our estimation, the cumulative installed capacity of electrolysers is expected to reach 15GW by 2025.
Based on the Xinjiang Kucha electrolytic water project and the related equipment costs of alkaline and PEM disclosed by ITM, the price of alkaline and PEM electrolytic water equipment is expected to be $2-1.5/W and $15-7.5/W from 2022 to 2025, with most of the electrolytic water projects in the demonstration stage, and alkaline electrolysers taking a larger market share with more mature technology and lower initial equipment costs. As the industry moves towards commercialisation, the focus will be on full lifecycle costs, and with the rapid decline in PEM equipment costs, the market share of PEM cells is expected to grow from 1% to 10% between 2021 and 2025. By calculating the market space for alkaline and PEM cells separately, it is expected that the cumulative installation of electrolytic cells will exceed 15GW in 2025, with a market size of over RMB 30 billion.