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method is widely used worldwide for producing volume, the TIC for electrolyzers is expected
clean hydrogen. Currently, three types of
electrolyzers are commercially available:
alkaline, proton-exchange membrane
(PEM), and anion-exchange membrane
(AEM). Additionally, solid oxide electrolyzers
are undergoing pilot demonstrations. All
commercial electrolyzers operate at low
to moderate temperatures (30–80°C) and
can integrate with intermittent renewable
electricity sources with various degrees of
flexibility. The three types of electrolyzers
differ significantly in terms of technology,
underlying scientific principles of operation,
and the materials used. Their costs also vary
substantially. In 2023, the total installed cost
(TIC) for electrolyzers was reported to range
between $1,700 and $2,000, approximately
10% higher than that in 2022 due to inflation. 3
The lower end of this estimate is for alkaline
electrolyzers, and the upper end for PEM.
Data on AEM electrolyzers is limited as they
are newer to the market. The TIC includes
equipment costs for electrolyzers, gas
purifiers, transformers, rectifiers, and
related components, as well as expenses
foe engineering, construction labor, project
development, interconnection agreements,
insurance, etc.
Challenges in electrolyzer project
development
There are several factors hindering the
development of electrolyzer projects and
slowing down investment decisions. The
primary factor is the high capital costs
associated with electrolyzers. However, the
manufacturing price of electrolyzers has been
gradually declining over the years, except
for the last couple of years, due to COVID-19
pandemic-related supply chain issues
and global inflation. Owing to the number
of projects in the pipeline, various policy
incentives, and an increase in manufacturing
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to drop to the $500–$1,000/kW range by 2030.
More original equipment manufacturers are
entering the market with innovative designs.
I believe that the reduction in electrolyzer
prices is on a good track to contribute
significantly to achieving our net-zero targets
in the coming decades.
Standardization: a path to risk
mitigation
One crucial aspect for de-risking
electrolyzer projects is the standardization
of electrolyzers. Currently, electrolyzers
from different manufacturers vary in
design, shape, size, and integration within
hydrogen production plants. This variation
means project developers cannot guarantee
that stacks from one manufacturer can be
seamlessly replaced by those from another.
If the electrolyzers come from a large,
financially stable company, this issue is
less pronounced. However, the market is
seeing an influx of startups with innovative
electrolyzer designs. Despite the uniqueness
and appeal of their products from a design and
engineering perspective, the financial stability
of these startups is often uncertain, leading
to increased insurance costs. Ensuring that
stacks from smaller manufacturers can be
replaced with those from larger, established
companies in the event of bankruptcy
would significantly reduce project risks and
insurance costs. I believe that professional
hydrogen associations should implement a set
of standards for electrolyzer manufacturers in
the future.
Establishing bankability of electrolyzer
products
An important method for de-risking new
technologies involves thorough assessments
by third-party engineering firms. Startups
entering the market can greatly benefit
Hydrogen Tech World | Issue 14 | February 2024

Low-carbon hydrogen project risk
ent
i pm st
qu co
E d
s ta
from this, as it provides credibility to their
unestablished products. Investors, project
developers, and insurance companies often
seek independent evaluations of design,
performance, manufacturing processes,
quality control procedures, warranties,
product support strategies, and the company’s
structure to determine the bankability of the
product and its manufacturer. At Black &
Veatch, we have been conducting independent
assessments of clean-energy technologies
for over a decade, with many manufacturers
benefiting greatly from these reports.
Assuring safety and compliance
In addition, the manufacturers should also
have proper knowledge about the design
safety rules (e.g., National Fire Protection
Association or NFPA rules in the US) and the
certifications (e.g., UL certifications) for their
products to be considered for projects. From
my experience, many electrolyzer companies
failed in the past in terms of design safety
that comply with the regulations, such as,
NFPA rules which are essential for projects
in the US. An experienced engineering firm
like Black & Veatch can help electrolyzer
Hydrogen Tech World | Issue 14 | February 2024
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manufacturers navigate this complex
landscape efficiently.
Partnering with large engineering
firms
In addition to the safety and compliance
issues, many electrolyzer manufacturers
have struggled to demonstrate effective
and reliable post-installation product support
strategies. A viable approach for smaller
companies is to collaborate with engineering
firms that have the required expertise to
n i on t n e manage post-installation operations and
ig z at uc l it y sig nc
s i d
o bi De l ia
De ar d Pr ka p
maintenance on their behalf. Black & Veatch,
n o m for example, have been involved in more than
n b a c
1 GW electrolyzer projects all over the world,
and are currently establishing partnerships
with electrolyzer manufacturers to provide
post-installation product support services
included in the warranty. For smaller
companies or foreign manufacturers with less
manpower in a certain country can benefit
from these partnerships.
Following these guidelines, electrolyzer
technologies from different manufacturers
can be de-risked for project deployment and
will eventually catalyze the hydrogen economy
and mitigate the effects of climate change.
As electrolyzers are expensive and there are
significant safety risks associated with hydrogen,
electrolyzer manufacturers should use the above-
mentioned strategies to de-risk their products.
Notes and references
*Note: Opinions expressed in this article are
solely my own and do not represent those of
my employer, Black & Veatch.
1
U.S. Department of Energy. (2023, December
19). Clean Hydrogen Production Tax Credit
(45V) Resources .
2
H ydrogen Council and McKinsey & Company.
(2023). Hydrogen Insights 2023.
3
IEA. (2023). Global Hydrogen Review 2023.
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