Electrolyzer OEM Business Models
For the production of green hydrogen, four main types of electrolyzer technologies are commonly used: alkaline water electrolysis (AWE), proton exchange membrane (PEM), anion exchange membrane (AEM), and solid oxide electrolyzers (SOEC). Electrolyzer original equipment manufacturers (OEMs) employ various business strategies to implement their systems and cater to the market effectively.
Licensing of Stack Technologies
New OEMs often opt for licensing their technology, allowing them to concentrate on their core competencies, such as designing, enhancing, and manufacturing electrolyzer stacks. This approach enables expansion without significant capital investment for establishing international offices and integrating BOP (balance of plant) components. Licensing accelerates technology deployment and revenue generation but may introduce risks like potential IP mismanagement and quality inconsistencies due to third-party integration.
Notable companies adopting this business model include Ceres Power (SOEC), Hoeller Electrolyzer (PEMEL), and Enapter (AEMEL). Enapter, a relatively young company, has successfully expanded its reach globally through a network of distribution partners and system integrators, demonstrating the effectiveness of licensing in facilitating rapid geographic and market growth.
Turnkey Systems
In this model, the OEM provides both the electrolyzer stack and all necessary BOP components, often delivered in containerized or skid-mounted systems. This approach appeals to clients seeking a simplified procurement and installation process with a single point of contact for the entire system. Turnkey systems can significantly increase revenue per project and strengthen customer relationships.
However, substantial investment in design, assembly, and maintenance capabilities is required, along with the risk of project execution failures and supply chain disruptions related to BOP. Established players like Nel, Plug Power, thyssenkrupp nucera, and ITM Power utilize this approach as one of their revenue generation strategies.
Customized Systems
OEMs also provide customized systems where the electrolyzer stack and BOP are designed to meet specific project requirements, optimizing overall system efficiency and performance. This bespoke approach caters to clients needing systems tailored to large-scale industrial applications or integration with existing infrastructure. However, customized systems demand extensive engineering expertise and increased complexities in project development, potentially extending timelines.
Many of the same OEMs that provide turnkey solutions also offer customized systems, recognizing the benefits of catering to a broader range of market needs – from standardized turnkey solutions for quicker deployment to highly customized systems that optimize performance for specific applications.
Consortium Participation
Electrolyzer OEMs may participate in consortiums developing projects, involving multiple entities collaborating to share risks and rewards of large-scale projects. This strategy allows for pooling of expertise and financial resources, reducing the burden on any single company and enabling projects that might be difficult to achieve individually.
In-House Project Development
OEMs may also develop projects independently, taking full responsibility for every aspect, including technology development, manufacturing, contracting EPC companies, securing long-term offtakers, financing, and overseeing commissioning and operations. This model offers maximal control over the value chain, potentially leading to higher margins and direct relationships with end-users.
It is particularly suited to large companies with robust financial backing and extensive expertise across multiple domains. However, substantial capital requirements, management of various project elements, and assumption of operational and market risks are the primary challenges.
Plug Power exemplifies a pure-play hydrogen equipment company adopting this in-house project development approach. The company is developing multiple liquid hydrogen production sites across the US, managing all project elements from production to the delivery of liquid hydrogen to its customers.
Market Trends and Technology Maturity
AEM electrolyzers, typically used in small-scale applications, are less mature compared to PEM and AWE technologies, with significant developments now pushing into medium-scale capacities.
PEM electrolyzers, recognized for their operational reliability, are commonly deployed in applications ranging from small to medium scales, with current project capacities under 50 MW. Larger projects over 100 MW are still in the development stages.
Alkaline water electrolysis (AWE), the most mature technology, is employed widely across small to large-scale projects over 100 MW, including emerging GW-scale projects.
Solid oxide electrolyzers (SOEC), operating at high temperatures, are optimal for integration with industrial processes that can provide necessary heat or steam, allowing for innovative applications such as synthetic fuel production by co-electrolysis of CO and H2O.
