Global Electrolyzer Industry in a Post-Pandemic World

The electrolyzer systems are used to for breaking water into hydrogen and oxygen through electrolysis. The electrolyzers consist of a cathode, an anode, and a membrane. It is estimated that around 95% hydrogen produced is from fossil fuels. 1-4% of hydrogen is produced through electrolysis. With increase in emphasis for reducing carbon footprint, the use hydrogen as fuel in industries such as automotive, locomotive, manufacturing, and chemical encourages the use of hydrogen produced from renewable sources, electrolyzers being one of them.

Meanwhile, favorable policies from governments are encouraging use of electric vehicle and technological advancement can offer lucrative opportunity for industry growth in the near future. Exempting electrolyzers from grid fees, taxes and levies, providing access to curtailed electricity and grid service revenues, and recognizing the value and price of green hydrogen are few measures that can be taken by government to promote healthy means of energy generation, which will aid the growth of electrolyzers market.

The major players in the electrolyzer industry are Cummins, Inc., Nel ASA, Siemens Energy Global GmbH, Co. KG. AG, Toshiba, Air Liquide, Plug Power, McPhy Energy, ITM Power, Idroenergy, and Next Hydrogen, and many others.

Impact of COVID-19 on several industries in context with Electrolyzer

Several industries have application of electrolyzers such as power generation, industrial feedstock, transportation, and building heating & power.

For power generation, electrolyzers are rapidly being used for power generation as a clean energy source. Since the hydrogen generated from electrolysis leaves out lower carbon footprint, thus the hydrogen generated through electrolysis is used as conventional energy alternative. The use of wind and solar energy sources for electricity used in electrolysis which also demonstrates the demand for electrolyzers in the industry. However, there was little impact on power generation industry as the demand for electricity declined but to and extent that was quickly recovered since the industry did not face any shut down.

For industrial energy and feedstock, many chemical and energy industries require hydrogen as feedstock to perform several operations. The hydrogen for use in several intermediate processes is categorized as feedstock, which can be generated through on site electrolyzer plant. Moreover, the manufacturing sites use electrolyzers on or near the plant locations for generating energy that is used in industrial processes. The market was deeply impacted as result of lockdown. Even after reopening of the economies, 100% workforce capacity is not allowed in many regions and thus the recovery is slowed down as a result.

The transportation industry is continuously seeking for ways to reduce their carbon footprint. Electric vehicles that run on fuel cells or batteries serve as an ideal way for the industry to lower their carbon emissions. Fuel cell vehicles (FCVs) are currently available in many countries such as Germany and the U.S. These FCVs are available in form of buses, heavy & light duty trucks, material handling, unmanned aerial vehicle, rail, and marine transportation. Germany already has rails running on fuel cells, and now Japan and South Korea are ready to deploy the same. Companies such as Hyundai, Toyota, and Honda provide commercial FCVs. However, transport restrictions, travel bans inflicted huge loss to the industry. Moreover, continued restriction on transport an travel bans that were seen during second wave and still anticipated during third wave will further contribute to negatively impact the electrolyzer industry.

Expectations from Electrolyzer

The economies have re-opened and are getting back to pre-COVID-19 situation. The countries have lifted shut down imposition in staged manners to continue several operations with intention to revive the fallen economies and simultaneously maintaining the precautions & minimizing the spread. Some countries have resumed full-fledged operation in all sectors whereas, some countries are still dealing with peaking numbers of positive cases hence, only essential sectors are permitted to operate. Electrolyzer are used in various sectors that have different range of impacts on the industry. Thus, it is tough to estimate a certain impact. However, it can be said that the correction will take at least 2 to 3 years. There are certain industry sectors that had positive impact but the negative impact is far more in comparison to them. Thus, it can be said that the electrolyzer industry has medium to high range of impact of COVID-19. In general, the demand for electrolyzer will rise gradually. However, the sectors that are impacted by macro factors will take longer time to come back to normal. 

There are certain geopolitical instabilities that affects the industry. However, the origin of the virus and failure of the Chinese government to control the spread initially led to disruption in demand supply chain globally as major parts of end-user depended on Chinese manufactures owing to imposed lockdowns. The sudden disruptions and huge impacts on various economies led the companies to rethink the dependence on China and thus, many companies announced shift from Chinese manufacturers to other countries. For example, Indian and Brazilian electrolyzer manufacturers saw decreased demand and experienced huge gap in raw material supply. Moreover, the rising tension between U.S. and China will also impact the market as both are major economies of and have significant role in global electrolyzer industry.

The companies across the globe are rethinking about the manufacturing bases, investment markets, feasibility of markets, favorable government policies, and others factors to shift the production bases, raw material suppliers, and other supply chain factors. Moreover, many companies grow through various strategies such as business expansions, and new ventures but there will be reduction in such activities as the companies will delay investments in large project. Moreover, the companies will invest toward strengthening supply chain by minimizing dependencies on outer sources. The digitalization will certainly grow in the electrolyzer industry.

The companies need to invest in downstream activities to decrease dependency. Maintaining strong relationships with the customer by offering technical supports and meeting specific demands will help companies survive the current situation. Electrolyzer industry require a strong R&D base, which will further help in the post-pandemic situation. Moreover, new application of the chemicals will open a new segment and market for the industry creating great opportunities. 

In conclusion, the electrolyzer industry suffered medium to large impact of COVID-19. The companies involved will need to be prepared and cope-up with drastic changes that have come with the pandemic. The changes in working methods, work environment, supply chain stages, and uncertain market situations will challenge the companies on various levels. Government bodies across the world have also announced various measures to help the sectors with many relaxations and investments in order to revive the industry.

Post COVID-19 Scenario

The industry will undergo several structural changes in context with cleanliness & hygiene, sustainability, raw material sourcing, manufacturing, supply chains. Moreover, the companies are engaged in improving liquidity, manage working capital, manage expenditures, and such. Focused implementations regarding safety and health of the employees across all domains is need of the hour. The management is faced with tough decisions during the pandemic times and go on making fundamental changes. Also, the company needs to be clear about the changes being made are to be temporary or permanent. However, the industry is expected to undergo several changes that will remain for long time.

Strategies such as end market positioning, regional positioning, supply chains, and liquidity. The companies need to find new applications for the various electrolyzer and offer customized products to fulfil the specific requirements. The companies need to reposition and re-establish themselves in various regional markets to strengthen their presence. Also, increasing product depth in the product portfolio can be a way to sustain the post-COVID impact.