Green hydrogen has long been hyped as a replacement for fossil fuels. Now, one of the industry’s biggest players is preparing its IPO

German industrial conglomerate ThyssenKrupp is weighing a potential initial public offering of its majority-owned hydrogen electrolyzer subsidiary. The parent plans to float up to 25% of the equity in ThyssenKrupp Nucera, a leading supplier of machinery needed to produce the gas, and aims to tempt sustainably-minded investors with a growing order book already worth €900 million.

“Our electrolysis and green hydrogen are the enablers for industries to decarbonize their still fossil-based processes,” Nucera CEO Denis Krude told analysts last Thursday.  

If ThyssenKrupp Nucera and its competitors are able to affordably scale hydrogen production—which Krude and others refer to as “the only zero carbon fuel”—the lightest and most abundant element on the periodic table could supplant coal and oil in the coming decades.

As a fuel, hydrogen is very versatile. Either used by itself, blended with natural gas, or converted into methane or methanol, it can be burned as an aviation fuel; chemically broken down into electricity via a vehicle’s fuel cell with water vapor as a byproduct; and used in a myriad of other ways.  

Commodities ranging from the steel, cement and glass used in construction, to the ammonia needed to fertilize crops could be produced with this energy source. These are industries that cannot run their manufacturing processes on electricity alone, so their factories would need to switch from fossil fuels to a green alternative in order to decarbonize.

Booming market

Krude estimates the global hydrogen market was worth €110 billion in 2020 and anticipates demand to rise sevenfold by 2050, driven mainly by hard-to-abate sectors such as transportation. Anywhere from 60% to 80% of that hydrogen will be “green”—that is, produced without any inherent carbon emissions in the process.

Perhaps just as importantly, forecasts for market growth have also been revised steadily higher. The Hydrogen Council initially predicted in 2019 that demand would hit 90 terawatt hours by 2030, but hiked that in November to 717 TWh—or eight times higher than just two years earlier. 

The catalyst to trigger a broad adoption among the global business community has been none other than COVID-19. Government stimulus programs to combat the pandemic’s recessionary effects are focusing their fiscal firepower on enabling a circular economy. 

“This has unleashed a whole new economy and creates huge demand for green hydrogen,” Krude said. 

Perhaps the thorniest question facing the company then is whether its commercially mature technology, called Alkaline Water Electrolysis (AWE), might eventually prove less competitive to newer forms of electrolysis currently under development. Critics argue Polymer Electrolyte Membrane (PEM) is better suited for smaller scale, decentralised hydrogen production that can be located closer to the customer or even on site, for example as part of a steel mill.

‘Grey’ vs ‘Blue’ hydrogen

Speed is of the essence when it comes to decarbonizing energy-intensive industries. The United Nations warned in October the world faces catastrophic climate change if it does wean quickly itself from its dependence on coal, oil and other fossil fuels for economic growth.

Although readily abundant, hydrogen is highly reactive and normally is not found in its gaseous state. Because its solitary electron quickly forms bonds with other elements, it combines readily to form a variety of molecules. Tearing those chemical links apart requires a lot of energy, and that’s where renewables come in.

Currently the bulk of hydrogen used in industrial applications is produced via a process called steam methane reforming. According to Nucera, roughly 10 metric tons of carbon dioxide are produced as a waste product for every ton of hydrogen.

That is because natural gas serves as the primary feedstock, rendering the resulting hydrogen “grey” rather than green. The colors incidentally don’t stop there either: grey hydrogen can be turned blue if the CO2 is trapped and stored rather than emitted, although environmental advocates question whether this process is truly as effective at capturing carbon as it claims.

ThyssenKrupp Nucera believes its technology can remedy this problem with renewables. A key failing of wind and solar power is that it is intermittent and as of today must immediately be used whenever it is generated—meaning that it goes to waste if it cannot be stored, for example in an industrial-size battery or a pump storage hydroplant. Krude’s plan is to harness this excess energy to convert conventional H₂O into valuable hydrogen gas—entirely emissions-free.

The ThyssenKrupp subsidiary sells electrolyzers that can split molecules of water, rather than those of methane, with the help of an electrical current provided by wind or solar. By 2050, it estimates 5,500 gigawatts of electrolyzer capacity will be installed (up from a negligible amount today).

For now the business based on this process—known as Alkaline Water Electrolysis—is just starting, and faces significant upfront costs to ramp up production. To fund ThyssenKrupp Nucera’s growth, it hopes to raise €500-€600 million from investors.

“We expect exponential profitable growth,” finance chief Arno Pfannschmidt told analysts, before pointing to the €900 million in AWE orders already booked—more than double that of its traditional chloralkaline business.

“We have the largest contracted backlog of all suppliers of green hydrogen,” he added.

Not all electrolyzers are created the same, however. 

Electrolyzer strategies

ThyssenKrupp Nucera, formerly known as Uhde Chlorine Engineers, believes its technology is commercially mature and well suited for industrial-scale projects, since it uses a basic 200-year-old chemical process adapted from its chloralkaline operations.

It already boasts 1 GW of annual production capacity at present, providing a standardized AWE electrolyzer with a 20 MW output that can be replicated as many times as desired depending on a customer’s need.

By comparison, competitor Siemens Energy is building an electrolyzer facility in Chile with newer Polymer Electrolyte Membrane technology. These tend to be smaller in scale due to the amount of precious metals like platinum needed. (There is also a third technology called solid oxide electrolysis but it is at a very early stage of development.)

Siemens argues PEM electroyzers fulfill even the most demanding environmental requirements from regulators, since it does not rely on caustic chemicals like potassium hydroxide, a strong lye. Moreover it can still operate efficiently when the electricity supply is intermittent, making it ideally suited for renewables like wind and solar. 

Hydrogen electrolysis has only recently become commercially attractive, because producing one kilogram of the gas from water typically can require some 55 kilowatt hours of power, roughly the entire amount of energy stored in a small EV like the Chevrolet Bolt or Volkswagen ID3. 

Only the advent of cheap and plentiful renewable electricity, combined with rising CO₂ costs (from cap-and-trade emission schemes, for example), has begun to tip the scales in its favor. 

Upcoming investments

The Biden administration aims to reduce the price of clean hydrogen to $1 for 1 kilogram in one decade — up from $5 or more — and U.S. utility Florida Power & Light plans to invest $65 million in the construction of a 20 MW electrolyzer. 

This is dwarfed however by Saudi Arabia’s 2 GW-plus clean hydrogen project in Neom, a lighthouse project for smart, sustainable living under development on the Red Sea. The Saudi government has contracted ThyssenKrupp with supplying the electrolyzers.

“It’s a real global trend to push net zero targets forward,” said the Nucera’s green hydrogen boss, Christoph Noeres. “Countries representing over 80% of global GDP plan to enter the hydrogen economy by 2025 with a clear, dedicated strategy, and importantly they will all have green hydrogen as their central pillar.”