In 2022, the global economy experienced rampant inflation, rising interest rates and a consequent increase in the cost of capital. As a result, leveraging debt for capital-intensive renewable energy and hydrogen projects has become increasingly difficult, risky, and expensive. Simultaneously, projects face higher labour costs and raw materials sourcing issues, resulting in upward revisions of costs and, in some cases, even project cancellations.
At the same time, the higher cost of capital has increased electrolyser equipment prices globally. In 2022, capital cost for electrolyses ranged between 1,590€ per kilowatt (kW) for alkaline water electrolysis and 1,758€/kW for proton exchange membrane electrolysis (PEMEL). This represents a 9% year-on-year increase compared to the costs registered in 2021. Europe also experienced a substantial increase in electricity prices since mid-2021, driven mainly by surging natural gas prices following Russia’s invasion of Ukraine.
This led to increased renewable energy sourcing costs – the single most significant cost component of green hydrogen – especially for electrolysers sourcing renewable electricity via the grid.
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