Norway’s Nel Hydrogen, one of the world’s leading electrolyser manufacturers, has announced that it is temporarily shutting down its flagship plant in Herøya. The decision is due to the slower-than-expected growth of the green hydrogen market. The company will also cut 20% of the plant’s workforce to adapt to current market conditions.

Key facts

Herøya plant:

• Capacity: 1 GW of alkaline electrolyzers per year.
• Status: Production has been temporarily halted.
• Reasons for the shutdown: Low demand – order volumes for 2023 and 2024 have fallen short of expectations.
• Project delays: Some customer projects are being postponed or cancelled.
• Accounts receivable: Nel has initiated collection proceedings with an unnamed customer.
• Staff cuts: About 20% of the plant’s employees will be laid off.

Management statements

Håkon Volldal, President and CEO of Nel:
“The long-term prospects for clean hydrogen production remain strong, but today we have to make difficult decisions. I regret that we have to lay off many qualified people now.”

Future plans

Nel continues to work on several projects, including fee-based design studies (FEED).
The company sees opportunities to sell PEM systems (proton exchange membrane electrolyzers), which are manufactured at a plant in Connecticut, USA.

• Context: green hydrogen market
• Overcapacity: according to BloombergNEF research, global electrolyzer production capacity is 15 times higher than demand.
• Competition with China: Chinese electrolyzers are about 4 times cheaper than their Western counterparts, which puts pressure on European manufacturers.
• Broken Promises: in 2022, Nel promised to reduce the cost of green hydrogen to $1.50 per kilogram by 2025. However, the current cost remains significantly higher.

Problems for electrolyser manufacturers

• Low Demand: many green hydrogen projects are delayed due to high costs and insufficient government support.
• Financial Difficulties: manufacturers face liquidity problems due to payment delays and low order volumes.
• Competition: chinese companies dominate the market due to low prices, making Western manufacturers less competitiveC

Green hydrogen market outlook

• Long-Term Potential: demand for green hydrogen is expected to increase after 2030, when large industrial and transport projects are implemented.
• Government Support: subsidies, tax incentives, and infrastructure investments are needed to accelerate market development.
• Technological innovation: Reducing the cost of electrolysers and increasing their efficiency remain key challenges.

Conclusion

The temporary shutdown of the Nel Hydrogen plant in Herøy is another sign of the difficulties facing the green hydrogen market. Despite the long-term potential, current demand remains low and competition from Chinese producers is increasing.

A coordinated effort by governments, businesses and investors is needed to successfully develop the industry. Only then can green hydrogen become a real alternative to fossil fuels and contribute to global decarbonisation.