ITM Power to build second UK electrolyzer factory as it eyes rapid hydrogen market expansion

Electrolyzer manufacturer ITM Power is to build a second UK factory to make renewable hydrogen production equipment as it prepares for rapid market expansion.

ITM Power has signed a heads of terms agreement to acquire a site in Sheffield, north England, for the 1.5 GW/year facility, it said in a statement Nov. 9.

"The planning and construction of our second, 1.5 GW capacity, factory marks the next step on delivering our strategic plan to create a blueprint for an automated PEM electrolyzer manufacturing facility to be rolled out internationally," ITM Power CEO Graham Cooley said in the statement.

Calculated production cost assessments for renewable hydrogen, produced by electrolysis of water, have been pushed sharply higher in recent weeks by soaring feedstock power prices, based on spot power prices.

S&P Global Platts assessed the cost of hydrogen production via proton exchange membrane electrolysis in the UK at GBP13.23/kg ($17.98/kg) on Nov. 8 (including capex, based on month-ahead power prices), up from below GBP5/kg when the assessment launched in April.

But production costs are expected to fall dramatically this decade, and are already significantly lower when taking into account renewable power purchase agreements.

Cooley told Platts in October that the recent spike in gas prices in Europe meant renewable hydrogen production costs were already below those for conventional fossil fuel-derived hydrogen production, when based on the latest most competitive PPAs.

"The cost of green hydrogen is now lower than the cost of grey hydrogen in most places around the world, because of the increase in the cost of natural gas," Cooley said in an interview Oct. 21. "If you link an electrolyzer to a PPA with a wind farm, [the power price] doesn't fluctuate at all, for the whole of the duration of the PPA."

UK solar PPA offers in Q2 2021 were GBP46.59/MWh, while wind PPA offers were GBP48.09/MWh, according to the Zeigo platform. By contrast, Platts assessed day-ahead baseload UK power prices at GBP168.15/MWh Nov. 8, up from GBP68.00/MWh at the start of the year.

Electrolyzer production expansion

ITM Power raised additional funds at the start of October to finance its production capacity expansion.

The significant scaling up would "take advantage of the forecast exponential demand growth in the global green hydrogen electrolyzer market," ITM Power said at the time.

The new factory will complement the company's existing 1 GW/year plant at Bessemer Park, also in Sheffield.

"We are also focused on increasing utilization and throughput at our Bessemer Park Gigafactory as we prepare for the next step change in capacity," Cooley added in the statement.

ITM Power said the new factory would provide the template for a first international facility, expected to have a production capacity of 2.5 GW/year, bringing ITM's total output capacity to 5 GW/year by the end of 2024.

The new UK plant will have an enlarged power supply that will allow testing of multiple modules of next-generation products at the same time, the statement said.

The site for the new facility is about 2 miles from the existing factory, and is part of the University of Sheffield's innovation district, ITM Power said. The new factory is expected to cost around GBP50 million to GBP55 million ($68 million to $75 million).

"The land has outline planning consent and a full design brief agreed with the City Council," it said. "The acquisition is subject to the grant of full planning permission for the new factory."