Q&A: Next Hydrogen pushes forward electrolyser technology
If the green future is going to be as hydrogen rich as many have predicted, then the world is going to need a tremendous number of electrolysers. inspiratia caught up with Next Hydrogen's CEO and President Raveel Afzaal to discuss electrolyser innovations and the future of the hydrogen market, as the company readies its upcoming IPO
Next Hydrogen is a Canadian electrolyser company with some big ambitions. Originally founded in 2008, it has been developing a rich intellectual property (IP) portfolio for years, patiently awaiting the maturity of the market.
The company is now weeks away from its IPO on the TSX Venture Exchange aspiring to provide investors with a pure-play exposure to the electrolyser scene in North America, following an oversubscribed private equity financing in the end of April  of Can$55 million (£32.1m €37.3m).
They aim to revolutionise the electrolyser market with ground-breaking designs that utilise the best of both PEM (polymer electrolyte membrane) and alkaline systems. Next Hydrogen's ultimate goal is to facilitate cost parity between green and grey hydrogen by delivering efficient electrolyser solutions at the lowest possible price.
Where did your journey with Next Hydrogen start?
I was leading the Canadian sustainability and special situations equity research practice for Canaccord Genuity, the financial service provider, where I covered the hydrogen space as well. When hydrogen started picking up in 2019, I started looking for electrolysis companies here in Canada, and while we had Ballard Power on the fuel cell side, I could not find any other electrolysis companies. The writing was on the wall with where the hydrogen industry was going and to produce green hydrogen, you need electrolysers.
In April 2020, I was approached by Next Hydrogen, and it was an easy decision for me. I joined the company in August 2020 as a consultant and subsequently as President and CEO.
The main reasons why I joined the company included, firstly, the scarcity premium: the notable lack of electrolyser producers not just in Canada but globally. Secondly, the team. They had proven expertise in water electrolysis and a good track record in the space. And finally, the unique technology that the company has, which can significantly lower the cost of green hydrogen.
What is Next Hydrogen's mission statement?
Number one, we want to be a solutions provider. There is a big difference between an equipment provider and a solutions provider. Two, we want to decarbonise large sections of the economy, by which we mean the transport and industrial sectors. The way you do that is through reducing the cost of green hydrogen. Three, we want to do it globally and at scale.
How did you decide between alkaline and PEM electrolysers?
When the company was founded, we saw that PEM technology had significant advantages. For example, high dynamic response and high density of operations, which has implications for how compact you can make the systems. The issue with PEM cells is that they are not very durable compared to alkaline cells and they are more expensive. They also use rare metals, which have seen price spikes.
Similarly, we looked at alkaline technology, which has some significant advantages in terms of cost competitiveness compared to PEM. It also has much longer lifetime – 90,000 hours compared with 60,000 hours. But then they had some weaknesses in terms of the dynamic response and the current density is also very low relative to PEM. We asked, 'Is it possible to take the best features out of PEM and alkaline?', and that is what we have done.
We have revolutionised how fluids and gases flow through the alkaline system to give you that high current density, up to 2.5 times the current density of typical alkaline systems, with the dynamic response of PEM and the cost and durability of alkaline cells. We have tried to occupy this rare space between PEM and alkaline, getting the best pieces of both technologies and coming up with our unique electrolyser design.
Towards what direction are Next Hydrogen's patents pushing the boundaries of the technology?
We have 38 patents from 12 plus years of IP development. What we have today is current density, dynamic response, and scalability.
We can go up to a current density of around 1 A/cm2 (amp per centimetre square of active surface area) – a typical alkaline system is half of this. If you have two times the current density, you are using less materials to produce more hydrogen compared to a typical alkaline system, that gives you significant cost advantage over your peers.
We are ramping up and down at around 5% per second, a typical alkaline system can be up to 5% per minute.
We believe we can scale these systems without compromising on the current density that leads to significant economies of scale. We have a 2MW system that we are looking to commercialise this year. You can compare that with the 6MW system that we are designing, which is only around 50% bigger in terms of footprint yet gives you three times more output.
What are the use cases for a Next Hydrogen electrolyser?
What we offer is the first purpose-built, alkaline electrolyser for integration with renewable energy resources, which takes us into the green hydrogen market. We will use wind farms, that are directly tied to electrolysers, to produce large quantities of green hydrogen, which can be then transported in a hub and spoke model to transportation customers as well as industrial customers that need to decarbonise their operations using green hydrogen.
Since the on-site market moved first, that is where we have our pilots. The first was with major retailer Canadian Tire back in 2014. They were testing out fuel cell forklifts for their distribution centres. They ran a competitive process and selected us. Following that, we won further contracts to produce about 650 kg of hydrogen per day from 2MW systems. We are also seeing visibility on industrial projects such as green ammonia projects.
We think that the large-scale green hydrogen market is going to move next. Our objective right now is to have six systems up and running in various locations so we can showcase to our customers as we prepare to build our backlog.
What is the company's funding plan?
Since September of last year, we have raised about Can$64 million (£37.3m €43.4m). Our most recent financing was Can$55 million (£32.1m €37.3m) at Can$10 (£5.83 €6.79) per share – this is a post-money valuation of about Can$255 million (£148.7m €173m). When we get listed at the end of this month, we will be the only company providing investors with pure play exposure to the electrolyser scene in North America, and the fourth one globally. The market is expected to grow to about US$80 billion (£56.2bn €65.4bn) in terms of just equipment sales by 2030 according to industry experts.
What this capital really does for us is that it fully funds our product development roadmap. The roadmap is going to be about Can$20 million (£11.7m €13.6m) over the next three years. A 1MW, 2MW and 3MW product line is being commercialised this year and then in 2023 we aim to start demoing our 'Green Giant' line, which has the larger scale 3MW, 6MW, and 9MW alkaline electrolysers.
We have also started a phase zero study on our PEM electrolysers, and we have patents on PEM design as well. We are agnostic to what cells you use, alkaline or PEM cells. Our commitment is that you will get the most out of these cells using our unique cell design architecture, which allows us to push these cells harder, reduce your upfront capital expenditure, and give you higher current density operations.
What is going to shape the global hydrogen market for the next decade?
Hydrogen is one of the only solutions to decarbonise industrial processes like cement, steel and fertiliser; they cannot be electrified. These are some of the most carbon intensive processes in the world. They need a clean gas as soon as possible and green hydrogen can play a vital role in those markets. Then there is the heavy mobility market where fuel cells and electric batteries are complementary, not competitors.
Around 80% of the cost of green hydrogen is the cost of renewables, where prices are plummeting, the other 20% is the electrolysis equipment, which has already come down significantly over the last 5-6 years and we think it is going to go down much further. We think that the cost of electrolysis equipment can drop by about 50% or more in the next 5 years.
Decarbonising is no longer just governments' problem, it is the private sector's problem, because of the work that ESG funds are doing, and environmentally conscious investors. They are asking the private sector to decarbonise operations to keep the same cost of capital available to them as before.
Together this is a very powerful combination of factors. Assuming the price of renewable electricity is in the US$0.02 per kW range you could see, by 2030, the cost of green hydrogen being US$1.50 per kg, which is going to be a very competitive, alternative energy source.
How soon will green hydrogen compete with fossil intensive hydrogen providers?
Today, grey hydrogen is about US$1.50 (£1.06 €1.23) per kg, blue is about US$2.50 (£1.76 €2.05) per kg, at site. However, if you need to transport to a customer, depending on where that customer is, blue hydrogen can get to about US$14 (£9.85 €11.46) per kg even now. You have to liquify it, transport it, store it in cryogenic tanks, vaporise and dispense it – it all adds cost.
Right now, green hydrogen – assuming US$1 million (£0.7m €0.82m) per MW for equipment cost, and US$0.08 (£0.056 €0.065) per kWh electricity price (some solar projects now are running at US$0.04 (£0.028 €0.033) per kWh) – is close to US$10 (£7.04 €8.18) per kg. And this way, you have an on-site hydrogen solution, so no supply disruption. Depending on the utilisation rate and location, green hydrogen right now can be cheaper and more reliable than grey or blue hydrogen. In terms of carbon emissions, grey hydrogen is about 12kg of carbon emission per kg of hydrogen, blue is around 6kg, and green hydrogen from renewable energy is next to zero.
Frankly speaking, we want blue hydrogen to do well too because if more people use blue hydrogen, that is just going to open bigger market opportunities for us to sell our green hydrogen into. We know where the price of green hydrogen is going, and it is going to be at parity. We wish everybody well, but at the end of the day, we want a decarbonised world. That is what drives us.