As heavy industry and transport sectors race to decarbonize, low-carbon hydrogen emerges as a promising zero-emission fuel, offering an alternative to battery electric vehicles for heavy transport while powering hard-to-abate industries from steel manufacturing to chemical production. Green hydrogen refers to hydrogen produced using renewable electricity, distinguishing it from hydrogen made using fossil fuels. Market intelligence firm IDTechEx explores the production processes, benefits, challenges, and key players of green hydrogen in a recent report, with some of the findings previewed here.
Introduction to green hydrogen and water electrolysis
Green hydrogen is produced through water electrolysis, which uses renewable electricity to split water molecules into hydrogen and oxygen. This happens in devices called electrolyzers, which are built from individual cells. Each cell contains several critical components: two electrodes (an anode and a cathode) separated by an electrolyte, transport layers and bipolar plates. The transport layers help gases and water move efficiently through the cell, while bipolar plates conduct electricity and help manage the flow of gases between cells. Multiple cells are combined to form a stack, and several stacks work together in an electrolysis plant along with the balance of plant–supporting systems for water purification, power control, heat management, and gas handling.
The efficiency of the green hydrogen plant depends on how well each component performs its role. The electrodes must efficiently catalyze reactions, the electrolyte needs to effectively transport ions, and the overall system must manage heat and pressure properly with minimal energy consumption. Improvements in these areas – from better electrode designs to more efficient thermal management – can reduce energy consumption and operating costs.
Different types of water electrolyzer technologies
There are four main types of electrolyzer technologies, each named after the way they split water molecules. Alkaline water electrolysis (AWE) is the most established technology, used industrially since the late 1930s. AWE uses a liquid alkaline solution as the electrolyte and remains the most widely deployed system today. AWE systems are known for their reliability, lower cost due to using more widely available metal components, and proven track record in large-scale applications. However, they tend to be less compact, slightly less efficient, and less able to respond to fluctuating renewable energy than newer technologies.
Proton exchange membrane electrolysis (PEMEL) is a newer technology that has gained significant market share. Instead of a liquid electrolyte, it uses a solid polymer membrane that conducts protons. PEMEL systems can respond quickly to fluctuating power inputs (making them ideal for use with variable renewable energy), operate at higher current densities, and produce pure hydrogen at high pressure. However, they typically cost more due to their use of precious metal catalysts and titanium bipolar plates.
Anion exchange membrane electrolysis (AEMEL) combines the design features of both AWE and PEMEL technologies. Like PEMEL, it uses a solid membrane instead of a liquid electrolyte but conducts negative ions (anions) like AWE systems. This emerging technology promises lower costs by using non-precious metal catalysts while maintaining the benefits of a solid membrane system.
Unlike the previously mentioned low-temperature technologies, solid oxide electrolysis (SOEC) operates at much higher temperatures (700-1000°C) using a ceramic membrane. Like AEMEL, SOEC is a newer technology but has been used in space missions to produce oxygen from CO2 in the Mars atmosphere. While still largely in the commercialization phase, SOEC systems offer potentially higher efficiencies, especially when integrated with industrial processes that can provide waste heat. However, the high operating temperatures present materials and durability challenges.
Currently, AWE and PEMEL dominate the market in terms of commercial installation, with AEMEL and SOEC emerging as promising future alternatives that could offer improved performance and lower costs as they mature.
Application sectors for green hydrogen
The market for green hydrogen spans several key sectors, with adoption timelines varying based on economic and technical readiness. In the immediate term (2024-2030), existing industrial hydrogen users lead adoption. Fertilizer and chemical manufacturers and refineries can readily switch to green hydrogen with minimal operational changes, making them natural early adopters.
The medium-term outlook (2030-2040) sees steel production and heavy transport emerging as a major demand driver, particularly in applications where batteries face limitations. Long-haul trucking and shipping are prime candidates, with hydrogen fuel cell vehicles offering faster refueling and longer ranges than battery alternatives.
Looking further ahead from 2040 to 2050, green hydrogen is expected to play a role in the power sector decarbonization, large-scale renewable energy storage, and aviation – all of which require further technology development and cost reductions to become commercially viable.
Success in these sectors often depends on strategic project placement. The most viable initiatives typically combine proximity to renewable energy sources, established industrial users, and strong infrastructure connections. For instance, port-industrial complexes like Rotterdam are emerging as early adoption hubs, where multiple users can share infrastructure costs while benefiting from existing transport links.
Benefits, challenges, and outlooks for green hydrogen
The benefits of green hydrogen extend beyond its use as a chemical feedstock and zero-emission energy – it offers unique advantages for sectors where electrification is difficult or impossible. Unlike batteries, hydrogen can be stored for long periods, providing the high-temperature heat needed for industrial processes. It also enables countries to convert abundant renewable resources into exportable energy, creating new economic opportunities.
However, significant challenges remain. Cost is the primary barrier as green hydrogen production is currently 3 to 7 times more expensive than its fossil fuel alternative – grey hydrogen. The technology also faces efficiency challenges, with energy losses in the production, storage, and conversion processes. Infrastructure presents another hurdle, as large-scale hydrogen transport and storage networks will need to be built mostly from scratch.
Despite these challenges, the water electrolyzer market shows promising growth. Global manufacturing capacity is scaling up rapidly, with major expansions announced across Europe, China, and North America. Technological improvements are steadily reducing costs, while growing policy support, including production incentives and carbon pricing, is improving project economics.
The outlook for 2030 and beyond appears to be positive, with the industry expecting electrolyzer costs to decrease as manufacturing scales up and designs improve. Early industrial adopters are paving the way, while transport and longer-term uses maintain strong growth potential. IDTechEx projects that the annual water electrolyzer market will exceed US$70 billion by 2034. However, access to more low-cost renewable electricity and stronger policy support for green hydrogen is needed to make it more competitive in various applications. After all, electricity forms the largest proportion of the cost of green hydrogen production.
IDTechEx details the benefits of green hydrogen production, alongside the barriers to large scale adoption. Their report, www.IDTechEx.com/Electrolyzer, also outlines the main applications for green hydrogen and the market sectors it will dominate most in, including transport, power, and chemicals. Downloadable sample pages are available for this report.
