The hydrogen economy sounds very appealing on the road to net zero. But when is it likely to deliver its full potential?

The global installed capacity of the electrolyser market is relatively low, having reached only 1.4 GW at the end of 2023, according to the International Energy Agency (IEA). While global electrolyser manufacturing capacity doubled since 2022 to reach 25 GW by end-2023, there’s still a long way to go to meet net zero targets. Numerous green hydrogen projects are in the pipeline and are forecast to reach an installed capacity of 230–520 GW. However, the IEA notes ‘the majority of these projects is still at early stages of development, and only around 20 GW have taken final investment decision (FID)’.

In fact, to reach the IEA’s net zero emissions 2050 scenario, installed electrolysis capacity would have to climb to 560 GW by 2030 alone. Is this feasible, given the current geopolitical situation, the Trump administration’s negative approach to renewables, and a challenging global economy?

‘The majority of these [green hydrogen] projects is still at early stages of development, and only around 20 GW have taken final investment decision.’ – IEA report on electrolysers

There are marked variations across the globe when it comes to installed electrolyser capacity and progress towards the hydrogen economy. China leads on installed capacity, the US has made major inroads, the European Union has adopted important policies (such as the EU Green Deal and Hydrogen Strategy), and both India and the Middle East are gaining momentum with large-scale projects. New projects include Statera Energy’s receipt of approval from Aberdeenshire Council for the UK’s largest green hydrogen project of 3 GW capacity, due online by 2030.

China currently accounts for 60% of global electrolyser manufacturing capacity and reached 0.8 GW in 2023, with more than 9 GW having taken FID or under construction. As the IEA explains, if all the announced projects were realised globally – reaching 230 GW by 2030 – China and Europe together would account for around half of the capacity, followed by Latin America and Africa with 17% each and Australia with 15%. But there is uncertainty about future demand, given the ‘lack of clarity on regulation and certification’, notes the IEA, as well as lack of infrastructure to deliver hydrogen to final consumers, and limited access to low-cost finance for emerging economies.

Indeed, a hydrogen monitoring report from the EU Agency for the Cooperation of Energy Regulators (ACER) forecasts that Europe is likely to miss its 2030 renewable hydrogen targets due to slow electrolyser rollout. ‘Though [there are] 70 GW of EU electrolyser projects, few are advanced,’ it says.

The primary driver behind the growth of the electrolyser market is the increasing demand for ‘green hydrogen’, which is powered by renewable energy sources like wind, solar, hydro as well as nuclear. The rapid decline in the cost of renewable energy has made green hydrogen production increasingly viable. Moreover, green hydrogen is considered vital for decarbonising industries that are difficult to electrify, like steel production, chemicals and heavy transport.

Technology 
Technology innovation is driving significant improvements in the performance and efficiency of electrolysers, while also making them more cost-competitive – due to advances in materials, catalysts and membrane technologies which reduce energy consumption and boost hydrogen production capacity, according to a report by TechSci Research and others.

A variety of electrolyser technologies are deployed, typically consuming 50–55 kWh of electricity for every kg of hydrogen produced. These include alkaline water electrolysers (AWEs), proton exchange membrane (PEM) electrolysis, solid oxide electrolysis (SOEC), and anion exchange membrane (AEM) electrolysers.

AWEs are the most commercially developed, and use electricity to split water using cathodic reduction of water to produce hydrogen and simultaneous anodic oxidation of nickel (II) hydroxide – Ni(OH)₂ – to produce hydroxide ions (NiOOH).

PEM electrolysis uses electricity to split water molecules into hydrogen and oxygen using a semi-permeable membrane. When a voltage is applied, water at the anode is split to produce hydrogen ions, electrons and oxygen. The hydrogen ions (protons) in the polymer electrolyte pass through the membrane to the cathode, where they combine with electrons to form hydrogen gas.

In SOEC, steam at the cathode combines with electrons from an external circuit to form hydrogen gas and negatively charged oxygen ions. The oxygen ions pass through a solid ceramic membrane and react at the anode to form oxygen and generate electrons for the external circuit. SOEC operates at high temperatures between 500°C and 850°C, to yield hydrogen and oxygen gases.

AEM electrolysers split water using an AEM membrane, the core component of which consists of multiple cells that selectively conduct negatively charged ions (anions), which allow water to be broken down. This process produces hydrogen under pressure of high purity, with AEM offering advantages in terms of low-cost transition metal catalysts and a more alkaline environment.

AWE and PEM electrolysers are available commercially, with the former commonly used in the chlor-alkali business to produce chlorine and sodium hydroxide. However, the pace of deployment for dedicated hydrogen production only started to accelerate in the early 2020s, and most hydrogen is produced by steam reformation of natural gas (a fossil fuel). The IEA considers that both these technologies ‘require policy support and improvements to stay competitive with traditional hydrogen production technologies based on unabated [emission] fossil fuels’.

Policy change is underway
Several governments have implemented policies that support the deployment of green hydrogen production in line with their net zero targets.

The European Commission has approved €18.9bn funding for four waves of hydrogen-related ‘Important Projects of Common European Interest’, with a call for at least €10bn of private investment. The Hydrogen Bank was launched in 2023 to provide a fixed premium for renewable hydrogen. The first auction awarded €720mn to seven projects, and the second auction was launched in December 2024, with funds of up to €1.3bn.

In 2021, Germany launched the H2Global Initiative, which is similar to the UK’s Contracts for Difference (CfD) approach, compensating for the difference between supply and demand prices with grant funding from the German government. The pilot auction was launched in December 2022, with results announced in July 2024. A second auction is underway. The Netherlands, Australia and Canada have also announced auctions.

The UK announced winners of the first Hydrogen Allocation Round in December 2023, with £2bn of operational expenditure support over 15 years for 11 projects totalling 125 MW of electrolysis. The first Electrolytic Allocation Round was opened between July 2022 and January 2023, supporting at least 250 MW of capacity, and a second allocation round was closed in April 2024.

Meanwhile, the Netherlands allocated €1bn to electrolysis in the 2024 budget.

In 2023, India approved the National Green Hydrogen Mission with the aim of producing 5mn tonnes of renewable hydrogen by 2030, as part of its Strategic Interventions for Green Hydrogen Transition programme.

The market grows
The electrolyser market is expanding rapidly. Among the leading companies is China’s LONGI which has leveraged expertise in renewable energy (particularly solar) to develop high efficiency alkaline water electrolysers, including Sinopec Global’s first 10,000 tonne green hydrogen project, with a hydrogen production capacity of 20,000 t/y, to replace hydrogen from natural gas in refining and process operations in western China.

US-based Plug Power manufactures PEM electrolysers for large-scale industrial applications and green hydrogen infrastructure. The company has strategic partnerships with big-name companies like Amazon and Walmart to integrate hydrogen solutions into their operations. At Amazon’s fulfilment centre in Aurora, Colorado, a 1 MW PEM electrolyser is producing green hydrogen to fuel more than 225 hydrogen fuel cell forklift trucks. Plug Power signed a basic engineering and design package (BEDP) in early 2024 for a 500 MW electrolyser to be located in Europe, and began first deliveries of green hydrogen from the Hy2gen electrolyser in Werlte, Germany, in April 2025 for GasUnie.

Other electrolyser suppliers include Hygreen (China), Bloom Energy (US), ITM Power (UK), McPhy Energy (France), PERIC Hydrogen Technologies (China), Electric Hydrogen (US), Thyssenkrupp Nucera and Cummins (US), among many others.

Sheffield-based ITM Power manufactures PEM electrolysers for use by hydrogen cell vehicles and a host of industrial processes. Neptune V units are to be supplied to Westnetza Dortmund-based German distribution system operator, for public transport and a German utility company. The 5 MW green hydrogen plant utilises ITM’s Trident stack PEM technology and claims to be the industry’s ‘smallest footprint per MW’.

French company McPhy produces high-pressure alkaline electrolysis, from light applications to multi-MW solutions. Its electrolysers are currently used for Audi’s E-gas manufacturing plant, and by energy companies such as Engie at the GRHYD green electricity demonstrator in Dunkirk, to bring flexibility to power networks.

Under a supply contract with CF Industries, Thyssen-Krupp Nucera is to deliver a green hydrogen plant for the production of green ammonia at the NEOM project in Saudi Arabia, to produce 650 t/d of green hydrogen. The 2 GW electrolysis plant will be one of the largest green hydrogen projects in the world.

Cummins installed its Hylyzer 100-30, 20 MW electrolyser at the Air Liquide hydrogen production facility in Becancour, Quebec, to produce over 3,000 t/y of hydrogen using clean hydropower. The modular electrolyser platform is claimed to be the largest PEM electrolyser in the world. The company has also provided six Cummins HySTAT 60-10 electrolysers for a demonstrator power-to-gas project in Falkenhagen, Germany, generating 360 Nm³/h of hydrogen which is fed via a pipeline into the gas grid, as a store for wind energy.

Innovation
On the innovation front, SOEC is quickly approaching commercialisation. In April 2023, a 2.6 MW SOEC electrolyser was installed in a Neste refinery in the Netherlands. Then Bloom Energy installed a 4 MW SOEC system in NASA’s Ames Research Centre in California. Bloom claims that its high-temperature unit (typically operating above 700–800°C) produces 20–25% more hydrogen per MW than lower temperature electrolysers (which typically operate at 50–80°C) such as the PEM or alkaline. Meanwhile, Topsoe is nearing completion of a 500 MW/y manufacturing facility in Denmark.

Looking at the cost picture, although PEM technology has shown significant cost reductions over recent decades, it remains 20% more expensive than alkaline systems, according to IEA estimates. Capital expenditure required for an installed electrolyser system is in the range of $2,000–2,450/kWe for alkaline and PEM technologies respectively, although the Chinese systems offer $750–1,300/kWe for alkaline electrolysis.

Traditionally, dedicated hydrogen production systems have been built in small volumes for niche markets. However, with growing demand for large-scale systems, investment costs are likely to reduce through economies of scale and automation.

Alkaline and PEM electrolysers have comparable efficiency depending on the design, and can operate flexibly to allow direct coupling with variable renewable electricity sources.

By comparison, SOEC systems, such as those provided by Sunfire, have achieved up to 84% electrical efficiency on a low heating value basis. New electrolyser designs, like Hysata’s capillary technology, report 80% efficiency on a low heating value basis.

There is also important progress in terms of the reduction of critical minerals intensity. Start-up BSKL is developing a catalyst-coated membrane which claims to use 25 times less iridium and platinum compared to traditional PEM designs. Clean Power Hydrogen has developed a membrane-free electrolyser that uses no platinum-based metals. And Toshiba has partnered with Bekaert to commercialise technology that is claimed to reduce iridium use by 90%.

Certainly, the seeds of the hydrogen economy appear to be planted worldwide and will potentially bloom in the years ahead, depending on the cost of electricity – which is particularly high in Europe currently.

• Further reading: ‘China solidifies lead in global electrolyser market’. China’s national plan identifies hydrogen as a key element in its low-carbon energy transition strategy, targeting 200,000 t/y of green hydrogen production by the end of 2025. However, the latest analysis from Rystad Energy suggests China will exceed that volume by the end of 2024. It forecasts that about 2.5 GW of hydrogen electrolyser capacity will have been installed by the end of the year, producing 220,000 t/y of green hydrogen, some 6,000 t/y more than the rest of the world combined.
• Discover more about new innovations that are driving change in hydrogen fuel cell technologies, including recent advancements from Hyundai, Toyota, Ricardo and Bramble Energy.