Hydrogen Market: Green Hydrogen, Fuel Cells and the Energy Transition

Hydrogen has been used as an industrial feedstock for decades, but it has recently attracted enormous attention as a potential clean energy carrier. The ability to produce hydrogen from water using renewable electricity — and then to use it as a fuel or chemical feedstock without emitting CO₂ — makes it attractive for decarbonising sectors that are difficult to electrify directly: heavy industry, shipping, aviation and long-haul transport. The hydrogen market is growing rapidly as governments and industry invest in production, infrastructure and end-use technology.

This article explains the main types of hydrogen, current and emerging uses, production technologies, infrastructure needs and the growth outlook for this strategically important market.

Key Takeaways

• Most hydrogen today is "grey hydrogen" made from natural gas, producing significant CO₂. "Green hydrogen" made by electrolysis using renewable electricity is growing rapidly.
• Industrial uses — ammonia for fertilisers, refining and chemicals — dominate current hydrogen demand.
• Fuel cells using hydrogen can generate electricity for vehicles, power plants and backup power with water as the only emission.
• Green hydrogen costs are falling and are on a trajectory toward competitiveness with fossil fuels in many applications.

Types of Hydrogen by Production Method

• Grey hydrogen: produced from natural gas via steam methane reforming (SMR), releasing CO₂. Accounts for most current global hydrogen production.
• Blue hydrogen: grey hydrogen production with carbon capture and storage (CCS) to trap and store the CO₂ emissions. Reduces but does not eliminate emissions.
• Green hydrogen: produced by electrolysis — splitting water into hydrogen and oxygen using renewable electricity. Zero direct emissions. The focus of most new investment and policy support.
• Turquoise hydrogen: methane pyrolysis, producing hydrogen and solid carbon rather than CO₂. Earlier stage technology.
• Pink hydrogen: electrolysis powered by nuclear electricity. Gaining interest as nuclear-powered clean hydrogen.

Current Industrial Uses

Most hydrogen today is used industrially, not as an energy carrier:

• Ammonia production: fertiliser manufacturing consumes around half of all hydrogen globally via the Haber-Bosch process.
• Oil refining: hydrogen is used to refine crude oil into cleaner fuels and remove sulphur.
• Chemical production: methanol, plastics and other petrochemicals use hydrogen as a feedstock.
• Steel production: hydrogen can replace coking coal in direct reduction of iron ore, a pathway to decarbonising steelmaking.

Emerging Energy Applications

Fuel Cells for Transport

Hydrogen fuel cell vehicles (FCEVs) convert hydrogen to electricity in a fuel cell, powering an electric motor with water as the only tailpipe emission. Toyota Mirai, Hyundai Nexo and heavy-duty trucks from Nikola and others use fuel cell technology. FCEVs offer longer range and faster refuelling than battery EVs, making them attractive for heavy trucks, buses and long-range applications where battery weight and charge time are constraints.

Power Generation and Backup Power

Fuel cells can generate electricity from hydrogen for stationary applications — grid backup, remote power and combined heat and power (CHP) for buildings and industrial facilities. For broader energy context, see our article on the energy storage market.

Industrial Decarbonisation

Replacing grey hydrogen in industrial processes with green hydrogen is one of the most direct ways to reduce industrial CO₂ emissions from steel, chemicals and refining — sectors where electrification is difficult.

Shipping and Aviation

Liquid hydrogen and ammonia (a hydrogen carrier) are being developed as low-carbon fuels for ships and aircraft, where long range makes hydrogen or its derivatives more practical than batteries.

Market Context

See Actual Market Research's analysis of the global hydrogen market for detailed sizing and projections. Investment in hydrogen has grown sharply, with national hydrogen strategies from Europe, Japan, South Korea, Australia, Chile and others committing billions to production, infrastructure and demand creation. The cost of green hydrogen production has fallen significantly as electrolyser costs decline alongside renewable electricity prices. Analysts project green hydrogen will reach cost parity with grey hydrogen in some markets during the late 2020s.

Infrastructure Challenges

Unlike electricity, hydrogen requires dedicated infrastructure: storage tanks, compression equipment, pipelines or transport by truck or ship, and dispensing stations for vehicles. Building this infrastructure at scale is a major challenge and cost. Repurposing natural gas pipelines for hydrogen is being explored but requires assessment and potentially recoating of pipe material. Hydrogen embrittlement — the tendency of hydrogen to weaken metals — is a critical engineering consideration for storage and transport.

Electrolyser Technology

Electrolysers split water into hydrogen and oxygen using electricity. The main types are:

• Alkaline electrolysers: mature technology with low capital cost. Suited for large-scale production but less flexible with varying renewable power input.
• PEM (proton exchange membrane) electrolysers: more flexible, can respond quickly to variable renewable power, higher efficiency but currently higher cost.
• SOEC (solid oxide electrolyser cells): high-temperature operation enables very high efficiency. Earlier stage commercially.

Electrolyser manufacturing is scaling rapidly in Europe, China and the United States, driving down costs.

Challenges

• High current cost of green hydrogen compared to fossil fuels without carbon pricing.
• Infrastructure investment requirements for storage, transport and dispensing.
• Scaling renewable electricity production alongside electrolysers without increasing emissions.
• Energy efficiency losses through the hydrogen production, compression, transport and reconversion chain.

Regional Outlook

Europe has the most ambitious green hydrogen policy, with large electrolyser targets and industrial hydrogen valleys in Germany, Spain and the Netherlands. Japan and South Korea are investing in hydrogen infrastructure and fuel cell vehicles. Australia is developing as a potential green hydrogen exporter, with large renewable resources and proximity to Asian markets. China is the largest electrolyser manufacturer. The United States is accelerating under the Inflation Reduction Act's clean hydrogen tax credits.

Strategic Recommendations

• For industrial hydrogen users: begin planning for green hydrogen supply to meet future carbon pricing and regulatory requirements.
• For energy companies: evaluate electrolyser investment in regions with low renewable electricity costs.
• For investors: electrolyser manufacturers, green ammonia producers and hydrogen infrastructure companies are near-term investment themes; longer-term value is in hydrogen becoming a global commodity.

Frequently Asked Questions

What is green hydrogen?

Hydrogen produced by splitting water using renewable electricity, with no direct CO₂ emissions. The most sustainable form of hydrogen production.

What is the difference between a hydrogen fuel cell and a battery?

A fuel cell generates electricity from hydrogen and oxygen, producing water. A battery stores and releases electrical energy chemically. Fuel cells are continuously refuelled; batteries are recharged.

Why is hydrogen important for the energy transition?

Hydrogen can decarbonise industrial processes, heavy transport and sectors where direct electrification is difficult, making it a complement to battery and solar/wind solutions.

When will green hydrogen be cost-competitive?

Analysts project that green hydrogen costs will reach parity with grey hydrogen in regions with abundant cheap renewables by the late 2020s to early 2030s, depending on carbon pricing.

Hydrogen Storage, Transport and Infrastructure

Hydrogen's physical properties — it is the lightest element, highly flammable and difficult to store — create significant infrastructure challenges. It can be stored as compressed gas (typically at 350 or 700 bar for vehicles), cryogenic liquid (−253°C) or in chemical carriers such as ammonia or liquid organic hydrogen carriers (LOHCs) that are easier to transport. Each storage and transport form involves energy losses and infrastructure costs. Compressed hydrogen is used in fuel cell vehicles; liquid hydrogen is used for some large-scale industrial applications; ammonia is increasingly considered as a hydrogen carrier for international trade, because it is liquid at moderate pressures and has existing shipping infrastructure. Pipelines can transport hydrogen — some existing natural gas pipelines can be repurposed — but hydrogen embrittlement of certain steels and the need for hydrogen-compatible compressors require engineering attention. For industrial applications of hydrogen, see our guide to the industrial pumps market for hydrogen-compatible fluid handling context.

Conclusion

The hydrogen market is transitioning from an industrial feedstock to a strategic clean energy carrier. The pace of investment and cost reduction suggests hydrogen will play a significant role in decarbonising the global economy, particularly in hard-to-abate sectors. Contact Actual Market Research for detailed analysis of hydrogen and clean energy markets.