Renewable electricity is abundant and cheap, but electricity alone cannot decarbonize all sectors. Aviation, shipping, heavy industry, and long-distance heating require energy-dense fuels that electricity cannot provide.
Green hydrogen, produced by using renewable electricity to split water into hydrogen and oxygen is emerging as the solution to this fundamental challenge.
Green hydrogen production via water electrolysis is straightforward in principle: pass renewable electricity through water, and hydrogen and oxygen separate. The challenge is scale and cost.
Currently, green hydrogen costs $4-6 per kilogram, compared to $1-2 per kilogram for conventional hydrogen produced from natural gas. This cost differential has limited deployment to pilot projects and niche applications.
However, the trajectory is clear: as renewable electricity costs continue declining and electrolyzer manufacturing scales, green hydrogen costs are projected to reach $2-3 per kilogram by 2030.
The applications are diverse and high-impact. In heavy industry, green hydrogen can replace natural gas in steel and cement production, eliminating 30% of global industrial emissions. In shipping, hydrogen fuel cells can power cargo vessels, replacing diesel. In aviation, hydrogen can be converted to synthetic fuels for aircraft.
In power systems, hydrogen provides long-duration energy storage, storing excess renewable electricity as chemical energy for use weeks or months later.
Global hydrogen demand reached 100 million tons in 2024, but nearly all of this is conventional hydrogen from natural gas. Green hydrogen production is expected to double to 1.8 million tons annually by 2026, still a tiny fraction of total demand but growing rapidly.
Several countries are investing heavily in green hydrogen infrastructure. The European Union has committed €1 billion to hydrogen projects. The United States is deploying green hydrogen plants in Louisiana and California. Australia is positioning itself as a green hydrogen exporter to Asia.
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For energy systems, green hydrogen serves multiple roles. As a fuel, it powers vehicles and industrial processes. As energy storage, it absorbs excess renewable electricity and releases it when needed. As a chemical feedstock, it produces ammonia for fertilizers and synthetic fuels for aviation. This versatility makes green hydrogen a cornerstone of deep decarbonization strategies.
The practical challenge is infrastructure. Hydrogen requires specialized storage, transport, and distribution systems. Existing natural gas pipelines can be adapted for hydrogen, but new infrastructure is needed for production, storage, and end-use. This infrastructure investment is substantial but necessary. Several countries are developing hydrogen strategies that include production targets, infrastructure investment, and end-use applications.
For renewable energy investors and utilities, green hydrogen represents a new market opportunity. Companies that develop green hydrogen production capabilities, storage systems, and end-use applications will capture significant value. For energy planners, green hydrogen is not an optional technology; it is essential for achieving deep decarbonization in hard-to-electrify sectors.
By Thuita Gatero, Managing Editor, Africa Digest News. He specializes in conversations around data centers, AI, cloud infrastructure, and energy.
