What is Green Hydrogen?

What is Green Hydrogen?

Green hydrogen is hydrogen gas produced through electrolysis—splitting water into hydrogen and oxygen using electricity—where the electricity comes from renewable sources such as wind, solar, or hydropower. Unlike grey hydrogen (produced from natural gas without carbon capture, accounting for ~95% of current production) or blue hydrogen (natural gas with CCS), green hydrogen generates no direct CO2 emissions during production.

Why It Matters

Hydrogen is essential to decarbonizing sectors that electricity alone cannot reach. Steel production, long-haul shipping, aviation, high-temperature industrial heat, and long-duration energy storage all require energy carriers with properties that batteries and direct electrification cannot provide. Green hydrogen—and its derivatives like green ammonia and synthetic fuels—is the leading candidate for these applications.

Global hydrogen demand stands at approximately 95 million tonnes per year, almost entirely supplied by grey hydrogen at a production cost of $1-2/kg. Green hydrogen costs have fallen from over $10/kg a decade ago to $3-8/kg depending on location and renewable energy costs, with the most competitive projects in regions with excellent solar or wind resources (Chile, Australia, the Middle East, North Africa) approaching $3/kg. The IRA's production tax credit of up to $3/kg in the U.S. has made green hydrogen cost-competitive with grey in favorable locations.

The policy environment is remarkably supportive. The EU Hydrogen Strategy targets 10 million tonnes of domestic green hydrogen production by 2030. The U.S. DOE's Hydrogen Shot aims for $1/kg production cost by 2031. Japan, South Korea, and India have published national hydrogen strategies with billions in public investment. Over $300 billion in announced green hydrogen projects were in development globally as of 2024, though final investment decisions have lagged announcements significantly.

For corporate buyers, green hydrogen represents both a future input cost and a strategic opportunity. Companies in steel, chemicals, refining, and heavy transport face inevitable transitions to hydrogen-based processes and need to understand supply availability, pricing trajectories, and infrastructure development timelines in their operating regions.

How It Works / Key Components

Electrolysis uses an electrolyzer to split water (H2O) into hydrogen (H2) and oxygen (O2) using electricity. Three primary electrolyzer technologies compete: alkaline electrolyzers (mature, lowest capital cost, slower response times), proton exchange membrane (PEM) electrolyzers (faster response, more compact, higher capital cost), and solid oxide electrolyzers (highest efficiency, uses waste heat, still in early commercialization). All three are scaling rapidly, with global electrolyzer manufacturing capacity expected to exceed 100 GW annually by 2030.

The economics of green hydrogen are dominated by electricity cost, which represents 60-70% of production expense. This is why the most competitive projects are sited in regions with the world's cheapest renewable resources—Patagonia (wind capacity factors above 50%), the Chilean Atacama (solar irradiance exceeding 2,500 kWh/m²/year), and Western Australia. Electrolyzer capital costs are falling along manufacturing learning curves, from roughly $1,500/kW in 2020 toward projected $300-500/kW at scale by 2030.

Storage and transport are critical infrastructure challenges. Hydrogen can be stored as compressed gas, liquefied (at -253°C), or converted to ammonia or liquid organic hydrogen carriers for long-distance transport. Pipeline transport is the cheapest option for large volumes—repurposing existing natural gas pipelines (with modifications for hydrogen embrittlement) offers a cost-effective pathway. Port infrastructure for ammonia and liquid hydrogen import/export is under development in Europe, Japan, and South Korea.

End-use applications span multiple sectors. In steel, hydrogen-based direct reduction of iron ore (H-DRI) replaces coal-based blast furnaces—SSAB's HYBRIT project in Sweden has produced the world's first fossil-free steel. In chemicals, green hydrogen replaces grey hydrogen for ammonia and methanol production. In transport, hydrogen fuel cells power heavy-duty trucks, buses, trains, and potentially ships and aircraft. For grid balancing, hydrogen provides long-duration energy storage that batteries cannot economically deliver.

Council Fire's Approach

Council Fire advises industrial and energy clients on green hydrogen strategy—assessing demand scenarios, supply chain development, offtake agreement structures, and infrastructure requirements. We help organizations determine where hydrogen fits within their decarbonization portfolio, model cost trajectories under various policy and technology scenarios, and evaluate participation opportunities across the emerging hydrogen value chain.

Frequently Asked Questions

When will green hydrogen be cost-competitive with grey hydrogen?

In locations with excellent renewable resources and supportive policy (IRA tax credits, EU subsidies), green hydrogen is already at or near cost parity with grey hydrogen. Without subsidies, widespread cost parity is expected by 2028-2032 as electrolyzer costs decline and renewable electricity prices continue to fall. The DOE's $1/kg target would make green hydrogen dramatically cheaper than grey in most markets, though achieving this within the stated 2031 timeline requires aggressive cost reduction across the value chain.

Is blue hydrogen a viable alternative to green hydrogen?

Blue hydrogen—produced from natural gas with CCS—offers a potentially lower-cost near-term pathway, but faces scrutiny over lifecycle emissions. Studies by Cornell and Stanford researchers found that blue hydrogen's climate benefit depends critically on methane leakage rates in the natural gas supply chain and CCS capture efficiency. At methane leakage rates above 3% (common in many gas systems), blue hydrogen's lifecycle emissions may exceed those of unabated natural gas. Blue hydrogen may serve as a transitional supply source, but green hydrogen is the definitive long-term solution for zero-carbon hydrogen.

What industries will be the biggest green hydrogen consumers?

The largest demand sectors by 2050 are expected to be steel production (replacing coal in iron ore reduction), chemicals (ammonia and methanol production), refining (replacing grey hydrogen currently used in desulfurization), heavy-duty transport (trucks, shipping, potentially aviation via synthetic fuels), and long-duration energy storage. The IEA projects global hydrogen demand could reach 150-500 million tonnes per year by 2050 in various net-zero scenarios, with green hydrogen capturing an increasing share as costs decline.