Water Electrolysis Market Size, Share, Growth, Trends 2024 To 2033

Water Electrolysis Market Size and Growth 2024 to 2033

The global water electrolysis market size was surpassed at USD 13.16 billion in 2023 and is predicted to reach around USD 26.31 billion by 2033 increasing from USD 14.10 billion in 2024, growing at a compound annual growth rate (CAGR) of 7.17% from 2024 to 2033.

The water electrolysis market involves the process of using electricity to split water into hydrogen and oxygen, a method essential for producing green hydrogen. This market is experiencing rapid growth due to increasing demand for clean energy, technological advancements, and supportive government policies. Key technologies include alkaline, proton exchange membrane (PEM), and solid oxide electrolysis. Applications span various sectors, including power generation, transportation, chemical manufacturing, and industrial processes. Major growth drivers include the push for decarbonization, the integration of renewable energy sources, and the development of hydrogen infrastructure across regions such as North America, Europe, and Asia-Pacific.

• “Hydrogen Optimized Inc., a Key DH Technologies Inc. subsidiary, has appointed Denis Krude as President and CEO, effective April 8, 2024. Krude, formerly CEO of thyssenkrupp nucera, will lead the company’s green hydrogen initiatives, while Co-Founder Andrew Stuart remains active as Executive Chair. “
• “US-based Ohmium has launched a Rs 2,000 crore green hydrogen electrolyzer gigafactory near Bengaluru, in Doddaballapur. The facility aims to boost green hydrogen production and reinforce Ohmium’s position in the renewable energy sector.”
• “Bekaert and Toshiba Energy Systems & Solutions Corporation have signed a Memorandum of Understanding to form a global partnership focused on MEA for PEM electrolysis. This collaboration aims to advance green hydrogen production, leveraging Toshiba’s Hydrogen Production Technology with Reduced Iridium to support energy transition and decarbonization efforts.”

Report Highlights

• Europe has captured highest revenue share of 37% in 2023.
• North America has registered second highest revenue share of 31% in 2023.
• By technology, Proton Exchange Membrane (PEM) Electrolysis segment has covered 36% of market revenue share in 2023.
• By technology, Alkaline Water Electrolysis (AWE) segment has recorded 36% of market revenue share in 2023.

Water Electrolysis Market Growth Factors

• Decarbonization Efforts: Governments and industries worldwide are increasingly committed to achieving net-zero emissions, making hydrogen a key element in their decarbonization strategies. Water electrolysis offers a sustainable method to produce green hydrogen, which can replace fossil fuels in various sectors, including transportation, power generation, and industrial processes.
• Renewable Energy Integration: The fluctuating nature of renewable energy sources like wind and solar creates challenges for grid stability and energy storage. Water electrolysis provides an effective solution by converting excess renewable energy into hydrogen, which can be stored and used when needed.
• Government Initiatives and Funding: Many governments are implementing policies, incentives, and funding programs to accelerate the development and adoption of green hydrogen technologies. These initiatives include research grants, tax credits, and subsidies that lower the financial barriers for electrolysis projects.
• Technological Advancements: Ongoing research and development efforts are leading to significant improvements in electrolysis technologies, enhancing their efficiency and reducing operational costs. Innovations such as advanced catalysts, improved membrane materials, and optimized system designs are making electrolysis more viable and cost-effective.
• Industrial Applications: Hydrogen is increasingly being utilized across various industrial sectors for its versatility and environmental benefits. In the chemical industry, it is a key feedstock for producing ammonia and methanol. The steel industry uses hydrogen to reduce carbon emissions during steel production processes.

Water Electrolysis Market Trends

• Expansion of Green Hydrogen Projects: There is a growing number of large-scale green hydrogen projects being announced and developed globally. Companies and governments are investing heavily in electrolysis facilities to produce hydrogen using renewable energy sources.
• Technological Innovations in Electrolysis: Significant advancements are being made in electrolysis technologies to improve efficiency and reduce costs. Innovations include the development of new catalysts, membranes, and system designs that enhance the performance and durability of electrolyzers.
• Integration with Renewable Energy Systems: The integration of water electrolysis with renewable energy systems is becoming more common as countries look to optimize the use of wind, solar, and other renewable sources. Electrolysis provides a method to store excess renewable energy as hydrogen, which can be converted back to electricity or used as a clean fuel.
• Decarbonization of Hard-to-Abate Sectors: The water electrolysis market presents significant opportunities in decarbonizing sectors that are challenging to electrify, such as heavy industry, aviation, and shipping. Hydrogen produced through electrolysis can serve as a clean fuel or feedstock, reducing emissions in these industries.
• Development of Hydrogen Infrastructure: There is a substantial opportunity in building and expanding hydrogen infrastructure, including transportation, storage, and distribution networks. As the demand for hydrogen increases, so does the need for a robust infrastructure to support its production and utilization.

Report Scope

Water Electrolysis Market Dynamics

Drivers

Rising Corporate Sustainability Goals:

• Many corporations are setting ambitious sustainability targets to reduce their carbon footprints and enhance their environmental responsibility. These goals often include transitioning to green hydrogen for their energy and production processes. As businesses seek to meet their sustainability objectives, they are investing in water electrolysis technology to produce green hydrogen, driving demand for electrolysis systems and contributing to market growth.

Increasing Hydrogen Fuel Cell Adoption:

• The growing adoption of hydrogen fuel cells in various applications, such as transportation (e.g., hydrogen-powered vehicles) and backup power systems, is significantly driving the demand for water electrolysis. As the fuel cell market expands, there is a concurrent need for efficient and scalable hydrogen production methods. Water electrolysis provides a clean and sustainable way to produce hydrogen, supporting the broader adoption of hydrogen fuel cell technologies.

Restraints

High Initial Capital Costs:

• The installation and setup of water electrolysis systems require significant upfront investment, including costs for electrolyzers, renewable energy sources, and infrastructure. These high capital expenditures can be a barrier for many companies and projects, particularly in emerging markets or for smaller players. The financial burden of initial investments can slow down the adoption of water electrolysis technology, limiting its market growth.

Energy Efficiency and Operating Costs:

• Although advancements are being made, water electrolysis systems can still face challenges related to energy efficiency and operating costs. The process requires a substantial amount of electricity, which can be expensive and impact the overall cost-effectiveness of hydrogen production. Additionally, ongoing maintenance and operational costs can be significant, affecting the economic viability of electrolysis compared to other hydrogen production methods or energy sources.

Opportunities

Collaboration with Emerging Technologies:

• The water electrolysis market can benefit from collaborations with other emerging technologies, such as carbon capture and storage (CCS) and advanced energy storage systems. Integrating electrolysis with CCS can create a comprehensive solution for producing low-carbon hydrogen while capturing and storing CO2 emissions. Additionally, pairing electrolysis with advanced energy storage technologies, like high-capacity batteries or flow batteries, can enhance energy management and storage, making electrolysis a more attractive option for various applications.

Expansion into Developing Markets:

• There is significant potential for growth in developing markets where industrialization and energy needs are rapidly increasing. Many of these regions are starting to invest in cleaner energy solutions to address pollution and energy security challenges. By expanding into these markets, water electrolysis technology providers can tap into new opportunities for hydrogen production and infrastructure development. Early entry into these markets can establish a strong foothold and leverage emerging growth trends as these regions transition to more sustainable energy solutions.

Challenges

Limited Availability of High-Purity Water:

Water electrolysis requires high-purity water to ensure efficient and effective hydrogen production. In regions where clean water resources are scarce or contaminated, securing the necessary quality of water can be challenging. This limitation can impact the feasibility and scalability of electrolysis projects, particularly in areas where water resources are already stressed or where water purification infrastructure is lacking.

Integration with Existing Energy Systems:

• Integrating water electrolysis systems with existing energy infrastructure can be complex and costly. Electrolysis systems often require significant modifications to current energy grids or facilities to accommodate the production and storage of hydrogen. This integration challenge includes aligning electrolysis operations with variable renewable energy sources and ensuring compatibility with existing infrastructure, which can present technical and logistical hurdles for deployment and scaling.

Water Electrolysis Market Segmental Analysis

Technology Analysis

Alkaline Water Electrolysis (AWE): In 2023, the AWE segment has accounted market share of 31%. Alkaline Water Electrolysis (AWE) is a mature technology that uses an alkaline electrolyte (such as potassium hydroxide) to split water into hydrogen and oxygen. It’s known for its reliability and cost-effectiveness. Trends include increasing efficiency and scaling up for large-scale hydrogen production, driven by the need for sustainable energy solutions and decreasing costs of materials and systems.

Proton Exchange Membrane (PEM) Electrolysis: The PEM Electrolysis segment has accounted market share of 36% in 2023. Proton Exchange Membrane (PEM) Electrolysis uses a solid polymer membrane as an electrolyte, offering high efficiency and fast response times. It’s suited for applications requiring high purity hydrogen and integration with renewable energy sources. Current trends involve advancements in membrane technology, enhancing performance and durability, and expanding use in decentralized and small-scale hydrogen production systems to support renewable energy integration.

Solid Oxide Electrolysis (SOE): The SOE segment has generated market share of 25% in 2023. Solid Oxide Electrolysis (SOE) operates at high temperatures using a solid oxide electrolyte, enabling high-efficiency hydrogen production. It is particularly effective for industrial applications and energy storage. Trends include improvements in material durability and system integration, with a focus on increasing operational stability and efficiency. SOE is gaining attention for its potential in large-scale and high-temperature hydrogen production processes.

Application Analysis

Power Plants: Water electrolysis in power plants focuses on producing hydrogen as a clean energy carrier. This hydrogen can be used for energy storage, balancing grid demand, and generating electricity. Trends include increasing integration with renewable energy sources to utilize surplus power and enhance grid stability. The technology is advancing to improve efficiency and scalability, driving growth in the market.

Chemical Industry: In the chemical industry, water electrolysis is used to produce hydrogen for various processes, including ammonia synthesis and methanol production. The trend is toward adopting green hydrogen to reduce carbon emissions and align with sustainability goals. Innovations in electrolysis technology aim to enhance efficiency and reduce costs, making green hydrogen a more attractive option for chemical manufacturing.

Petroleum Industry: The petroleum industry uses hydrogen from water electrolysis for refining processes, such as hydrocracking and desulfurization. Trends include a shift towards green hydrogen to decrease the carbon footprint of refining operations and meet regulatory requirements. Technological advancements are focused on improving hydrogen production efficiency and integrating electrolysis systems with existing infrastructure in the petroleum sector.

Electronics and Semiconductors: Water electrolysis provides high-purity hydrogen essential for electronics and semiconductor manufacturing, used in processes like chemical vapor deposition. The trend is towards increased adoption of green hydrogen to meet environmental regulations and improve sustainability. Advances in electrolysis technology are enhancing purity and efficiency, addressing the high-quality hydrogen needs of the electronics industry.

Steel Production: In steel production, hydrogen from water electrolysis is utilized as a reducing agent to replace carbon-intensive processes. The trend is towards adopting green hydrogen to reduce greenhouse gas emissions and meet industry decarbonization targets. Innovations in electrolysis technology are focused on scaling up production and reducing costs to support the steel industry’s transition to cleaner methods.

Others: Other applications of water electrolysis include hydrogen production for fuel cells, backup power systems, and various industrial uses. The trend is towards expanding the use of green hydrogen in diverse applications to support sustainability and energy transition goals. Technological advancements are improving electrolysis efficiency and reducing costs, driving growth in these additional sectors.

End Users Analysis

Industrial: In the industrial sector, water electrolysis produces hydrogen used as a feedstock for chemicals and refining processes. Trends include increasing adoption for ammonia and methanol production and efforts to decarbonize heavy industries. Innovations in electrolysis technology aim to improve efficiency and reduce costs, supporting the shift toward more sustainable industrial practices and fostering growth in this segment.

Transportation: Water electrolysis is used to generate hydrogen for fuel cells in vehicles, including buses, trucks, and cars. The transportation sector is seeing a rise in hydrogen-powered vehicles as part of the transition to cleaner fuels. Trends include expanding refueling infrastructure and advancements in fuel cell technology, which are driving increased adoption and investment in hydrogen-powered transport solutions.

Energy: In the energy sector, water electrolysis provides a method for storing and utilizing excess renewable energy by converting it into hydrogen. Trends involve the integration of electrolysis with wind and solar power to enhance grid stability and energy storage. As renewable energy sources grow, so does the role of electrolysis in balancing energy supply and supporting a sustainable energy infrastructure.

Commercial: Water electrolysis in the commercial sector focuses on providing hydrogen for various applications, including backup power systems and heating. Trends include growing interest in hydrogen as a clean energy solution for commercial buildings and facilities, driven by sustainability goals and energy efficiency improvements. This segment is expanding as businesses seek to reduce carbon footprints and adopt cleaner energy technologies.

Others: The "Others" segment encompasses niche applications of water electrolysis, such as in aerospace for propulsion systems or in specialized manufacturing processes. Trends include research and development into novel applications and technologies that leverage hydrogen for unique use cases. This segment reflects emerging opportunities and innovative uses of electrolysis technology across diverse and specialized fields.

Water Electrolysis Market Regional Analysis

Why Europe is leading in the water electrolysis market?

The Europe water electrolysis market size is expected to hit around USD 9.73 billion by 2033 and growing at a CAGR of 7.10% from 2024 to 2033 driven by ambitious climate goals and a strong commitment to reducing greenhouse gas emissions. The trend in Europe involves substantial public and private investments in hydrogen infrastructure, with a focus on integrating electrolysis with renewable energy sources and advancing hydrogen fuel cell technology for various applications, including transportation and industry.

North America Water Electrolysis Market Trends

The North America water electrolysis market size was valued at USD 4.08 billion in 2023 and is expected to hit around USD 8.16 billion by 2033 with a CAGR of 7.21%, driven by substantial investments in green hydrogen projects and research. The trend is focused on integrating electrolysis with large-scale renewable energy projects and advancing hydrogen infrastructure. There is significant support from government policies and incentives aimed at reducing carbon emissions and fostering clean energy technologies, particularly in the U.S. and Canada.

Why Asia-Pacific is experiencing rapid growth in the water electrolysis market?

The Asia-Pacific water electrolysis market size was valued at USD 3.42 billion in 2023 and is poise to reach around USD 6.84 billion by 2033, experiencing rapid growth (CAGR of 7.23%) due to increasing industrialization and energy demands. Trends include significant investments in hydrogen production technologies and initiatives to develop hydrogen infrastructure, particularly in countries like Japan, South Korea, and China. The region is focusing on integrating water electrolysis with renewable energy sources to address energy security and environmental concerns.

LAMEA Water Electrolysis Market Trends

In the LAMEA region, the water electrolysis market is emerging with opportunities driven by growing interest in sustainable energy solutions and industrial applications. Trends include the development of pilot projects and partnerships to explore hydrogen production potential, especially in the Middle East, which has abundant renewable energy resources. In Latin America and Africa, there is a focus on leveraging electrolysis for energy access and industrial development, although the market is still in early stages.

Water Electrolysis Market Top Companies

• Nel Hydrogen
• ITM Power
• Cummins Inc.
• Siemens Energy
• ABB Ltd.
• McPhy Energy S.A.
• Enel Green Power
• Hydrogenics Corporation
• PowerCell Sweden AB
• Sunfire GmbH
• Giner ELX
• H2B2 Electrolysis Technologies
• Green Hydrogen Systems
• Ballard Power Systems
• Toyota Tsusho Corporation

New players such as Green Hydrogen Systems and H2B2 Electrolysis Technologies are adopting innovative approaches like modular systems and advanced electrolyzer designs to enter the market. Nel Hydrogen, ITM Power, and Siemens Energy dominate the market due to their extensive experience, broad technology portfolios, and significant investments in R&D. These key players leverage their advanced technology, strong global presence, and established infrastructure to lead in hydrogen production, driving advancements and scaling up electrolyzer capabilities to meet growing demand.

Recent Developments

The water electrolysis market has seen several key developments in recent years, with companies seeking to expand their market presence and leverage synergies to improve their offerings and profitability. Some notable examples of key development in the market include:

• In 2023, Honda plans to strengthen its fuel cell system as part of its hydrogen business strategy. Committed to a carbon-neutral society, Honda will enhance its hydrogen use and continue electrifying its products to advance its hydrogen business.
• In 2022, Shell and Thyssenkrupp Nucera have agreed to develop the Hydrogen Holland I project in Rotterdam, featuring a 200 MW electrolysis plant. This includes a 20 MW alkaline water electrolysis module.
• In 2023, Greenko Group has announced that John Cockerill will supply 28 units of 5 MW alkaline electrolyzers for its green ammonia factory in Una, Himachal Pradesh, supporting the firm’s efforts in sustainable ammonia production.
• In 2022, Cummins Inc. has secured a 2.5-megawatt electrolyzer supply contract with Hysetco. This electrolyzer will support Hysetco's Paris-based project, aiming to create the world's first large-scale hydrogen mobility platform, integrating production, delivery, and consumption.

Market Segmentation

By Technology

• Alkaline Water Electrolysis (AWE)
• Proton Exchange Membrane (PEM) Electrolysis
• Solid Oxide Electrolysis (SOE)

By Application

• Power Plants
• Chemical Industry
• Petroleum Industry
• Electronics and Semiconductors
• Steel Production
• Others

By End User

• Industrial
• Transportation
• Energy
• Commercial
• Others

By Region 

• North America
• APAC
• Europe
• LAMEA