Like many in the green energy space, LONGi Green Energy Technology Company is ready to figure out whether green hydrogen—a potential source of renewable energy—can actually be a viable solution in society’s race to decarbonize.

In recent years, top decision makers at LONGi, a massively successful solar power company founded in 2000, have seen the company’s profitability slashed by plunging solar power prices and have determined that the firm’s hyperfocus on solar modules should expand to include a diversification into new growth areas. As such, in 2021, LONGi launched LONGi Hydrogen Energy Technology Company to manufacture green hydrogen equipment. The new arm’s first product was an alkaline water electrolyzer, which uses electricity to split water (H2O) into hydrogen and oxygen in a process called electrolysis. When the process is powered by renewables, it yields green hydrogen, an energy source devoid of carbon emissions.

But it is early days for green hydrogen. By 2024, LONGi was the world’s largest manufacturer of electrolyzers, and yet its green hydrogen equipment business generated a scant 1% of the company’s total revenues. In fact, green hydrogen accounts for less than 1% of all hydrogen produced, over 98% of which is still derived from natural gas. Overall, hydrogen represents a tiny slice of the world’s energy market, accounting for less than 1% of the global energy mix.

And yet, plenty of energy experts agree that green hydrogen can’t be discounted. Hydrogen has been called the Swiss Army knife of decarbonization because of its adaptability to a range of high-emitting areas across industry, power, heat, and some forms of transportation, such as marine fuels. It is also true, of course, that while Swiss Army knives can do lots of things, they aren’t exactly known for doing any one function particularly well.

Swiss Army knives shine, when there is a lack of alternatives—as may well be the case with green hydrogen. The business case will work for applications, where there are few viable alternatives.

Two of the biggest barriers to the expansion of green hydrogen have been its relatively high price—due mostly to the cost of electrolyzers and the renewable energy to power them—as well as infrastructure and compatibility problems with current power systems. What’s clear, and what adds to the uncertainty surrounding the space, is that the scale-up of green hydrogen will be heavily dependent on policy support.

Thanks to its relevance to many otherwise hard-to-abate sectors, global demand for hydrogen is projected to increase significantly in the coming decades, from 125 million tonnes (Mt) per year in 2030 to over 500 Mt by 2050. If demand does indeed track this steep upward path, it will require a dramatic scale-up in production—and oil majors and utilities are taking note. Saudi Aramco acquired a 50% equity stake in Blue Hydrogen Industrial Gases Company in 2024; the year prior, the utility company NextEra Energy announced a plan for full decarbonization that includes converting 16,000 megawatts of natural gas generating units to run on green hydrogen. The year before that, British oil and gas company BP acquired a $36 billion stake in what is now the Australian Renewable Energy Hub, which will produce 1.6 Mt of green hydrogen per year upon completion.

Then there is low-carbon steel. Stegra, formerly known as H2 Green Steel, is expected to complete the world’s first full-scale low-carbon steel plant by 2026. Since Stegra’s announcement, over a dozen other companies have announced their own intentions to produce over 40 Mt of low-carbon steel by 2030 in Europe alone.

Whether or not green hydrogen’s rise will meet these projections and ultimately play a central role in helping the world achieve decarbonization will depend upon more than whether existing technology can scale up. Much more work remains to be done in the space to develop new technologies, address infrastructure and compatibility issues, and formulate policies that can effectively jump-start a flow of hydrogen energy that becomes progressively greener as the years pass—not less so.

Read on for four key points about the current state of green hydrogen development and where it needs to go from here.

Key Point No. 1: Incorporating hydrogen into the energy system is not a fanciful, futuristic idea—it’s already being done. Still, plenty about hydrogen and its use needs to change.

Today, hydrogen is commonly used as an input in petroleum refining, where it acts to break apart complex hydrocarbons and remove impurities. Most of the hydrogen used for this purpose, and others, is produced from natural gas, a process that releases carbon dioxide.

Hydrogen made this way—from natural gas, with CO2 as a byproduct—is commonly known as grey hydrogen, which describes nearly all hydrogen production today, representing over 98% of the current hydrogen market.

Asahi Kasei Starts Construction of Alkaline Water Electrolysis Pilot Test Plant for Hydrogen Production in Kawasaki, Japan