Hydrogen production: We need to talk about decentralisation

The outcomes of COP28 reinforced the role of hydrogen in supporting the transition to a lower-carbon energy system. The agreed text highlighted the importance of low-carbon hydrogen production in helping to replace unabated fossil fuels across a range of sectors.

This provides greater confidence for governments and industry to continue investing in hydrogen technologies. According to the International Energy Agency (IEA), this momentum comes as electrolyser manufacturing capacity continues to expand, creating opportunities to accelerate deployment across industrial and transport applications.

Hydrogen is expected to play an important role in sectors where direct electrification can be challenging, including heavy industry, manufacturing and commercial transport. However, while policy direction is becoming clearer, a critical question remains: how will hydrogen reach the end users who need it?

For transport in particular, reliable fuel availability will be essential if adoption is to scale. Addressing this challenge requires greater discussion around decentralised hydrogen production.

A centralised hydrogen production model would mirror many existing energy systems. Large-scale facilities would produce hydrogen, which would then be transported through pipelines or delivery networks to end users.

There are clear advantages to this approach. Larger facilities can typically achieve lower production costs through economies of scale. However, these benefits can be offset by the costs associated with transporting and storing hydrogen over long distances.

A decentralised approach offers an alternative. Instead of relying on a small number of large facilities, hydrogen could be produced closer to where it is consumed through a network of smaller-scale production sites equipped with on-site electrolysers.

While production costs may be higher at individual locations, transportation and storage costs can be significantly reduced. This model could be particularly valuable for commercial transport operators that require dependable fuel supplies across large geographic areas.

Electrolysers powered by renewable electricity offer a practical route to producing low-carbon hydrogen closer to the point of use.

Proton Exchange Membrane (PEM) electrolysers are particularly well suited to this application because they can respond rapidly to fluctuations in renewable power generation. This flexibility makes them effective partners for intermittent energy sources such as solar and wind power.

PEM electrolysers also produce high-purity hydrogen, reducing the need for additional processing equipment and supporting simpler site designs.

As distributed energy resources become more widely adopted, decentralised hydrogen production could increasingly align with local renewable generation. Examples include:

This approach may help address concerns about the availability of renewable energy for green hydrogen production while supporting wider decarbonisation goals.

Current net-zero scenarios suggest that both battery-electric and hydrogen fuel cell vehicles are likely to contribute to the future transport landscape.

While battery-electric technologies are expected to play a significant role, hydrogen fuel cells may offer advantages in applications where long range, rapid refuelling and high utilisation rates are required.

Expanding hydrogen adoption could also help reduce pressure on electricity networks. Increasing electrification across transport sectors is expected to place additional demands on grid infrastructure, creating challenges in some regions.

Decentralised hydrogen production presents an alternative pathway. Electrolysers powered by local renewable generation can operate when renewable electricity is available, helping to balance energy demand and reduce reliance on centralised infrastructure.

Hydrogen storage systems can also operate independently of larger networks, providing additional flexibility and resilience.

Efficiency remains one of the key advantages of PEM electrolysis.

Although PEM electrolysers can involve higher upfront costs than some alternative technologies, operational efficiency can improve total lifecycle economics. As deployment increases and manufacturing scales, cost barriers are expected to continue falling.

Digital twin technology can further enhance performance by enabling operators to:

Many PEM electrolyser systems can also be deployed as modular, turnkey solutions. Depending on site requirements and local regulations, these systems may incorporate hydrogen storage and fuel cell technologies to create integrated energy solutions.

This modularity can be particularly valuable for fleet operators and facilities located in remote areas where access to large-scale infrastructure may be limited.

PEM electrolysers operate using pure water and do not require the corrosive electrolytes used by some alternative technologies, such as alkaline electrolysis.

This can simplify operational requirements by reducing the handling, disposal and lifecycle management considerations associated with hazardous chemicals.

The long-term sustainability of hydrogen technologies will also depend on circular economy principles. Recovering and reusing valuable materials at the end of equipment life can help improve resource availability and strengthen supply chain resilience.

Many industries already demonstrate the benefits of this approach. The automotive sector, for example, routinely recovers and recycles materials from catalytic converters for reuse in future applications.

Electrolyser technology is already delivering value in large industrial installations. However, many existing systems operate at scales that are suitable primarily for major industrial users.

To unlock wider adoption across transport and logistics, future hydrogen solutions will need to be:

Decentralised hydrogen production supported by PEM electrolysis offers one potential route to achieving these objectives.

Improving access to low-carbon hydrogen will be an important part of wider decarbonisation efforts. While national infrastructure continues to evolve, decentralised production models could help organisations begin their transition sooner and build resilience into future energy systems.

Further reading

Related IMI content

This article discusses potential future developments in hydrogen production, transport and energy systems. Actual market adoption, technology deployment and infrastructure development may differ depending on economic, regulatory and technical factors.

A version of this article was originally published in Global Hydrogen Review in 2024.