World Bank Report Highlights Electrolyzers as Key to Unlocking Clean Hydrogen in Developing Economies

A new World Bank–backed report provides the most comprehensive global assessment to date of electrolyzer technologies — the core systems used to produce clean hydrogen.

Clean hydrogen is emerging as a strategic pillar of economic development, particularly for emerging markets and developing countries seeking to expand exports, create jobs, and decarbonise heavy industry. A new World Bank–backed report provides the most comprehensive global assessment to date of electrolyzer technologies — the core systems used to produce clean hydrogen.

Titled Electrolyzers for Hydrogen Production: Technical and Economic Characteristics, the report translates complex technical analysis into practical guidance for governments, investors, and project developers navigating the rapidly evolving hydrogen sector.

Produced by the Energy Sector Management Assistance Program (ESMAP) under the 10 GW Lighthouse Initiative, the publication reflects the World Bank Group’s push to convert knowledge into measurable development impact.

Valerie Levkov, Vice President for Infrastructure at the World Bank Group, described the report as a flagship example of the institution’s “Knowledge Bank” approach — combining operational experience, private-sector data, and global technical expertise to deliver actionable insights.

Why Electrolyzers Matter

Electrolyzers sit at the heart of the clean hydrogen value chain. By using electricity — ideally from renewable sources — to split water into hydrogen and oxygen, they enable the production of low-carbon hydrogen that can help reduce emissions in hard-to-abate sectors such as steel, chemicals, and shipping.

For many developing economies, hydrogen offers a pathway to industrial transformation, greater energy security, and new employment opportunities, while supporting global decarbonisation goals.

However, scaling hydrogen production remains challenging. The sector is capital-intensive, technically complex, and exposed to financial risk. In many emerging markets, developers also face limited access to reliable data about electrolyzer technologies, supplier performance, installation costs, and risk mitigation strategies.

Global Manufacturing Capacity: Supply Outpacing Demand

The report finds that global annual electrolyzer manufacturing capacity has reached 61 gigawatts (GW), with an additional 16 GW currently under construction.

Despite increasing demand projections, supply currently exceeds demand. This has led to significant manufacturing overcapacity, with many facilities operating below optimal utilisation rates.

This imbalance highlights both opportunity and uncertainty: while equipment availability is expanding, long-term demand signals and supportive policy frameworks remain critical to market stability.

Dominant Technologies in the Market

Two technologies currently dominate the electrolyzer market:

• Alkaline (ALK) technology

• Proton Exchange Membrane (PEM) technology

Alkaline systems lead the sector, accounting for 64 percent of installed capacity and 84 percent of projects under construction. PEM systems hold a smaller share but are widely deployed in applications requiring flexibility and faster response times.

Emerging technologies — including Solid Oxide Electrolyzer Cell (SOEC) and Anion Exchange Membrane (AEM) systems — remain in earlier stages of commercialisation and represent a smaller portion of the market.

What Drives Project Costs?

A key finding of the report challenges common assumptions about hydrogen project economics.

While attention often focuses on the electrolyzer stack itself, the stack typically represents only about one-third of total project cost. Engineering, procurement and construction (EPC), civil works, permitting, and financing collectively account for 40 to 50 percent of total expenditure.

The report concludes that the greatest cost-reduction opportunities lie in:

• Balance-of-plant components

• Construction efficiency

• System integration

• Economies of scale

• Design standardisation

• Supply chain consolidation

These areas may offer greater cost savings than incremental improvements in stack technology alone.

Electricity Cost: The Decisive Factor

The most critical determinant of hydrogen production cost is electricity pricing.

The report estimates that the most competitive projects can produce hydrogen at approximately US$3 per kilogram. However, achieving this benchmark depends on access to affordable and reliable renewable electricity.

Without low-cost renewable power, hydrogen projects struggle to compete — reinforcing the importance of broader power sector reform and renewable energy deployment in developing economies.

Procurement Strategy: Beyond Headline Efficiency

The report advises developers to adopt a holistic approach when procuring electrolyzers.

Rather than focusing solely on headline efficiency metrics or stack specifications, buyers should assess:

• Technical durability

• Operational flexibility

• Supplier reliability

• Financing structures

• Long-term system integration costs

• Risk allocation mechanisms

Strategic procurement decisions, the report notes, can significantly influence project bankability and long-term value.

Turning Knowledge into Development Impact

By consolidating operational experience, private-sector insights, and global technical data, the report aims to reduce information asymmetry in the hydrogen market — particularly for emerging economies seeking to enter the sector.

As countries explore clean hydrogen as a development opportunity, the report provides a roadmap for aligning technology choices, infrastructure planning, and policy frameworks to attract investment and manage risk.

With manufacturing capacity expanding rapidly and global decarbonisation efforts intensifying, electrolyzers are positioned to play a central role in shaping the future hydrogen economy — especially in developing regions seeking to balance growth with climate responsibility.