The Green Hydrogen Production Process, Explained for Developers

6 min read · Jan 12, 2026 · By Alex

I find that most of the confusion around green hydrogen isn’t about the chemistry, it’s about where the cost actually sits. The electrolyzer gets all the attention in pitch decks, but the renewable power supplying it is usually the single biggest line item in the economics. Understanding the process end to end is what separates a developer who can answer a lender’s questions from one who can’t.

In short: green hydrogen is produced by running an electric current from renewable power through water in an electrolyzer, splitting it into hydrogen and oxygen. No fossil input, no carbon emissions from the reaction itself. The electrolyzer is the core equipment, but the renewable power supply, the water source, and the storage and offtake plan are what actually determine whether the project is bankable.

The core process, step by step

Water sourcing and treatment. Electrolyzers need demineralized water. Most projects use freshwater and a treatment train; a handful, like Vietnam’s largest green hydrogen plant now under construction, use seawater electrolysis to sidestep freshwater competition entirely.
Renewable power supply. Solar, wind, or hydro power feeds the electrolyzer. This is where most of the levelized cost of hydrogen actually comes from, more than the electrolyzer equipment itself in most project models.
Electrolysis. A direct current splits water into hydrogen gas at the cathode and oxygen gas at the anode. The two most common electrolyzer types in commercial projects are alkaline (lower cost, less flexible with variable renewable input) and PEM, proton exchange membrane (higher cost, better suited to fluctuating solar or wind power).
Compression or liquefaction. Hydrogen gas is low-density, so it needs to be compressed or liquefied for storage and transport, which adds meaningful capex and energy consumption to the project.
Storage and offtake. The hydrogen is stored and then delivered to its end use, whether that’s industrial feedstock, fuel cell vehicles, or blending into existing gas infrastructure.

Two live Southeast Asian projects worth studying

Vietnam broke ground on what’s described as its largest-ever green hydrogen plant in Tra Vinh Province, developed by TGS Tra Vinh Green Hydrogen Corporation on a 21-hectare site. What makes it a useful reference is the choice of seawater electrolysis, producing an estimated 24,000 metric tons of hydrogen and 195,000 metric tons of oxygen per year, at an estimated capex of roughly USD 341 million. The plant is also designed to absorb surplus output from nearby wind and solar generation, which is a pattern worth noting: pairing a hydrogen plant with curtailed renewable capacity rather than building dedicated generation from scratch.

At a smaller scale, Sarawak, Malaysia has a 10 MW modular green hydrogen plant under a USD 17 million EPC contract to Chloroplant Co., commissioned by Singapore-based H1Hydro Group, targeting Q1 2026 for phase one operations. It’s a useful contrast to Tra Vinh: a much smaller, modular build aimed at Northeast Asian export markets rather than domestic industrial offtake, built on Sarawak’s existing hydropower base.

	Tra Vinh, Vietnam	Sarawak, Malaysia
Scale	24,000 t H2/year	10 MW electrolyzer
Water source	Seawater	Not specified
Power base	Wind and solar (surplus absorption)	Hydropower region
Capex	~USD 341 million	~USD 17 million (EPC contract)
End market	Domestic heavy industry	Northeast Asian export

Where this breaks in practice

Modeling the electrolyzer cost and forgetting the power cost. In most bankable models, renewable electricity is the largest single cost component in the levelized cost of hydrogen, not the electrolyzer stack. A capex-heavy equipment budget paired with an underpriced power assumption is a model that won’t survive lender scrutiny.
Underbudgeting compression and storage. Hydrogen’s low density means the downstream handling equipment is not a minor add-on; it’s a substantial share of total project capex, and skipping a detailed spec here at the feasibility stage is a common gap.
No firm offtake before breaking ground. Both projects above moved forward with a clear end market in mind, domestic industry for one, export for the other. A green hydrogen plant built without a contracted or strongly indicated offtake is a much harder financing conversation.

A practical method for scoping your own project

Start with the power source, not the electrolyzer. Secure or model a realistic renewable power price and availability profile before sizing the electrolyzer, since that cost usually dominates the economics.
Choose your electrolyzer type based on your power profile. Alkaline suits steadier power supply; PEM handles variable solar or wind input better but costs more upfront.
Decide your water source early. Freshwater availability and treatment cost, or a seawater electrolysis route if freshwater is constrained, changes both capex and permitting timelines.
Size storage and compression to your actual offtake logistics, not a generic assumption, since transport distance and end-use pressure requirements drive this spec.

Common mistakes I see developers make

Pitching a green hydrogen project on electrolyzer cost curves alone, without a credible renewable power supply plan.
Choosing an electrolyzer type without first characterizing the power source’s variability.
Treating compression and storage as a line item instead of a design decision with real cost implications.
Starting construction before an offtake agreement or strongly indicated end market is in place.

A quick checklist before you take this to lenders

A renewable power supply agreement or realistic price and availability model
An electrolyzer technology choice matched to your power profile (alkaline or PEM)
A defined water source and treatment plan, freshwater or seawater
A storage and compression spec sized to actual offtake logistics
A contracted or strongly indicated offtake for the hydrogen produced

Sources

Tuoi Tre News, Work starts on Vietnam's largest-ever green hydrogen plant
SolarQuarter, Green Hydrogen: Chloroplant secures $17m contract for 10 MW hydrogen plant in Sarawak
The Borneo Post, coverage of Sarawak's integrated hydrogen production and refuelling pilot Sarawak: towards sustainable mobility.

FAQ

What's the difference between alkaline and PEM electrolyzers?

Alkaline electrolyzers are generally lower cost and well proven, but work best with steady power input. PEM electrolyzers cost more but handle fluctuating renewable power, like solar or wind, more gracefully, which matters if your power supply isn’t firm around the clock.

Why does the power source matter more than the electrolyzer in most cost models?

Because electrolysis runs continuously over the life of the plant, the cumulative cost of renewable electricity typically outweighs the upfront capex of the electrolyzer itself. Getting the power price and availability assumption right matters more to bankability than optimizing the electrolyzer spec.

Can a green hydrogen plant use seawater instead of freshwater?

Yes. Vietnam’s Tra Vinh plant is built around seawater electrolysis specifically to avoid competing with freshwater demand, which can be a meaningful advantage in water-stressed or coastal locations.

If you’re scoping a green hydrogen project and want to pressure-test your power supply assumptions or electrolyzer choice, that’s exactly the kind of question I work through with developers. Get in touch and we can look at your numbers together.

I’m part of the WeConnect Asia team, working with developers and investors on low-carbon infrastructure projects across Southeast Asia.

This article is for general informational purposes and does not constitute financial, legal, or engineering advice. Figures cited are drawn from publicly reported project data and should be independently verified before use in any financial model.

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