Electrolysis consists of using electricity to split water into hydrogen and oxygen. Electrolysis of water is 70–80% efficient (a 20–30% conversion loss) while steam reforming of natural gas has a thermal efficiency between 70 and 85%. The electrical efficiency of electrolysis is expected to reach 82–86% before 2030, while also maintaining durability as progress in this area continues apace.

Water electrolysis can operate between 50–80 °C (122–176 °F), while steam methane reforming requires temperatures between 700–1,100 °C (1,292–2,012 °F). The difference between the two methods is the primary energy used; either electricity (for electrolysis) or natural gas (for steam methane reforming). Due to their use of water, a readily available resource, electrolysis and similar water-splitting methods have attracted the interest of the scientific community. With the objective of reducing the cost of hydrogen production, renewable sources of energy have been targeted to allow electrolysis.

There are three main types of electrolytic cells, solid oxide electrolyser cells (SOECs), polymer electrolyte membrane cells (PEM) and alkaline electrolysis cells (AECs). Traditionally, alkaline electrolysers are cheaper in terms of investment (they generally use nickel catalysts), but less-efficient; PEM electrolysers, conversely, are more expensive (they generally use expensive platinum group metal catalysts) but are more efficient and can operate at higher current densities, and can therefore be possibly cheaper if the hydrogen production is large enough.