Neither steam methane reforming (SMR) nor electrolysis is the best choice everywhere. SMR uses natural gas and established process infrastructure; electrolysis uses electricity to split water and can have lower production emissions when its power supply is sufficiently low-carbon. The right fit depends on local fuel and electricity prices, emissions, plant scale and operating hours, infrastructure, and—if SMR is used—the carbon capture and storage (CCUS) configuration. A production route alone does not establish that hydrogen is low-emissions.
How do SMR and electrolysis make hydrogen?
Steam methane reforming
SMR reacts methane in natural gas with high-temperature steam in the presence of a catalyst. The U.S. Department of Energy (DOE) describes reforming conditions of 700–1,000°C and 3–25 bar. The process first produces hydrogen and carbon monoxide; a water-gas shift reaction then converts carbon monoxide and steam into carbon dioxide and additional hydrogen. Pressure-swing adsorption removes carbon dioxide and other impurities from the hydrogen product stream.
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SMR is a mature route that can use existing natural-gas pipeline infrastructure. DOE says 95% of hydrogen produced in the United States is made by natural-gas reforming in large central plants; that figure describes U.S. production, not the global mix.
Water electrolysis
Electrolysis uses electricity to split water into hydrogen and oxygen. The main electrolyzer types differ in their electrolyte and operating conditions:
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- Alkaline: Commercial systems generally operate below 100°C.
- Proton-exchange membrane (PEM): DOE describes operation around 70–90°C.
- Solid oxide: DOE describes operation around 700–800°C. These systems can use heat to reduce the electrical input required.
Electrolysis has no carbon dioxide emissions at the production point in the IEA accounting described below. That does not mean its electricity supply—or the equipment and power assets used to provide it—has no emissions.
Which route has lower emissions?
The answer depends on the emissions boundary and energy supply. Compare lifecycle emissions for equivalent hydrogen output, rather than treating a route label such as “electrolytic” or “with carbon capture” as an emissions result.
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| Route or emissions factor | What the evidence says | How to interpret it |
|---|---|---|
| Unabated natural-gas hydrogen | The International Energy Agency (IEA) estimates 10–12 kg CO₂-equivalent per kg H₂ for unabated natural gas. | This is an IEA estimate, not a guarantee for every plant or gas supply. Upstream and midstream fuel emissions matter as well as process emissions. |
| Electrolysis using grid electricity | In its comparison, the IEA estimates electricity-generation intensity must be below 200–240 g CO₂/kWh for electrolytic hydrogen to have lower emissions than SMR. | This is a threshold from the IEA’s comparison, not a universal cutoff for every project boundary or configuration. Assess the actual electricity source. |
| Renewable-powered electrolysis: embedded asset emissions | The IEA estimates 0.4–2.7 kg CO₂-equivalent per kg H₂ from construction and manufacturing of renewable assets. | These are embedded emissions, distinct from emissions at the hydrogen production point. The IEA says most standards and schemes at the time excluded them. |
| SMR with CCUS | In global 2023 accounting, the IEA says 75–95% of hydrogen-production emissions occurred directly at production, where CCUS can reduce them. | Capture at the plant does not address every lifecycle source. Upstream and midstream emissions also need to be addressed. |
For context, the IEA reports that global hydrogen production emitted 920 Mt CO₂ in 2023, and nearly two-thirds of production came from unabated natural gas. These are global figures for 2023, not estimates for an individual facility.
For SMR with CCUS, capture rate is important but does not by itself establish a project’s total emissions. The IEA estimates SMR abatement costs of USD 60–85 per tonne of CO₂ for 55–70% capture and USD 85–110 per tonne for capture above 90%. These are estimates, not universal project quotes; they do not remove the need to assess upstream fuel emissions or CO₂ transport and storage.
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Is electrolysis cheaper than SMR?
There is no defensible universal cost winner. SMR’s economics are exposed to natural-gas prices and the cost of capture, transport, and storage if CCUS is added. Electrolysis depends heavily on electricity prices, electrolyzer capital and operating costs, and how many hours the equipment can run. A low electricity price is not enough if the power is emissions-intensive and emissions performance is part of the project requirement.
The IEA’s global-average levelised-cost chart, last updated on 24 September 2020, modeled 2019 and 2050 cases. It assumed lower-heating-value efficiencies of 76% for SMR without CCUS, 69% for SMR with CCUS, and 64% for electrolysis in 2019 (74% in 2050). The chart incorporated assumptions including fuel and electricity prices, capital and operating costs, utilization hours, capture rates, and a representative discount rate. These historical modeled inputs explain why costs vary by scenario; they are not current universal prices or project bids.
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The IEA’s separate 2021-route chart used 50 kWh/kg H₂ for low-temperature electrolysis, including compression to 30 bar. Its SMR comparison assumed natural-gas demand of 44.5 kWh/kg H₂ without CO₂ capture, 45.0 kWh/kg H₂ at 60% capture, and 49 kWh/kg H₂ plus 0.8 kWh/kg H₂ electricity at 93% capture. These are chart methodology assumptions, not guaranteed real-plant performance specifications.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What should you compare before choosing?
Use a like-for-like comparison for the intended location and output. A route comparison can mislead if one option is evaluated at the plant gate and the other after compression, or if the options assume different operating profiles or lifecycle boundaries.
Best Value
- Set the location and year. Specify the project geography and the date of the fuel, electricity, and financing assumptions.
- Price the energy supply. Compare delivered natural-gas and electricity prices, including the expected operating profile and utilization hours.
- Set the emissions boundary. Include electricity-generation emissions for electrolysis and upstream and midstream fuel emissions for SMR. State whether embedded construction emissions are included.
- Specify the plant and product. Compare electrolyzer type and operating profile, plant capacity, and hydrogen purity and delivery pressure on the same basis.
- Define the SMR capture system. State the capture rate and include the costs and availability of CO₂ transport and storage; do not treat capture as eliminating all lifecycle emissions.
- Use project-specific economics. Include capital and operating costs, utilization, and financing assumptions rather than applying an old global average as a current quote.
The broad DOE and IEA comparisons establish process fundamentals and show why cost and emissions depend on assumptions. They do not establish current costs for a particular site, a recommendation for a project with unspecified conditions, or which incentives and certification rules apply in a given jurisdiction.
When might each route fit?
SMR may fit when gas and infrastructure are available
SMR may suit a project that values a mature process, reliable natural-gas supply, and established central-plant infrastructure. If the project requires lower emissions, evaluate the actual capture configuration alongside the fuel supply chain’s emissions and the arrangements for moving and storing captured CO₂.
Electrolysis may fit when low-emissions power is workable
Electrolysis may suit a project with access to sufficiently low-emissions electricity at a workable price, including one integrated with renewable or nuclear power. Grid electricity is not automatically low-emissions: its generation intensity is central to the result. The DOE notes that electricity’s source, cost, efficiency, and generation emissions must be considered when evaluating electrolysis’s benefits and economic viability.
Neither route can be selected from the name alone
For a specific decision, the strongest comparison uses the same system boundary, output specifications, plant scale, and operating assumptions for both routes. Without local energy prices, electricity emissions, plant requirements, and (for SMR with CCUS) capture and storage details, a project-level cost or route recommendation cannot be established.
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