Oil major Chevron has revealed plans to build and operate a solar-to-hydrogen production facility in California. The 5 MW project will use solar-generated electricity to split non-potable water into hydrogen fuel.

The project marks Chevron’s first direct investment in its own hydrogen project. Deloitte estimates the global hydrogen market could reach $1.4 trillion by 2050.

Hydrogen fuel is created by using electricity to split a water molecule in a process called electrolysis. When it is burned as fuel, it emits water vapor and warm air, rather than carbon dioxide. However, today, about 95% of all hydrogen is produced from steam reforming of natural gas, according to the US Department of Energy.

Chevron said it expects the plant to produce 2.2 tons of hydrogen per day starting in 2025. This is the equivalent of powering 54,000 homes, said the company in a press release.

Hydrogen acts as an energy storage medium for renewable energy generators such as solar and wind. It is highly dispatchable and long-duration fuel, making it available to serve a different set of use cases than lithium-ion battery storage, which is currently the leading form of new-build storage under development for renewables.

The project is part of Chevron’s plan to reach 150,000 tons of hydrogen fuel production per year, supplying industrial, power, and heavy-duty transportation customers.

The company is spending $2 billion on “lower carbon” projects in 2024, though a significant part of these investments are expansions of renewable diesel and carbon sequestration, rather than an investment in renewables. Chevron announced a $16 billion capital expenditure plan company-wide for 2024.

A recent report from Stanford University shows how hydrogen plus renewables-charged battery storage could help many nations to lower their annual energy costs by about 61%.

In February, utility-scale energy storage company Energy Vault announced a first-of-its kind 293 MWh energy storage and hydrogen project in California. Upon completion, it will be the largest long-duration energy storage and green hydrogen hybrid project in the United States.