A team of researchers in Germany has developed a highly efficient method to convert sunlight directly into hydrogen fuel, a breakthrough that could help solve some of the biggest challenges facing the green hydrogen industry and pave the way for cleaner industrial energy systems.

The new prototype, which relies on a type of solar cell commonly used in space applications, serves as a proof of concept that could eventually enable the large-scale production of completely carbon-free hydrogen fuel.

Scientists at the Fraunhofer Institute for Solar Energy Systems in Freiburg, Baden-Württemberg, developed a system that combines photovoltaic cells with proton exchange membrane (PEM) electrolysis technology, allowing them to convert sunlight into hydrogen with an efficiency of 31.3%.

“Our new record demonstrates that hydrogen can be produced directly from sunlight with very high efficiency,” said Dr. Frank Dimroth.

The prototype uses III-V solar cells, which are currently the most efficient commercially produced solar cells available.

According to Interesting Engineering, these cells have long been used in spacecraft because of their exceptional performance and durability.

Direct solar-to-hydrogen production could reshape clean energy

Green hydrogen has long been viewed as one of the most promising solutions for hard-to-decarbonize industries such as steelmaking and maritime shipping.

Hydrogen can generate extremely high temperatures when burned, similar to thermal coal and heavy fuel oil, but its combustion produces only water vapor rather than carbon dioxide and other greenhouse gases.

However, the environmental benefits of hydrogen depend entirely on how it is produced.

Most hydrogen currently used worldwide is gray hydrogen, which is produced using fossil fuels and therefore does little to reduce industrial carbon emissions.

Green hydrogen, produced using renewable energy, has been promoted for years as a key component of the clean energy transition. Yet real-world deployment has proven far more expensive and complex than initially expected.

A 2025 study titled *The Gap Between Green Hydrogen Ambitions and Implementation* found that fewer than 10% of green hydrogen projects announced in 2023 had actually entered operation.

The study, published in *Nature Energy* after tracking 190 projects over three years, showed that only 7% of the world’s announced production capacity was completed on schedule.

In many cases, directly using renewable electricity remains more efficient than converting that electricity into hydrogen first.

The International Renewable Energy Agency (IRENA) warned in a 2022 report against the “indiscriminate use of hydrogen,” arguing that large-scale hydrogen production could divert renewable energy away from applications where it delivers greater efficiency.

Put simply, green hydrogen remains expensive and involves significant energy losses during production.

A potential game changer

The Fraunhofer Institute’s new approach could help address those concerns.

Instead of generating electricity through solar panels and then using that electricity to produce hydrogen, the system converts sunlight directly into hydrogen, eliminating the intermediate electricity-generation step altogether.

Because sunlight is an abundant and renewable energy source, the technology could eventually help decarbonize heavy industries without consuming clean electricity that may be needed elsewhere in the economy.

However, the technology remains at an early stage and requires further development before it can become commercially viable.

“The development is still in its early stages, and it is difficult to estimate how long it will take before we can deliver commercially competitive systems,” Dimroth said in a statement accompanying the study.

He added that the team is currently seeking investors to support a planned startup called ClearSun Energy, which will focus on advancing and commercializing the technology.

The breakthrough comes at a timely moment, as investor interest in green hydrogen has started to recover after several years of slowdown, supported by renewed concerns over global energy security following disruptions linked to tensions around the Strait of Hormuz.

Major Wall Street indexes advanced on Thursday after the June US jobs report came in weaker than expected, easing investor concerns that the Federal Reserve could raise interest rates in the coming months.

The closely watched nonfarm payrolls report showed that the US economy added 57,000 jobs last month, compared with economists’ expectations for a gain of 110,000 jobs.

At the same time, the unemployment rate stood at 4.2%, versus expectations that it would remain unchanged at 4.3%.

The report snapped a streak of strong labor-market readings seen in recent months, potentially giving the Federal Reserve more room to remain patient on borrowing costs.

According to data compiled by the London Stock Exchange Group, the probability of at least one interest-rate hike this year fell to 76%, down from about 84% before the jobs report was released.

“It’s an excellent reading and probably the best outcome we could have hoped for,” said Florian Ielpo, Head of Macro Research at Lombard Odier Investment Managers. “It shows the labor market remains in good shape, but not so hot that it risks fueling inflation further.”

As of 9:48 a.m. Eastern Time, the Dow Jones Industrial Average was up 447.72 points, or 0.86%, at 52,752.96.

The S&P 500 gained 49.84 points, or 0.67%, to 7,533.51, while the Nasdaq Composite rose 146.99 points, or 0.56%, to 26,187.02.

Jobs data shift Fed focus toward labor market as Middle East risks persist

Markets had feared that stronger labor-market data would give the Federal Reserve greater scope to focus on combating price pressures, particularly after the shock to oil prices caused by the US-Iran war reignited inflation concerns.

However, the latest jobs report may encourage policymakers to pay closer attention to the labor market, one of the Federal Reserve’s two core mandates, according to Bret Kenwell, US Investment Analyst at eToro.

“The new Federal Reserve has adopted a hawkish tone on inflation, and a stronger labor market would have reinforced that stance,” Kenwell said. “But today’s report does not point to problems in the labor market, while at the same time cooling the narrative that had been building around continued labor-market strength.”

Federal Reserve Chairman Kevin Warsh said on Wednesday that inflation risks had eased, while reiterating the central bank’s commitment to achieving its 2% inflation target.

Even so, ongoing uncertainty surrounding the Strait of Hormuz remains a source of risk, particularly if hostilities in the Middle East resume.

The United States and Iran concluded another round of indirect talks on Wednesday without any clear signs of progress toward a lasting peace agreement.

At the same time, uncertainty over the interest-rate outlook comes at a sensitive stage for artificial intelligence-related stocks, as investors debate whether companies benefiting from the AI boom, particularly semiconductor manufacturers, still have room for further gains.

The Philadelphia Semiconductor Index was little changed during Thursday’s session, while 10 of the 11 sectors within the S&P 500 traded higher, led by materials and consumer staples.

“We currently see plenty of value opportunities outside AI-related stocks and prefer the broader equity market,” Ielpo said.

In individual stock moves, Bending Spoons fell 3.9%, one day after shares of Vimeo, which is owned by the company, surged about 40% in their Nasdaq debut.

Market breadth remained positive, with advancing stocks outnumbering decliners by a ratio of 3.85-to-1 on the New York Stock Exchange and 2.48-to-1 on the Nasdaq.

Neither the S&P 500 nor the Nasdaq Composite recorded any new 52-week highs or lows.

Aluminum prices edged higher on Thursday, supported by positive industrial data from China, Europe, and the United States, although prices remained under pressure from weaker investor risk appetite and growing expectations of a recovery in global supply following the easing of US-Iran tensions.

Reuters reported that the benchmark three-month aluminum contract on the London Metal Exchange rose 0.59% to $3,094 per metric ton, following two weeks of sharp price volatility.

The gain was supported by a series of manufacturing activity indicators in China, Europe, and the United States, which showed that the industrial sector remained resilient despite higher production costs. This is a positive factor for aluminum, which is widely used in transportation, packaging, and construction.

Copper prices also remained largely stable, as the White House did not issue a widely anticipated June update on tariffs.

Supply pressures and geopolitical concerns limit market gains

Earlier in the day, however, aluminum prices remained under pressure, touching their lowest levels in more than four months as investor risk appetite weakened and signs emerged of a faster-than-expected recovery in global supply following the end of the US-Iran trade war.

The benchmark three-month aluminum contract on the London Metal Exchange fell 0.8% to $3,053 per metric ton by 09:30 GMT, recording a fourth consecutive session of losses after earlier touching $3,040 per ton, its lowest level since February 19.

LME aluminum has lost around 20% of its value over the past month, as the United States and Iran moved closer to ending their dispute, strengthening expectations that supply will return to markets at a faster pace.

The most-traded aluminum contract on the Shanghai Futures Exchange also fell 0.4% to 22,400 yuan per ton.

Losses extended to most metals traded on the London Metal Exchange, amid weaker investor risk appetite and a decline in Asian equities ahead of US jobs data, which investors are watching for clues about the future path of US monetary policy.

The US economy showed a notable slowdown in job creation at the start of the summer, according to a report released Thursday by the Bureau of Labor Statistics, a development that strengthened investor expectations that the Federal Reserve will not need to raise interest rates in the near term.

Nonfarm payrolls increased by 57,000 jobs in June on a seasonally adjusted basis, following a downwardly revised gain of 129,000 in May. The result came in below the Dow Jones consensus forecast of 115,000 jobs.

Meanwhile, the unemployment rate fell to 4.2%, compared with 4.1% a year earlier.

Labor force participation declines as prior data are revised lower

The decline in the unemployment rate was driven largely by a drop in labor force participation, which fell by 0.3 percentage points to 61.5%, its lowest level since March 2021.

The household survey also showed a sharp deterioration in employment, with the number of employed people falling by 507,000 during the month. The broader measure of unemployment, which includes discouraged workers and those working part-time for economic reasons, declined by 0.2 percentage points to 7.9%.

Previous months’ data were revised lower as well. May payroll growth was cut by 43,000 jobs after originally coming in well above economists’ expectations, while April payrolls were revised down by 31,000 to 148,000 jobs, indicating that labor market growth had been considerably weaker than previously believed.

Average hourly earnings rose 0.3% in June and were up 3.5% from a year earlier, in line with market expectations.

Professional and business services led job gains, adding 36,000 positions. Social assistance employment increased by 25,000 jobs, while healthcare added 22,000 jobs, although that growth came at a slower pace than is typical for the sector. Government employment also increased by 8,000 jobs.

By contrast, the leisure and hospitality sector lost 61,000 jobs, which the Bureau of Labor Statistics attributed to weaker-than-usual seasonal hiring. There had been expectations that the World Cup would provide a boost to employment, with Goldman Sachs estimating the event could add around 40,000 jobs.

Most other sectors saw little change in employment levels.

Markets scale back rate hike expectations as the Fed faces a more complex labor picture

US stock futures rose following the report as traders reduced expectations for a possible interest-rate increase as early as September.

At the same time, US Treasury yields declined, with the policy-sensitive two-year yield falling 3.5 basis points to 4.13%.

Seema Shah, Chief Global Strategist at Principal Asset Management, said: “The slowdown in job growth undermines the narrative that had been developing in recent months that the labor market was regaining strength. At the same time, it reinforces the view that the Federal Reserve is under little pressure to tighten monetary policy further.”

The report comes at a time when Federal Reserve officials have expressed mixed views on the US economy. Policymakers have remained relatively optimistic about growth while continuing to worry about inflation, after earlier concerns over labor market weakness had eased. However, Thursday’s weak employment data could prompt policymakers to reassess labor market conditions.

Federal Reserve Chairman Kevin Warsh described the labor market as “stable” during a media appearance on Wednesday, while reiterating the importance of returning inflation to the central bank’s 2% target.

Inflation has remained above that level for nearly five years, with the latest increase driven in part by the war with Iran and the ongoing effects of tariffs.

“These numbers are fine for the Federal Reserve,” said Thomas Simons, Chief Economist at Jefferies, in a research note. “Job growth remains sufficient to keep the unemployment rate stable, while wage growth remains solid without accelerating. There is no urgent need to take immediate action on interest rates, and the slower pace of payroll growth suggests that a rate hike this year has become highly unlikely.”

Markets expect the Federal Reserve to leave interest rates unchanged throughout the summer. Following the jobs report, traders largely ruled out a rate increase at the September meeting, although futures markets still imply some probability of a hike in October, according to the CME FedWatch Tool.

For his part, Kevin Warsh has avoided providing forward guidance on the future path of interest rates, repeatedly emphasizing since taking office that he is not committed to any predetermined policy course.

In separate labor-market data released Thursday, initial jobless claims fell to 215,000 on a seasonally adjusted basis in the week ended June 27, down by 1,000 from the previous week and below market expectations of 220,000.