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Photoelectrochemical cells (PECs) are a promising option for directly converting solar energy into chemical energy by producing hydrogen (H2) gas, thus providing a clean alternative to consuming fossil fuels. H2 as fuel is free from any carbon footprints and negative environmental impacts. Therefore, the H2 production, especially directly using sunlight in PECs, is critically important for the rapidly growing energy demand of the world. Although promising, PECs are inefficient and must overcome a few inherent losses in producing H2—the most important being the activation overpotential (ηa) required for splitting water. This work analyzes the impact of ηa on solar-to-fuel efficiency (ηSTF) and H2 production rate (HPR). This work also discusses choosing appropriate photo-absorbing materials based on their energy bandgaps and suitable electrode pairs to achieve desired ηSTF and HPR for different electrical and optical PEC configurations. Significant changes are observed in ηSTF and HPR when ηa is considered in water splitting.