Once hailed as the silver bullet of Europe’s energy transition, hydrogen was supposed to replace fossil fuels in steel plants, power trucks across the continent. It was also meant to store excess renewable energy for the future. But five years before the EU’s ambitious 2030 targets are due, the hydrogen revolution is sputtering. Costs are soaring, rollout is crawling, and even industry insiders admit the “fuel of the future” risks remaining just a promise always on the horizon, but never quite delivered.
It was meant to be the big breakthrough in the energy transition: hydrogen. Political leaders in Brussels and across European capitals embraced it as a fast track to decarbonisation. It was seen as a fuel that could replace fossil gas in heavy industry, power long-haul transport, and even serve as a storage vessel for renewables. The EU aimed to produce 10m tonnes of hydrogen and import another 10m by 2030.
With just five years left, however, scaling up has proven far slower and more expensive than projected. During last week’s debate on the ’realities, costs, use-cases and regulatory environment’ of hydrogen in the European Parliament, MEPs expressed their worries about the feasibility of the EU’s hydrogen strategy.
Ambitious start, but…
In recent years, the EU has been eager to turn its hydrogen ambitions into funding frameworks. The 2023 Fit for 55 package and the 2022 REPowerEU Strategy placed hydrogen at the centre of Europe’s energy plans. Electrolyser factories, where water is split into hydrogen and oxygen, were planned in countries such as Germany and Spain. The so-called hydrogen valleys started as flagship ecosystems to showcase regional hydrogen economies.
Abroad, the Commission signed memoranda of understanding with partner countries, backing them financially in exchange for promised future imports. These included a €500m loan to Namibia and €225m in support for Chile.
You might be interested
Staggering roll-out
But even as hydrogen remains central to Europe’s green ambitions, its rollout has been slower and far costlier than anticipated. Despite €18.8bn already invested in hydrogen-related projects, progress has been minimal. The Agency for the Cooperation of Energy Regulators (ACER) reported that Europe’s installed electrolyser capacity in 2023 stood at just 216 MW, with factories totalling 1.8 GW expected to be operational by late 2026. That is, however, still a fraction of the more than 100 GW needed by 2030.
Meanwhile, electrolyser costs have risen by 20–45 per cent since 2021, and no significant price drops are expected in the near term. Developers continue to struggle with securing long-term agreements at competitive prices, while inflation and regulatory uncertainty weigh heavily on investments. Once celebrated as the ’fuel of the future’, hydrogen is now, as industry insiders joke, ’always the fuel of the future.’
All in all, it does not seem that hydrogen will deliver at the scale and pace once promised. In early September, MEPs debated its implementation, and little optimism was felt in the room. MEP Paolo Borchia (PfE/ITA) called the 20-million-tonne target “an impossible ask” under current conditions. He argued that investors face crippling uncertainty from overly complex rules and warned that without radical change, EU targets will remain a dream.
MEP Daniel Obajtek (ECR/POL) struck a similar note, acknowledging the need for transformation but stressing that rollout is lagging. Rolling out green hydrogen across industry, he cautioned, is not currently feasible and risks driving up costs, undermining competitiveness.
There is no demand for 10 million tonnes by 2030, let alone the 20 million tonnes envisaged by the Commission. – European Court of Auditors’ report
The European Court of Auditors raised similar concerns last year, warning of a mismatch between the Commission’s ambitious targets and actual demand. It concluded that the strategy is politically driven rather than grounded in robust analysis. “There is no demand for 10 million tonnes by 2030, let alone the 20 million tonnes envisaged by the Commission,” the report stated.
Industry keeps its hands off
Recent industry developments seem to underline those concerns. This summer, Stellantis, parent company of Opel, Peugeot, Alfa Romeo, Jeep and Fiat, announced it would stop developing hydrogen as a fuel for cars, citing high costs. Deutsche ReGas, recently forwent funding in had been granted earlier htis year for which had won €112m in EU Hydrogen Bank support for a renewable hydrogen project in Lubmin on Germany’s Baltic coast, citing regulatory uncertainty.
Two other hydrogen projects in Spain and the Netherlands also ultimately declined granted subsidies. Similarly, the French investment fund Meridiam was awarded €159m to build two electrolysers in Germany, but ultimately decided not to proceed.
Not really renewable
On top of the implementation problems of the hydrogen regime, its green credentials also remain contested. Research by Corporate Europe Observatory found that fossil fuel companies played a key role in lobbying for hydrogen’s central place in EU policy. Industry groups spent more than €75m annually on influencing EU institutions.
Indeed, hydrogen is still largely reliant on fossil fuels. As of 2024, just 0.3 per cent of production came from renewable sources, while 99.7 per cent was produced from fossil fuels. That is a process which emits 10–14 kilograms of CO₂ per kilogram of hydrogen. Truly renewable hydrogen remains scarce and costly, priced at around €6 per kilogram. That is nearly double the cost of grey hydrogen from natural gas. Executives warn that by 2030, green hydrogen could rise to around €10 per kilogram due to rising regulatory and investment costs, roughly four times today’s price of natural gas.
As a result, the industry often does not see green hydrogen as viable. At Thyssenkrupp’s steel plant in Duisburg, a flagship project meant to showcase green hydrogen in heavy industry, CEO Miguel Ángel López Borrego recently warned that unless renewable hydrogen costs fall sharply, the company will have no choice but to fall back on fossil fuels.
A strategy in question
Against this backdrop, many MEPs are beginning to ask whether the problem is simply slow implementation, or whether the strategy was flawed from the start. MEP Michael McNamara (Renew/IRL) noted that Europe, once a front-runner, is now lagging in green hydrogen deployment. He asked whether regulation is to blame, or whether the technology itself has failed to mature as quickly as expected.
Speaking for the Commission, Kitti Nyitrai of DG Energy acknowledged the concerns, noting that high costs remain a critical obstacle. She confirmed that the Commission is looking to finetune the rules and implementation frameworks where needed.
