The development of hydrogen and its use in the energy sector are nowhere near the targets set by the European Union. In 2024, a total of 308 MW of electrolyser capacity was operating in the EU – only a fraction of the 6 GW target set out in the European hydrogen strategy. The EU is also falling short of its 2024 hydrogen production target.
The reality of hydrogen development in the European Union is significantly lagging behind the ambitious targets the EU set in its hydrogen strategy. Hydrogen is intended to be one of the pillars of the transition to clean energy and a means of eliminating dependence on fossil fuels, especially natural gas.
However, as the latest annual report from the European energy regulator (ACER) shows, hydrogen is in fact still at the very beginning of its development. Since the first targets of the hydrogen strategy were set for 2024, it is easy to compare reality with the stated goals.
The targets are based on the European hydrogen strategy, which was created in 2020 shortly after the first wave of the COVID-19 pandemic and was intended to lay the foundations for the development of hydrogen use in the energy sector. Before its publication, all indications suggested that a tipping point was approaching and that hydrogen would play a crucial role in the energy sector.
“According to many indicators, we are now approaching a tipping point. New investment plans, often in the gigawatt range, are announced every week. Between November 2019 and March 2020, market analysts increased their forecasts for planned global investment in electrolyser capacity by 2030 from 3.2 GW to 8.2 GW (57% of which was in Europe),” states the 2020 hydrogen strategy.
Four years after the hydrogen strategy was published, the anticipated tipping point has not materialised. According to the hydrogen strategy, a total of 6 GW of electrolysers using electricity from renewable sources should have been operating in the EU by the end of last year. The reality? Just 0.3 GW was in operation at year-end.
The only slight consolation is that capacity increased by 51% year on year. A total of 104 MW of electrolyser capacity was commissioned. Up to 1.8 GW of new installed capacity is currently under construction, but even this would not have been enough to meet the 2024 target. For the EU as a whole to meet the target, almost twenty times as much capacity would have been needed.
Power to gas. Source: Uniper
The target for 2030 appears even more distant. By then, 40 GW of electrolysers producing hydrogen from renewable electricity should be brought into operation. Meeting this target would require a fundamental shift in project economics, including the introduction of generous financial support.
The European Union is already trying to support new hydrogen projects, for example through auctions for green hydrogen production projects. However, these have not delivered particularly positive results either. As the European energy regulator’s report states, between August and September this year, a total of seven projects with 1.8 GW of capacity withdrew their applications for financial support in the auction. The total capacity awarded support was 2.2 GW. The overwhelming majority of successful projects therefore appear unlikely to go ahead after all.
Electrolysers produced 29,000 tonnes of hydrogen
Hydrogen production in electrolysers is also far below expectations. The target set by the European hydrogen strategy for 2024 was one million tonnes of hydrogen. Last year, however, electrolysers produced only 29,000 tonnes of hydrogen. A year earlier, they produced 19,000 tonnes.
Although some progress in hydrogen production is evident, it represents only a fraction of the target set by the European Union. The 2030 target – production of 10 million tonnes of hydrogen in electrolysers – is even further away. Without a fundamental breakthrough in economics that would revive hydrogen demand and production, achieving this target is highly unlikely.
There is no sign of a recovery in demand or the development of new projects so far. Several planned projects have been scaled back or halted altogether this year alone. One example is a giant Exxon Mobil project, which the company decided to stop due to weak demand from potential customers.
Barriers to hydrogen development in the European Union
The energy regulator sees two main barriers to hydrogen development. The first is the insufficient transposition of European legislation into national regulations. Only Germany and Denmark have so far fully transposed European rules that are crucial to hydrogen development. This makes sense in the case of these two countries. Thanks to the capacity of offshore wind farms, both countries have some of the best conditions for hydrogen production. Other countries, including the Czech Republic, have not yet fulfilled their obligations.
The second barrier remains the high cost of producing hydrogen using electrolysers. The European energy regulator estimates that the price of green hydrogen is around EUR 8 per kilogram. Compared with hydrogen production from natural gas, this is approximately four times higher. Given developments in the emissions allowance market and the market for liquefied natural gas, the regulator does not expect prices to converge soon.
High hydrogen production costs also affect investment in transport infrastructure. Uncertain future demand for renewable hydrogen makes it difficult for potential hydrogen network operators to plan infrastructure development in line with expected market developments.
