Europe’s €50 billion hydrogen gamble

On 20 May, the EU Commission cleared a €1.3 billion German state aid programme for renewable hydrogen (Brusselstimes, Politiken). Around the same time, Dutch and German grid operators signed a joint development agreement for a cross-border hydrogen corridor due to operate by 2031.

The direction of travel is clear enough. Across northern, southern and central Europe, governments and grid companies are putting tens of billions into a green hydrogen network before the market for it has properly arrived. Green hydrogen still costs three to five times more than the fossil-based version, and projects are being cancelled more quickly than new ones are reaching construction.

Four pipelines, one customer

Denmark wants to send green hydrogen south through the Danish Hydrogen Backbone. The SoutH2 corridor would carry supply from North Africa through Italy to Austria and Germany. Spain's BarMar submarine pipeline between Barcelona and Marseille is aiming for a 2032 start. The Netherlands is trying to make Rotterdam the import hub for northwest Europe.

The routes differ, but the customer is largely the same: German heavy industry. Germany expects to need 2.6 to 3.6 million tonnes of hydrogen a year by 2030 for steelmaking, chemicals and refining. Berlin already accepts that 50% to 70% of that will have to be imported.

That puts the scale of the build-out in perspective. Denmark's planned supply of 78,000 tonnes a year would meet only about 2% to 3% of German demand.

Who absorbs the cost gap

Green hydrogen is made by using renewable electricity to split water. In Europe today it costs €4.50 to €8.50 per kilogram, depending on location and power prices. Grey hydrogen, made from natural gas, costs about €1.50 per kilogram.

That gap is not a passing inconvenience. Electricity can account for up to 60% of the production cost of green hydrogen, and European power prices remain structurally higher than the level industry says it needs to compete.

Governments are covering part of the difference. Germany's programme pays producers a fixed amount per kilogram, between €0.44 and €3.49, for up to ten years. The larger exposure, though, sits in the pipes.

Germany's hydrogen core network could cost nearly €50 billion once financing and operations are included. The system is ultimately backed by grid fees and public funds. If pipeline use remains low, the state has promised to cover at least 76% of the shortfall through 2055, potentially leaving taxpayers with a €34.7 billion bill.

The Netherlands is seeing the same pattern on a smaller scale. Its network cost estimate rose from €1.5 billion to €3.8 billion in two years. Spain has committed €2.8 billion in public support, but has only 30 MW of electrolysis running against a 12 GW target for 2030.

Buyers and developers are already backing out

About 60 major green hydrogen projects were cancelled globally in 2025, with combined capacity of 4.9 million tonnes a year. Iberdrola cut its 2030 hydrogen targets by two-thirds. Shell and Equinor both cancelled Norwegian projects.

The bottleneck has moved from supply to demand. Europe can manufacture 13.1 GW of electrolysers a year, but it cannot find enough buyers willing to pay three to five times the fossil price.

Germany's own figures show the distance between target and delivery. The national goal is 10 GW of electrolyser capacity by 2030. Today, only 955 MW is installed, less than 10%.

A change in EU rules will make the economics harder again. From 2030, green hydrogen producers will have to match their electricity use with renewable generation on an hourly basis rather than a monthly one. CE Delft estimates that this will raise production costs by about 27.5%.

There is a reason for the rule. Without it, electrolysers could end up consuming existing renewable power and pushing the wider grid back towards fossil fuels. The climate logic is sound. The commercial effect is awkward.

Europe is building hydrogen pipelines on the assumption that costs will fall and buyers will arrive. Both may happen. If hydrogen's learning curve is slower than solar's, taxpayers will be left carrying the difference for longer than governments are currently saying out loud.