Europe's €50 billion hydrogen gamble

On 20 May, the EU Commission approved a €1.3 billion German state aid programme for renewable hydrogen (Brusselstimes, Politiken). Dutch and German grid operators have signed a joint development agreement for a cross-border hydrogen corridor due to operate by 2031. Across northern, southern and central Europe, public money is being pushed into a green hydrogen network before the market behind it is fully there.

For Maltese readers, this is not another distant Brussels energy story. It is a case study in how the EU is using state aid, infrastructure guarantees and industrial policy to keep heavy industry inside Europe. The problem is that green hydrogen still costs three to five times more than the fossil-based version, while projects are being cancelled faster than new ones reach 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 targets a 2032 start. The Netherlands is trying to turn Rotterdam into the import hub for northwest Europe.

The four routes point to the same buyer: 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 also accepts that 50 to 70% of that demand will have to be imported. Denmark’s planned supply of 78,000 tonnes a year would cover only about 2-3% of German demand.

Who absorbs the cost gap

Green hydrogen, produced by splitting water with renewable electricity, costs €4.50 to €8.50 per kilogram in Europe today, depending on location and power prices. Grey hydrogen, made from natural gas, costs about €1.50/kg. That gap is not a minor start-up problem. Electricity can account for up to 60% of green hydrogen’s production cost, and European power prices remain too high for the competitiveness case to work on its own.

Governments are therefore paying part of the difference. Germany’s programme gives producers a fixed amount per kilogram, between €0.44 and €3.49, for up to ten years. The larger fiscal risk sits in the pipes. Germany’s hydrogen core network could cost nearly €50 billion once financing and operations are counted, with grid fees and public funds ultimately standing behind it. If the pipes are underused, 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 dynamic on a smaller scale. Network cost estimates 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

Around 60 major green hydrogen projects were cancelled globally in 2025, with a 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 constraint has moved from supply to demand: Europe can manufacture 13.1 GW of electrolysers a year, but cannot find enough buyers willing to pay three to five times the fossil price.

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

An EU rule change will push costs higher. From 2030, green hydrogen producers must match their electricity consumption with renewable generation hour by hour, rather than month by month. CE Delft estimates this will raise production costs by about 27.5%. The rule has a clear purpose: without it, electrolysers would soak up existing green power and force the grid back towards fossil fuels. Economically, it makes the project harder.

Europe is building hydrogen corridors on two assumptions: that costs will fall and that industrial buyers will come. Both may still happen. If hydrogen’s learning curve proves slower than solar’s, the real political question will be how long taxpayers are asked to carry the difference.