Finance
Green hydrogen retreat poses threat to emissions targets
Published by Global Banking and Finance Review
Posted on July 23, 2025
6 min readLast updated: January 22, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on July 23, 2025
6 min readLast updated: January 22, 2026
Green hydrogen projects face global setbacks due to high costs and low demand, threatening emission targets and prolonging fossil fuel reliance.
By Pietro Lombardi, Nina Chestney and Riham Alkousaa
MADRID/LONDON/BERLIN (Reuters) -Green hydrogen developers are cancelling projects and trimming investments around the world, raising the prospect of longer than targeted reliance on fossil fuels.
The challenges facing the sector have exposed its initial ambitions as unrealistic.
Hard-to-electrify industries that were seen as ideal candidates for green hydrogen, such as steelmaking and long-distance transportation, have found that transition to the low-carbon fuel looks prohibitively expensive.
The gap between ambition and reality in Europe shows the extent of the reset happening within the industry, said Jun Sasamura, hydrogen manager at research company Westwood Global Energy.
Only about a fifth of planned hydrogen projects across the European Union are likely to come online by the end of the decade, he said. That equates to roughly 12 GW of production capacity against an EU target of 40 GW, Westwood Global Energy data shows.
"In the current state, I really don't see the EU 2030 (hydrogen production) target being reached," he added.
INFLATED EXPECTATIONS
Companies say that high costs and a lack of demand for green hydrogen have rendered many plans unprofitable.
"Green hydrogen was an inflated expectation that has turned into a valley of disillusionment," said Miguel Stilwell d'Andrade, chief executive of Portuguese power company EDP.
"What’s missing is the demand. There are 400 million euros ($464.2 million) of subsidies for hydrogen in Spain and Portugal, but we need someone to buy the hydrogen."
The company has several projects in advanced stages but cannot move forward because of a lack of buyers, said Ana Quelhas, EDP's hydrogen chief and co-chair of the European Renewable Hydrogen Coalition.
Across the border, Spain's Iberdrola has shelved plans to increase capacity at a green hydrogen plant with electrolyser capacity of 20 MW until it finds buyers for additional output, company executive Iban Molina said at an energy event in Madrid.
They are among more than a dozen large companies that have trimmed spending or shelved projects across Europe, Asia, Australia and elsewhere in recent years.
Companies had scrapped or delayed more than a fifth of all European projects by the end of last year, Westwood Global Energy says.
At Aurora Energy Research, Emma Woodward said: "In 2020-2021 we had this view of hydrogen and the fact it was going to be used in almost every sector that hadn't been electrified.
"I think we've realised now that there are other, probably more commercially viable, alternatives for lots of sectors. Maybe we don't need as much hydrogen as initially expected."
TOO EXPENSIVE
Many governments have long supported development of green hydrogen - produced through electrolysis that splits water into hydrogen and oxygen using electricity from renewables - to help to decarbonise energy, transport and industry.
Countries including Australia, Britain, Germany and Japan announced ambitious investment strategies they hoped would bring down costs and eventually create a profitable green hydrogen sector that would no longer need support.
Production, however, remains more expensive than for natural gas and other fossil fuel-based alternatives, said Minh Khoi Le, Rystad Energy's head of hydrogen research.
It is at least three times more expensive than natural gas as a fuel for power generation, for example, and twice as expensive as grey hydrogen. The latter is produced from natural gas and coal and is already used in industries such as oil refining and production of ammonia and methanol.
Costs could fall by 30-40% in 10-15 years if equipment prices decline and the broader supply chain scales up, he added, while Aurora's Woodward and Westwood Global Energy’s Sasamura said that green hydrogen is unlikely to become competitive before then.
Only 6 million metric tons per annum (mtpa) of low-carbon hydrogen capacity - including green and blue hydrogen, which is made from gas - is either operational or under construction globally, consultancy Wood Mackenzie says.
This is well below the 450 mtpa the consultancy says is needed as part of the global push for net zero greenhouse gas emissions by 2050. The EU has committed to reducing emissions by 55% from 1990 levels by 2030, en route to the 2050 target.
BUYERS PRICED OUT THE MARKET
The industry had counted on sectors such as steel, oil refining, cement and transport to be among the first buyers, but the expected demand has failed to materialise.
German die forging company Dirostahl, which makes components for wind turbines, ships and oil and gas drill pipes, is dependent on furnaces fired by natural gas and is looking for a replacement.
However, green hydrogen is still too expensive. Offers for the fuel do not come below 150 euros per megawatt hour (MWh) while natural gas can be bought for 30-35 euros/MWh, said Chief Executive Roman Diederichs.
"It simply doesn’t work. You might not want to call it economic suicide, but in practice it would be just that. We'd be completely uncompetitive," he said.
Prices remain elevated because of the high cost of electrolysers needed for large-scale production, infrastructure bottlenecks and increased energy costs resulting from rules on what constitutes green hydrogen.
Some European countries have scaled back their ambitions. Italy has recently shifted more than 600 million euros in post-pandemic funds from hydrogen to biomethane. France lowered its 2030 hydrogen electrolysis capacity target by more than 30% in April and Portugal has cut its electrolysis capacity ambitions by 45%.
The Dutch government last year made sharp cuts to funds it had originally reserved for green hydrogen projects and battery development, shifting the focus of its climate fund toward the planned construction of two new nuclear plants.
Several players in Australia, meanwhile, have scaled back or withdrawn from projects despite more than A$8 billion ($5.2 billion) of pledged government support.
Projects that are going ahead also face delays. Rystad Energy analysts estimate that 99% of A$100 billion of projects announced for the next five years have failed to progress beyond the concept or approval stage.
INFRASTRUCTURE DIFFICULTIES
Another problem is that hydrogen is difficult to store because it requires high-pressure tanks, extremely low temperatures and tends to leak, making for risky transportation through old gas pipelines while awaiting new infrastructure.
Spain hopes to build a 2,600 km (1,615 mile) hydrogen network and connect it to another project - the trans-European H2Med link - from the Iberian region to northwest Europe.
The Spanish network should be operational around 2030, but delays of two or three years are likely for broader European infrastructure, said Arturo Gonzalo, CEO of Spanish gas grid operator Enagas.
"Infrastructure is not something that happens when the market has already taken off; it is something that has to happen for the market to take off," he said.
($1 = 0.8617 euros)
($1 = 1.5340 Australian dollars)
(Reporting by Pietro Lombardi in Madrid, Nina Chestney in London and Riham Alkousaa in BerlinAdditional reporting by Sergio Goncalves in Lisbon, Vera Eckert in Frankfurt, Bart Meijer in Amsterdam, Christine Chen in Canberra and Sam Li in BeijingEditing by David Goodman)
Green hydrogen developers are cancelling projects and trimming investments due to high costs and a lack of demand, making many plans unprofitable.
Only about a fifth of planned hydrogen projects across the European Union are likely to come online by the end of the decade, equating to roughly 12 GW of production capacity.
Green hydrogen is currently at least three times more expensive than natural gas for power generation, primarily due to the high costs of electrolysers and infrastructure bottlenecks.
Many governments have supported the development of green hydrogen with ambitious investment strategies, but some have recently scaled back their ambitions due to the high costs and lack of demand.
Currently, only 6 million metric tons per annum of low-carbon hydrogen capacity is operational or under construction globally, which is well below the 450 mtpa needed for net zero emissions by 2050.
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