Many European nations are investing heavily in green hydrogen to decarbonize industries that are difficult to transition away from fossil fuels. The region has remained competitive with other emerging hubs like the Middle East and Asia-Pacific. However, despite progress in expanding green hydrogen capacity, Europe faces a significant implementation gap that could jeopardize its decarbonization targets in the coming decades.
The Role of Green Hydrogen
Green hydrogen is produced by using renewable electricity to power an electrolyzer, which splits water into hydrogen and oxygen. When burned, it emits only water vapor and warm air, making it a carbon-free energy source. This differs from grey hydrogen, which is produced using natural gas and releases carbon emissions. Hydrogen is considered a versatile fuel, particularly for sectors like transport and manufacturing, where reducing emissions is challenging.
European Countries Push Forward
Several European nations are advancing green hydrogen projects as part of their broader clean energy strategies. Germany, for instance, has set ambitious targets in its National Hydrogen Strategy, aiming for 5 GW of production capacity by 2030 and an additional 5 GW between 2035 and 2040. The government also plans to establish 1,800 kilometers of new and refurbished pipelines by 2027/2028 to create a “hydrogen start-up grid.”
In February, Finland launched its first green hydrogen plant. Finnish company P2X Solutions became one of the first in Europe to begin commercial production. The plant, located in western Finland, has a 20 MW production capacity and will eventually include a methanation facility. Powered by wind energy, the plant ensures carbon-free hydrogen production. The Finnish Ministry of Economic Affairs and Employment provided a $27.6 million grant, while the Finnish Climate Fund contributed a $10.6 million loan.
P2X CEO Herkko Plit emphasized that stricter emissions regulations in aviation, marine transport, and industrial production could drive demand for green hydrogen. He highlighted the company’s strategy to scale production gradually, aligning with market demand. Plit also noted that Europe has an opportunity to enhance its competitiveness in the sector, especially in light of the U.S. Inflation Reduction Act (IRA), which has drawn significant investment to the United States.
Spain is also stepping up its green hydrogen efforts. In February, the country allocated nearly $425 million from its post-COVID recovery fund to support the European Hydrogen Bank’s Auction-as-a-Service (AaaS) program. The initiative aims to accelerate green hydrogen development across the EU while helping Spain’s industry and transport sectors cut emissions.
The Implementation Gap and Funding Shortfall
Despite these promising developments, Europe faces significant challenges in executing its green hydrogen plans. A 2025 report tracking 190 green hydrogen projects over three years found that only 7% of global capacity announcements were completed on schedule. Although the project pipeline has tripled to 422 GW, achieving these targets would require approximately $1.3 trillion in subsidies—far more than what has been committed so far.
Past implementation gaps and a lack of sufficient funding suggest that Europe may struggle to meet its green hydrogen goals on time. Policymakers will likely need to prepare for prolonged hydrogen shortages and secure additional investments to close the gap.
Companies Scale Back Amid High Costs and Regulatory Hurdles
Some companies have scaled back their green hydrogen ambitions due to high costs and regulatory challenges. British oil major BP, Spanish energy firm Repsol, and Norwegian aluminum and energy company Norsk Hydro have either delayed or canceled planned projects.
In October, Repsol announced it was pausing its green hydrogen projects in Spain, citing an unfavorable regulatory environment. While the company has a project pipeline of 350 MW, it now plans to develop its next electrolyzer in Portugal instead.
IEA Calls for Stronger Policy Support
The International Energy Agency (IEA) warns that the adoption of low-carbon hydrogen remains slow due to unclear demand signals, financing barriers, regulatory uncertainties, and operational challenges. To accelerate deployment, the IEA recommends policies that stimulate demand in key sectors like heavy industry, refining, and long-distance transport.
Despite these challenges, early commercial-scale projects, such as Finland’s P2X Solutions facility, could encourage more investment in the sector. If Europe can address regulatory and funding barriers, the region may still emerge as a global leader in green hydrogen development.
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