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Many countries across Europe are investing heavily in the development of green hydrogen projects to help decarbonise hard-to-abate industries in support of a green transition. Europe has been highly competitive with other emerging green hydrogen regions, such as the Middle East and Asia-Pacific. However, while Europe’s green hydrogen capacity expands, the region continues to face a significant implementation gap, which could make it miss decarbonisation targets in the coming decades.
Green hydrogen is produced using renewable electricity to power an electrolyser, which splits water into hydrogen and oxygen. The gas is then burned to produce power, emitting only water vapour and warm air, which makes it carbon-free. This contrasts with the grey hydrogen production process, which is powered using natural gas and produces carbon emissions. Hydrogen is a versatile carrier that can be used for a range of applications and is expected to be used to fuel hard-to-abate industries, such as transport and manufacturing.
In Europe, several countries are developing their green hydrogen capacity in pursuit of a green transition. Germany has some of the most ambitious green hydrogen targets in Europe, introduced in its National Hydrogen Strategy. It sets out a production target of 5 GW by 2030 and an additional 5 GW to be developed between 2035 and 2040. The government also aims to establish 1,800 kilometres of new and refurbished pipelines for a “hydrogen start-up grid” in Germany by 2027/2028.
In February, Finland’s first green hydrogen plant commenced production. Finnish company P2X Solutions is among the first companies in Europe to begin commercial production. The new facility in the west of the country has a production capacity of 20 MW and will also include a methanation facility, which will launch at a later date. The plant uses wind energy to power operations, making for carbon-free hydrogen production. The Finnish Ministry of Economic Affairs and Employment provided a $27.6 million grant for the development of the facility, while the Finnish Climate Fund provided a $10.6 million loan.
The P2X CEO Herkko Plit said that the regulatory restrictions on emissions in air and marine traffic and industrial production that are expected to take effect could drive demand for green hydrogen. “Our company strategy has been to scale up, bearing market and technological risks in mind,” said Plit, adding it was easier to find sufficient customers for a smaller plant and scale up production incrementally as demand shifts. “I also see this as an opportunity for Europe to (…) increase competitiveness, which perhaps was not as strong when the IRA was attracting investments to the United States,” Plit stated.
In February, Spain announced almost $425 million in investment from its post-Covid recovery fund for the European Hydrogen Bank’s Auction-as-a-Service (AaaS) scheme. The funding aims to boost the development and deployment of green hydrogen across the EU and support the decarbonisation of Spain’s industry and transport sectors.
Despite several positive moves by European countries aimed at developing the region’s green energy capacity, a significant implementation gap persists in deploying green hydrogen policies. One 2025 report, which tracked 190 green hydrogen projects over three years, showed that only 7 percent of global capacity announcements were completed on schedule. The announced project pipeline tripled to 422 GW within three years, however, the $1.3 trillion in subsidies expected to be needed to achieve this development greatly exceeds the already announced subsidies for the sector.
The significant implementation gaps of the past and insufficient designated funding make it unlikely that the projected green hydrogen capacity will be developed in the anticipated timeframe. Therefore, policymakers will need to prepare for prolonged green hydrogen scarcity, as well as seek greater funding to achieve their capacity goals.
Several companies have reined in green hydrogen ambitions due to spiralling costs and regulatory hurdles faced during project development. The oil majors British BP and Spanish Repsol, as well as Norway’s aluminium and energy company Norsk Hydro, have all either cancelled or delayed green hydrogen projects.
In October, Repsol announced it would be pausing green hydrogen development projects in Spain due to the country’s unfavourable regulatory regime. Repsol has a project pipeline of 350 MW. However, the firm does not plan to ditch its green hydrogen ambitions altogether, instead stating plans to develop its next electrolyser in neighbouring Portugal.
According to the International Energy Agency (IEA), the uptake of low-carbon hydrogen is slow at present due to “unclear demand signals, financing hurdles, delays to incentives, regulatory uncertainties, licensing and permitting issues and operational challenges.” Therefore, the IEA recommends the introduction of policies that stimulate demand in key sectors such as heavy industry, refining, and long-distance transport to speed up deployment. Meanwhile, the successful launch of early commercial-scale projects, such as the Finnish P2X Solutions facility, will likely encourage more companies to develop green hydrogen projects.
