Key Takeaways

• Europe has sufficient electrolyser capacity for hydrogen production, but investment decisions lag.
• Only 3GW of planned 31GW green hydrogen capacity by 2030 has secured funding.
• Collaboration among manufacturers is essential for creating demand and securing investments.

Hydrogen Production Capacity and Investment Gaps

Europe has developed significant electrolyser manufacturing capacity, totaling up to 8.49GW annually. However, a new report from the Energy Industries Council (EIC) warns that without timely investment decisions, factories will remain underused, jeopardizing 2030 hydrogen goals. Despite having an extensive pipeline of hydrogen projects, the actual investment needed for these projects is lacking.

Out of the planned 31GW of green hydrogen capacity by 2030, only 3GW has received a final investment decision (FID). This discrepancy is a crucial challenge in Europe’s hydrogen sector, where technology and manufacturing capabilities are advancing faster than market demand. High production costs, uncertain demand, and a lack of long-term offtake agreements hinder developers from securing necessary financing.

The report highlights a cyclical pattern: developers are hesitant to invest due to uncertain demand, while potential customers hold off on spending until sufficient hydrogen infrastructure is established. EIC’s analysis indicates that for the short term, the production of electrolysers won’t bottleneck development, with manufacturers expected to meet anticipated orders in 2027 and 2028. However, a potential shortage could arise in 2029 unless more projects gain financial backing.

To stimulate growth, a coalition called Electrolysers4Europe was formed, comprising six key electrolyser manufacturers. They aim to create demand, establish clearer regulations, and enhance funding allocation for hydrogen projects. Since 2020, 624 hydrogen projects have been announced across Europe, though many are still in the planning stages. Green hydrogen remains the dominant focus, with 395 proposed developments.

Regional disparities exist within Europe, particularly in the UK, which leads with 130 proposed projects. However, only 8% are under construction, leaving a shortfall against the government’s targets. Germany shows a more favorable situation with 87 projects, 23% of which are under construction. Spain and Scandinavia also have numerous proposals, but many are at the feasibility stage.

Across Europe, proposed projects could equate to around 72GW of electrolyser capacity, needing an estimated $269 billion in investment. The distinction between this ambitious project pipeline and actual investment is critical. The future landscape for electrolyser manufacturers will largely hinge on the pace of FIDs. If investment accelerates, the industry might experience a supply shortage by decade’s end. Therefore, swift policy responses are essential to bridge the investment gap and turn ambitious hydrogen goals into reality.

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