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OPINION | Europe's lead in the green hydrogen market shows that policies and pipes trump power prices

Multiple 100MW+ projects are post-FID or under construction even in parts of Europe where renewable H2 is expensive to produce, writes Polly Martin

Shell's 200MW Holland Hydrogen 1 project under construction in the Port of Rotterdam
Shell's 200MW Holland Hydrogen 1 project under construction in the Port of RotterdamPhoto: Martens Multimedia/Port of Rotterdam
Chief Reporter
Air Liquide’s announcement that it has taken a final investment decision (FID) on its 200MW ELYgator green hydrogen project in the Netherlands was one of the few unambiguous silver linings for H2 last week, after a wave of project cancellations in the US and Australia.

Assuming it starts operations by the end of 2027 as planned, the green hydrogen project will be the second of its size to be completed in the Netherlands, after Shell's under-construction 200MW Holland Hydrogen 1. A number of other developments with 100MW or more in electrolyser capacity have also passed FID or begun construction throughout the EU.

So why is Europe surging ahead on green hydrogen, when its higher power prices would mean more expensive H2 than could be produced in regions with more abundant wind and solar resources and cheaper land?

The first and biggest part of the answer is policy support. The EU has set out clear mandates for renewable hydrogen and its derivatives to be used in industry and transport by 2030, with member states expected to transpose these targets into national legislation, meaning potential buyers have a clear deadline to purchase enough green molecules to meet these targets.

Meanwhile, the EU and its member states have signed off billions of euros in grants and fixed-payment subsidies for renewable H2 projects over the past few years, bringing down development costs and allowing producers to offer cheaper prices than if they had gone subsidy-free.

For example, ELYgator had been one of the projects to secure an undisclosed sum in subsidies from the Dutch government’s recent near-billion-euro auction (which ended up allocating only €700m across 11 winners), and had already lined up a buyer in TotalEnergies.

Politically, it makes sense that European governments would prioritise projects built within their borders, which would boost construction and operation jobs in tandem with reducing emissions from their own industries and transport.

But the EU and its member states have also provided grants or development bank loans for overseas projects, albeit at a much smaller scale. The H2Global mechanism, originally launched by Germany, is even designed to subsidise the imports of green hydrogen and its derivatives — but has only seen one winner, Fertiglobe, allocated funding to date.

De-risking delivery

Another part of the answer is that it is simply easier for green hydrogen produced in Europe to be delivered to end users within the same country compared to export-oriented developments, particularly in nations beyond the reach of a pipeline.

Air Liquide already operates an existing hydrogen pipeline network, which would allow green molecules produced at ELYgator to be immediately fed to customers in the Netherlands and Belgium.

Other large-scale green hydrogen projects that have reached FID in Europe are being constructed adjacent to where the molecules will be used, or linked to pipeline projects that are already being built or converted to make up the initial “backbone” of their national H2 networks.

Meanwhile, the largest export-oriented project in the world — Saudi Arabia’s 2.2GW Neom project — will convert green hydrogen into ammonia, a product which is already shipped overseas and can be safely handled at several European ports.

However, co-developer Air Products had originally laid out plans to crack the ammonia back into hydrogen, which would require additional cracking infrastructure to be installed at European ports.

Converting green hydrogen to ammonia overseas, and then cracking it back to H2 in Europe, would require large amounts of clean energy, with some analysts arguing that this process would outweigh any cost benefit from producing molecules in overseas regions with abundant wind and solar.
At least one of Air Products’ cracking projects, at the Port of Immingham in the UK, has already been shelved despite receiving a development consent order, with the company noting that H2 cracked from renewable ammonia would not currently qualify for support under the country’s existing mechanism.

Air Products has taken on a 30-year exclusive offtake agreement to buy green ammonia from the Neom complex to sell on to other demand centres. But in recent years, it has struggled to sign offtake agreements with end-customers, much to the chagrin of shareholders.

Similarly, the winner of the first H2Global auction, Fertiglobe in Egypt, will require a 100MW green hydrogen project by Scatec to start up before it can begin producing renewable ammonia at an existing fertilizer production site.

Scatec has not yet taken a final investment decision on its Egypt Green Hydrogen project, which could risk its offtaker being late to start supplying Germany with 397,000 tonnes of ammonia in total between 2027 and 2033.

As such, some European offtakers may consider it a safer option to procure renewable hydrogen or its derivatives made locally, even at a much higher cost, than to bet on an entire value chain of production, export terminals, and import infrastructure coming on line at the right time.

Even cross-border H2 pipelines to other regions in Europe with theoretically low levelised cost of hydrogen production based on high wind and solar resources, such as Iberia and the Nordics, still appear years away from being permitted, let alone built.

This could explain why, although northern Sweden boasts the largest renewable hydrogen project in Europe under construction (the 700MW Stegra green steel facility), Germany is further ahead with 880MW of capacity post-FID across multiple large-scale projects by BP, RWE, EWE, Shell and Salzgitter — despite its power prices being some of the highest in Europe.

So while it can be tempting to boil down the success or failure of projects to the levelised cost of hydrogen production, FIDs in Europe might demonstrate that policy and perceived risk around alternative sources of supply can outweigh cost as a driver for industrial demand.

Polly Martin is the chief reporter at Hydrogen Insight.
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Published 30 July 2025, 10:38Updated 31 July 2025, 12:42
EuropeEUGreen H2PipelinesAmmonia