Germany wants to become climate neutral by 2045. To achieve this, alternatives to fossil fuels such as oil and natural gas are needed. One of the bearers of hope is hydrogen.¹

But can gas really play a key role on the path to climate-neutral energy production? We look at the question, highlight the opportunities and challenges and take a look at the current state of the hydrogen economy in Germany and Europe.  

What is hydrogen about?

What makes hydrogen so popular: The most common element in our universe is neither toxic nor radioactive and leaves no residue when burned. However, the ultra-light gas called H2 is not easy to grasp: It occurs on Earth practically only in bound form, such as in water, hydrocarbons and other organic compounds.¹ In order to use hydrogen as an energy carrier, the gas must first be released and separated from these compounds. This is done with the help of energy in the form of electricity, a process called electrolysis.² 

If the electricity required for electrolysis comes from renewable sources such as wind power, this is called green hydrogen. There are also other methods, such as grey hydrogen, which is produced using fossil fuels, or the pink variant, which uses electricity from nuclear power.  

Green hydrogen - hype or hope?

Since the production of green hydrogen does not involve any climate-damaging greenhouse gases or radioactive radiation, this method is at the heart of sustainable energy production. The applications - such as in the construction industry, the transport sector or steel production - are also wide-ranging, making H2 a multi-talent.³   

In addition, hydrogen can be stored permanently and in large quantities and transported over long distances.⁴ This means that H2 has the potential to compensate for fluctuations in electricity production caused by wind and sun. This is particularly crucial in energy-intensive industries such as steel production, as this ensures a consistently high energy supply.⁵  

Sounds exciting? That’s right. However, there is a large gap between implementation and ambition for green hydrogen. This is because green hydrogen is not yet competitive. There are two reasons for this: On the one hand, the corresponding electrolysis technology is still at an early stage of development, which leads to high investment costs. On the other hand, the production process requires large quantities of renewable energy, the availability and costs of which fluctuate greatly.⁶ In addition, the transport and safe storage of hydrogen requires the construction of its own infrastructure, which is still in the early stages in Europe.⁷  

The National Hydrogen Strategy

In order to promote the expansion of green hydrogen and speed up the market ramp-up, the German Federal Government presented the National Hydrogen Strategy in 2020 and updated it in 2023. The aim is to anchor hydrogen as a central component of the energy transition and the decarbonisation of the economy.⁸ 

An electrolysis capacity of 10 gigawatts (GW) is to be built up by 2030. So far, this capacity has only been around 150 megawatts (MW), but investors and operators have announced new projects to increase the capacity to 13.4 GW by 2030. Nevertheless, achieving this target will also be far from sufficient to meet the forecasted demand (between 18 and 89 GW depending on the calculation).⁷

What about the hydrogen economy in Europe?

Germany is not alone in the project to establish hydrogen as a sustainable, reliable and competitive energy source. H2 is a key element for the whole of Europe on the road to climate neutrality and an elementary part of the future energy system.   

However, hydrogen currently plays only a minor role in the European energy supply.⁹ To change this, the EU must promote the expansion of the necessary infrastructure across national borders, create framework conditions and promote corresponding investments in the economy and science.¹⁰