The European Union’s ambitious hydrogen targets are central to its strategy for achieving net-zero emissions by 2050, with hydrogen positioned to decarbonise hard-to-abate sectors like industry and transport. In 2022, the REPowerEU set strategic goals to produce 10 million tonnes of renewable hydrogen domestically and import another 10 million tonnes by 2030. By 2050, hydrogen is expected to supply around 10% of the EU’s energy needs.
Yet, the European Commission’s current impact assessment projects only 3 million tonnes of hydrogen by 2030—far below the 10 million tonne target. This gap highlights a mismatch between the scale of the EU's ambitions and the capacities of its current policy. To scale hydrogen production, the EU must surpass tremendous technological, economic, and regulatory barriers—it should not come as a surprise that the European Court of Auditors has called for a "reality check,” noting concerns about whether sufficient demand can support such large volumes of hydrogen.
Our 2024 Annual Decarbonisation Perspective—which maps Europe’s various pathways to net-zero— suggests that Europe’s domestic clean hydrogen supply and demand could reach 20-22 million tonnes by 2050 (see Figure 1), around 4-5% of final energy consumption (see Figure 2), which is below the 10% projected by REPowerEU.
The central focus of these metrics should be to achieve EU decarbonisation through a balanced energy system. Rapidly scaling up hydrogen production, especially green hydrogen, which demands significant renewable energy, could divert resources from sectors where direct electrification is more efficient. A pragmatic strategy would prioritise hydrogen for hard-to-decarbonise sectors, like shipping and aviation, while reserving direct electrification for heating and other applications where it’s more effective.
Recommendations:
Tech-Inclusive PPAs: Implement PPAs for diverse low-carbon sources, ensuring a stable energy supply to support hydrogen production at scale.
Funding Mechanisms: The new EU budget should enable these funds (or these new fund structures) to address critical needs:
So while the EU may face challenges in meeting its ambitious 2030 hydrogen targets, this should not deter long-term planning. The 2040 hydrogen goals remain attainable with a pragmatic, balanced approach to decarbonisation and a flexible, adaptive strategy. This should involve setting clear intermediate milestones and regularly assessing infrastructure readiness, technological progress, and supply chain integration.
Expanding Power Purchase Agreements (PPAs) and Diversifying Energy Sources
To fully unlock hydrogen’s potential, immediate action is needed to address infrastructure gaps including electrolyser manufacturing and deployment, regulatory challenges, and the diversity of energy sources. Relying solely on renewables for hydrogen production could limit scalability and stability, while incorporating a wider array of low-carbon sources—such as nuclear via Power Purchase Agreements (PPAs)—will ensure a reliable hydrogen supply that can adapt to demand growth.
Leveraging EU Funding Mechanisms for a Resilient Supply Chain
Leveraging EU funding mechanisms such as the European Innovation Fund, Horizon Europe, and the Connecting Europe Facility is crucial to support hydrogen infrastructure, R&D, and necessary grid upgrades. These funds can drive essential investments to scale hydrogen production while supporting technological advances across the value chain. With targeted funding for both deployment and infrastructure, the EU can ensure a resilient hydrogen supply that aligns with its climate and energy security goals. The new EU budget should ensure these funding mechanisms are accessible and the process is as streamlined as possible.
Supporting a Full Hydrogen Supply Chain through Hydrogen Valleys
The EU’s Hydrogen Valleys offer a whole-systems approach, integrating hydrogen production, storage, and usage across local economies. Supported by initiatives like the Clean Hydrogen Partnership, these Hydrogen Valleys demonstrate hydrogen’s scalability and its role in building a skilled, competitive workforce for Europe. Projects in regions like the Northern Netherlands and Spain’s Hydrogen Corridor are essential for meeting both EU competitiveness and net-zero goals.
Conclusion
To achieve the EU's decarbonisation goals and enhance competitiveness, prioritising hydrogen for hard-to-decarbonise sectors while ensuring a balanced use of renewable resources is crucial. By investing now in Hydrogen Valleys, accelerating market creation for hydrogen and an inclusive framework, the EU can establish a resilient hydrogen economy, enhancing energy security and decarbonisation efforts across the continent.
