‘The EU has put more than €20bn towards green hydrogen, but it is way behind its targets’: ACER

10 12 2025 | 05:34Polly Martin / HYDROGEN INSIGHT

A report by the EU agency warns that renewable H2 is still too expensive for industries to adopt without clear demand drivers in place

The EU has allocated more than €20bn ($23.2bn) in subsidies for green hydrogen as part of its push to decarbonise industries and incentivise the use of the zero-carbon gas, according to a report by the European Union Agency for the Cooperation of Energy Regulators (ACER).

But despite seeing a 51% increase in installed electrolyser capacity between 2023 and 2024, the bloc is falling far behind its targets.

ACER notes that just 308MW of electrolyser capacity had been built by the end of 2024, with another 1.8GW under construction — compared to an EU target of 6GW by then, leaving a 40GW-by-2030 target even further out of reach.

Meanwhile, the report cites data from Hydrogen Europe which suggests that only around a fifth of the projects that had been allocated funding via the Important Projects of Common European Interest (IPCEI) have reached a final investment decision, and 31% have yet to sign binding grant agreements with their host member states.

The EU’s Projects of Common or Mutual Interest (PCI/PMI) scheme, which aims to accelerate permitting and unlock funding for key cross-border energy infrastructure including H2 pipelines and storage, has also seen few final investment decisions, with projects still likely to take years to implement.
And while two rounds of the European Hydrogen Bank auctions have been held, offering more than €1bn in fixed payments per kilogram of renewable H2, several winners have exited the process, with some citing regulatory delays and infrastructure gaps that made it difficult for them to meet the auction’s deadline for operations to begin.
A major problem for Europe to meet its hydrogen goals is that the cost of renewable H2 is much higher than that of grey H2 made from unabated natural gas.
ACER estimates that the average cost of hydrogen meeting the EU’s definition of a renewable fuel of non-biological origin (RFNBO) is around €8/kg, while grey H2 is close to €2/kg.
“Expectations for liquified natural gas (LNG) and CO2 emission allowance price levels favour fossil-fuel hydrogen in the short-term,” the agency warns.
 

“Meanwhile, slower deployment of electrolysers limits economies of scale, delaying the anticipated reductions in related capital costs. The recent deceleration or even reversal of the decline in renewable electricity costs further undermines these cost-reduction prospects.”

As such, green hydrogen will struggle to displace grey H2 or other fossil fuels without clear policy drivers to encourage the uptake of RFNBOs.

ACER notes that as of October 2025, only two member states — Denmark and Ireland — have completed their transposition of the updated Renewable Energy Directive (RED III), which sets a mandate of 42% of industrial hydrogen and 1% of transport fuels to be RFNBOs by 2030.

As such, the agency urges the remaining member states to transpose the directive into their laws as soon as possible.

ACER also recommends that the hydrogen and decarbonised gas markets package is also implemented quickly, in order to ensure a clear regulatory environment for H2 midstream infrastructure.
In addition to recommending faster permitting and grid connection for renewable hydrogen projects, ACER also urges member states to deploy more renewable energy assets to decarbonise their grids to allow for lower electricity costs and more flexible electrolyser operation to produce H2 that meets RFNBO criteria.
 
However, when it comes to blue hydrogen — expected to be around €3/kg, and therefore closer to the cost of grey — ACER strikes a more cautious note, pointing out that few projects have been deployed at commercial scale and additional costs for CO2 transport and storage are “highly uncertain”.

“Moreover, the long-term gas offtake contracts required for such projects could lock-in fossil fuel dependence and exposure to price volatility in the global natural gas market,” the report continues.

“A robust assessment of these uncertainties is essential to determine the most appropriate hydrogen production pathways.

Cover photo:  European Commission president Ursula von der LeyenPhoto: Dati Bendo/European Commission

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