Green hydrogen is considered one of the key building blocks for the decarbonization of industry and the energy supply. At the same time, there remains a significant gap between political expectations and technical reality. Where do we stand today – and what is realistic by 2030? The following text provides answers to these questions.
Currently the lack of long-term experience at the MW scale, particularly regarding system degradation; the lack of standardization, for example in terminology (e.g., efficiency definitions) and performance evaluation methods; and the associated uncertainty for investors, which makes business cases difficult to calculate, are making market ramp-up extremely difficult. As long as lifespan, efficiency, and flexibility cannot be reliably compared from a technical and regulatory standpoint, the financing and implementation of many projects will remain risky.
The following outlines key technical, regulatory, and economic challenges, as well as opportunities and specific projects that reflect the actual state of the market ramp-up. Every hydrogen (H2) project fundamentally rests on four pillars: energy supply, water availability, safety, and logistics/quality.
Renewable electricity as a prerequisite
Green hydrogen absolutely requires renewable electricity – in Germany, primarily from wind and solar power plants, ideally combined with battery storage. Electrolysis could be used to benefit the grid, for example by utilizing excess generation and contributing to grid stabilization. The reality, however, is complex, as the local and temporal availability of renewable electricity often does not match the demand of large electrolyzers.
Furthermore, the power system is undergoing a transformation: large power plant units with rotating masses are being replaced by many decentralized generators – system inertia and stability must now be ensured by other means. Grid operators must first ensure supply security. In some cases, this means that large new loads, such as electrolyzer parks, are not guaranteed grid connection – and projects are never realized in the first place. Ideally, hydrogen production will become an active component of system stabilization. In the worst-case scenario, projects will fail due to connection or grid restrictions.
Water as a scarce resource
Electrolysis requires very pure water, often fully desalinated. While many plants can be connected to the drinking water supply, they then require extensive treatment. Especially in the summer, when PV yields are high and electrolysis could be ramped up, water shortages and droughts become more frequent – even in Germany. Water can then quickly lead to potential conflicts over its use between drinking water supply, agriculture, and industrial applications, including hydrogen production. This applies even more to planned import projects in water-scarce regions. For large-scale hydrogen production, it therefore makes sense to consider alternative sources, such as treated industrial wastewater and seawater (including desalination and treatment technology) – particularly relevant for offshore production projects.
Safety: a known risk on a new scale
Hydrogen has been used industrially for over 100 years, particularly in the chemical industry. This foundation is helpful, but it does not replace the need for a reassessment in the context of large-scale electrolysis, refueling stations, pipelines, and decentralized applications.
Specific aspects of electrolysis operations:
- During water splitting, a small proportion of the other gas is always carried over – hydrogen to the oxygen side and vice versa.
- Particularly during partial-load operation, the oxygen side can enter the range of flammable mixtures; safety shutdowns therefore restrict the lower load limit and thus flexibility.
- High-pressure refueling, Ex zones, pipeline operation, and compression require continuous safety assessments, particularly during rollout and scaling.
Quality and logistics: from raw gas to marketable product
The raw gas from the electrolyzer consists not only of H₂, but also contains oxygen, water, traces of nitrogen, and, in the alkaline process, possibly electrolyte droplets. Depending on the application, gas purification of varying complexity is required. The necessary technologies are generally well-established, but they must be able to adapt flexibly to fluctuating operating conditions and be integrated into the overall plant design.
Process pressure is also a key factor: pressure electrolysis (typically ~30 bar) reduces gas volume, simplifies transport and storage, but places higher demands on leak-tightness and materials. Atmospheric electrolysis is simpler in this regard but requires additional compression stages, for example for transport or storage.
For large plants, connection to a pipeline infrastructure is the only sensible solution. Although this infrastructure is currently under development and will eventually enable the use of underground gas storage facilities for enormous amounts of energy, regions without a foreseeable pipeline connection are thus initially excluded from certain business models.
Smaller, decentralized plants can be supplied via truck transport, but this requires high-pressure stages and reliable measurement and quality assurance during delivery. There are still some unresolved issues here – such as calibrated measurement systems for refueling operations – that must be addressed for a fully developed hydrogen economy.
Political and economic conditions
The regulatory environment for green hydrogen is currently in flux and more often acts as a barrier than as a catalyst. The frequent policy shifts over the past five years, which have failed to provide investment certainty, have been particularly challenging. Requirements suddenly came into effect that were unknown at the time of project planning (e.g., measurement concepts for grid fee exemptions), which posed particular challenges for operators.
The current certification requirements for sustainable hydrogen have also not yet been able to give the industry any significant momentum. This is due, among other things, to the fact that implementation has proven to be quite complicated and expensive, while at the same time it has not yet been demonstrated whether the intended effect can be achieved.
Since German law largely implements European directives, many decisions must be made at the EU level including consideration of international trade and import issues.
On the positive side, there are already instruments designed to support the ramp-up, such as:
The key here is to utilize electricity from renewable sources rather than curtail it. The grid fee exemption for electrolyzers has been implemented, and dual-auction models such as H2-Global (for imports) and the European Hydrogen Bank, which operates on similar principles, are now in effect. These instruments are important building blocks, but they do not alter the fact that regulatory complexity and volatility pose a significant risk to project developers and investors.
Role through 2030: a learning phase rather than mass adoption
By 2030, green hydrogen is not expected to play a dominant role in Germany – neither in industry nor in the energy supply sector. The current decade should be viewed more as an intensive learning and development phase. It is dedicated to the implementation and operation of pilot and early large-scale projects, as well as gathering operational experience on a megawatt (MW) to gigawatt (GW) scale. Additionally, standards and reliable business models are being developed and established, and the development of infrastructure (pipelines, storage facilities, import chains) is being advanced. Realistically, the actual large-scale rollout is expected in the 2030s – provided that today’s hurdles can be gradually overcome. In the long term, hydrogen offers considerable potential: it makes an important contribution to European energy independence and improves system stability in a largely renewable electricity system. It also indirectly ensures more stable energy prices as dependence on global fossil fuel markets decreases. It holds enormous economic potential through the development of a new industry with many skilled, sustainable jobs: from planning and construction to operation and maintenance, recycling, and sector coupling.
Energy prices determine competitiveness
It is currently difficult to reliably estimate the cost of green hydrogen compared to fossil fuels or other renewable technologies. What is clear, however, is that the price of electricity is the dominant factor. The more expensive the electricity, the more expensive the hydrogen and all products derived from it become. If electrolysis can be utilized in a way that benefits the grid, particularly when much cheaper renewable electricity is available, production costs will drop significantly.
It remains unclear how the costs of massive infrastructure development (pipelines, storage, etc.) will be distributed in the long term. Here, other stakeholders (regulators, grid operators, policymakers) are called upon to develop viable models.
It is important to note that hydrogen is already a reality today. Over 100 million tons are used annually worldwide – mostly of fossil origin, primarily in refineries and chemical processes. Transitioning this existing demand to renewable, low-carbon pathways is not a vision, but an urgent necessity. In addition, there are sectors where decarbonization is hardly possible without hydrogen, such as steel production and certain chemical processes.
These pathways cannot simply be replaced by other technologies. Added to this is hydrogen’s role as a flexibility module in the power system: In the long term, it can help balance the supply and demand of renewable electricity generation while ensuring system stability and a degree of energy independence.
There is currently no viable alternative that could perform this combination of functions (decarbonization of heavy industry + energy storage + system services + chemical feedstock) to the same extent. The question, therefore, is less “whether” and more “how quickly and how efficiently” the transition will succeed.
Conclusion: realistic pragmatism instead of promises of a miracle cure
Green hydrogen is neither a miracle cure nor a pipe dream. Technically, production is feasible, industrial expertise is available, and initial projects demonstrate how integration and operation can work. At the same time, infrastructure, standardization, regulatory stability, and economic conditions are crucial to determining whether today’s isolated solutions will evolve into a viable, large-scale hydrogen economy. The 2020s will above all be a decade of learning, of testing in real-world conditions, and of building infrastructure. If we succeed in systematically removing today’s obstacles, hydrogen can make a significant contribution to climate protection, energy independence, system stability, and economic value creation in the 2030s and thus truly evolve from a beacon of hope into a cornerstone of the “energy of the future.”
Further information
Green Hydrogen: Production and usage
H2Mare Game sets sail on a grand tour of Germany – Blog | Fraunhofer-Institut für Windenergiesysteme