Germany's Hydrogen Strategy Faces Implementation Hurdles, Institutions Criticize It as Falling Far Short of Targets

Project delays, rising costs, and disjointed planning have made Germany’s hydrogen strategy—once considered the "core engine" of its energy transition—struggle to advance, drawing skepticism from various quarters.

In its latest report, the German Federal Court of Audit warned that progress in implementing the country’s hydrogen strategy is "far from reaching its targets," with industries becoming increasingly reliant on government subsidies—a trend that could evolve into a long-term burden on the federal budget.

Based on production methods and associated carbon emissions, hydrogen can be categorized into green, blue, and gray hydrogen, in ascending order of carbon footprint. The most environmentally friendly is green hydrogen, produced through water electrolysis using renewable energy, which generates no carbon emissions throughout the process. Blue hydrogen, on the other hand, is derived from natural gas, with the resulting carbon dioxide captured and stored.

According to the German Renewable Energy Federation, green hydrogen not only presents development opportunities for German enterprises and creates tens of thousands of jobs, but also reduces dependence on energy imports, significantly enhances the resilience of the energy system, and provides crucial support for decarbonizing high-emission industries such as chemicals, shipping, and aviation.

To this end, Germany launched its first National Hydrogen Strategy in 2020, planning to invest 9 billion euros to promote hydrogen production and application. The updated 2023 National Hydrogen Strategy further aims to increase electrolysis capacity from 5 gigawatts (GW) to at least 10 GW by 2030, strengthening Germany’s leading position in hydrogen technology.

However, progress in reality has fallen short of expectations. German news outlet Tagesschau reported that the country has so far achieved only about 1.6% of this target, with under-construction electrolysis capacity amounting to just around 200 megawatts (MW). As more hydrogen projects are suspended or canceled, the prospects for hydrogen development appear increasingly bleak. Felix Matthes, acting chairman of Germany’s National Hydrogen Council, warned that the country’s 2030 hydrogen targets are likely to be missed.

An article on Tagesschau’s website pointed out that the stagnation of Germany’s hydrogen strategy is no accident. As an energy carrier still in its early stages, hydrogen development must rely on a complete industry chain, including production facilities, pipeline distribution infrastructure, and industrial users. Yet the capital and policy foundations supporting this system remain highly fragile.

Matthes noted that the cost of green hydrogen is significantly higher than initially expected. High costs have trapped the entire industry chain in a vicious cycle—at current price levels, green hydrogen holds little appeal for large industrial users. Tepid demand, in turn, deters potential producers. Without sufficient order guarantees, energy enterprises are hesitant to invest in new plants. Insufficient production further drives up costs, keeping prices persistently high, which in turn leads to a renewed contraction in demand, plunging the market into a cyclical deadlock.

A report by the Federal Audit Office states that the failure of the hydrogen strategy to meet expectations not only threatens Germany's ability to achieve its climate goals and maintain the status of its industrial base, but may also impact the stability of the federal budget.

In response to the Federal Audit Office's warnings, German industry holds a different view. The Association of German Engineers believes it is inappropriate to evaluate the strategy based solely on current costs and market parameters. The German Federal Renewable Energy Association also argues that the Federal Audit Office's assessment overlooks the strategic necessity and long-term economic returns of developing green hydrogen.