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Energy policy

An adjusted strategy is needed to ground green hydrogen expectations in reality

Nature Energy volume 10, pages 19–20 (2025)Cite this article

Subjects

Scaling up green hydrogen will be difficult if future projects solely depend on expensive subsidies to overcome competitiveness barriers. Policy makers need to implement supportive policies grounded in realistic expectations, focusing on hydrogen-specific support in sectors where electrification isn’t feasible, while also gradually introducing technology-neutral market mechanisms such as carbon pricing.

Messages for policy

  • Green hydrogen projects have recently fallen dramatically short of expectations, calling into question the reliability of steep growth rates implied by ever-increasing future project announcements.

  • Relying solely on supply-side subsidies to spur green hydrogen investments will be prohibitively expensive as a substantial competitiveness gap prevails across all end-use sectors.

  • Green hydrogen support should be combined with demand-side measures such as quotas that steer scarce and expensive hydrogen into hard-to-electrify sectors. Use cases can later be expanded to other sectors if supply exceeds expectations.

  • Policymakers need to support hydrogen projects, but should regularly adjust related expectations in order to avoid fossil lock-ins and implement a transition to technology-neutral market mechanisms like carbon pricing.

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Fig. 1: The three gaps of green hydrogen.

Further reading

  • Shafiee, R. T. & Schrag, D. P. Carbon abatement costs of green hydrogen across end-use sectors. Joule https://doi.org/10.1016/j.joule.2024.09.003 (2024). This article shows that current and future prices of delivered green hydrogen translate into very high carbon abatement costs, especially if transport and distribution of hydrogen are accounted for.

    Article  MATH  Google Scholar 

  • Neuwirth, M., Fleiter, T. & Hofmann, R. Modelling the market diffusion of hydrogen-based steel and basic chemical production in Europe – A site-specific approach. Energy Convers. Manag. 322, 119117 (2024). This article demonstrates how urgently green hydrogen is required in selected energy-intensive industries in the EU such as the production of primary steel, ammonia and carbonaceous chemicals.

    Article  Google Scholar 

  • Plötz, P. Hydrogen technology is unlikely to play a major role in sustainable road transport. Nat. Electron. 5, 8–10 (2022). This comment article argues that the window of opportunity for hydrogen vehicles has effectively closed, and that policymakers should focus on battery electric vehicles in both passenger and freight transport.

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  • Ueckerdt, F. et al. Potential and risks of hydrogen-based e-fuels in climate change mitigation. Nat. Clim. Change 11, 384–393 (2021). This perspective article demonstrates that hydrogen-based e-fuels are likely required for very few large sectors (for example, aviation and plastics), while any expectations for road transport and low-temperature heating risk to deepen fossil lock-ins.

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  • Richstein, J. C. & Neuhoff, K. Carbon contracts-for-difference: How to de-risk innovative investments for a low-carbon industry? iScience 25, 104700 (2022). This article shows how project-based carbon contracts-for-difference can reduce investment risks arising from market and political uncertainty, using a case study from the steel sector.

    Article  MATH  Google Scholar 

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Acknowledgements

We gratefully acknowledge funding from the Kopernikus-Projekt Ariadne by the German Federal Ministry of Education and Research (grant nos. 03SFK5A, 03SFK5A0-2, A.O., F.U.) and the HyValue project (grant no. 333151, F.U.).

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Authors and Affiliations

  1. Potsdam Institute for Climate Impact Research, Member of the Leibniz Association, Potsdam, Germany

    Adrian Odenweller & Falko Ueckerdt

  2. Global Energy Systems Analysis, Technical University of Berlin, Berlin, Germany

    Adrian Odenweller

Authors
  1. Adrian Odenweller
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  2. Falko Ueckerdt
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Corresponding author

Correspondence to Adrian Odenweller.

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The authors declare no competing interests.

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Cite this article

Odenweller, A., Ueckerdt, F. An adjusted strategy is needed to ground green hydrogen expectations in reality. Nat Energy 10, 19–20 (2025). https://doi.org/10.1038/s41560-024-01682-9

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