Germany’s ambitious green hydrogen industry is at a turning point, facing a stark reality: demand is lagging far behind production capacity. Despite significant investment in electrolyzer manufacturing, storage infrastructure, and international partnerships, the market isn’t developing fast enough to justify the massive scale-up. This mismatch threatens to derail Germany’s climate goals and could leave billions in investments stranded.
The Supply-Demand Imbalance
Factories like Quest One near Hamburg stand poised to churn out electrolyzers – machines that split water into hydrogen and oxygen using renewable energy. However, these facilities are operating well below potential, with Quest One even forced to lay off 20% of its German workforce due to weak orders. The core issue isn’t a lack of supply; it’s that green hydrogen remains too expensive compared to fossil fuel-derived alternatives. Currently, green hydrogen production accounts for less than 1% of global output, and scaling up is crucial to lower costs.
Misplaced Priorities and Sectoral Disconnects
A key obstacle is misplaced focus. Experts like communication professor Christian Stöcker criticize the overemphasis on hydrogen for inefficient applications such as home heating and personal vehicles, where heat pumps and electric alternatives are far more viable. Meanwhile, the sectors that genuinely need green hydrogen—heavy industry (steel, chemicals, shipping)—are not driving demand effectively.
Adding to the complexity, some critics point to the involvement of fossil fuel companies and automakers, suggesting they may be using hydrogen as a way to justify continued investment in outdated infrastructure. Volkswagen, owner of electrolyzer manufacturer Quest One, is even reportedly considering selling its hydrogen assets.
Infrastructure at Risk
Germany is investing heavily in hydrogen infrastructure: pipelines across northern Germany, underground storage facilities (like those being built by Storengy Deutschland), and even international transport networks reaching as far as India and Saudi Arabia. However, this infrastructure may become worthless if demand doesn’t materialize. Converting hydrogen into ammonia for transport introduces efficiency losses, and sourcing from countries like Chile or Namibia raises concerns about exacerbating energy inequality.
Government Support Is Essential
German hydrogen companies insist that government policy is the only viable solution. Without aggressive regulation and subsidies, the entire sector could collapse. The urgency is compounded by China’s dominance in electrolyzer manufacturing (accounting for nearly 60% of global capacity) and recent project cancellations: in the last 18 months, 52 low-carbon hydrogen projects have been scrapped.
A Race Against Time
While industry leaders like Ivana Jemelkova of the Hydrogen Council maintain a cautiously optimistic outlook, the reality is grim. Companies cannot indefinitely wait for a supportive market. The German government, while still committed to hydrogen as a climate solution, is already tempering its ambitions amid high costs. The next few years will determine whether Germany’s green hydrogen gamble pays off or becomes a costly failure.
