Germany's budding hydrogen sector continues to see lagging market development – report

Stakeholders from the hydrogen sector in Germany still take a rather negative view of the progress of the market ramp-up, showed the third edition of the H2 Market Index. Compared to last year's survey, the index has fallen from 44 to 41 points. Zero points is the lowest score, indicating a negative assessment, 50 points is neutral and 100 points is the most positive.

The survey commissioned by several associations and conducted by research institute EWI captures market players' perceptions of the current state and expected developments in various areas of the hydrogen market: innovation environment (index 55), policy and regulation (38), infrastructure development (35), and market development (37).

“The market is not taking off,” said Matthias Belitz, head of the sustainability, energy and climate department at the German Chemicals Industry Association (VCI). He called on the government to reduce regulatory hurdles and bureaucracy, cut energy costs and provide state support, including at EU level. “Otherwise, the hydrogen economy is in danger of failing before it even gets off the ground,” he said.

Stakeholders' assessments of the hydrogen market ramp-up vary. Transmission system operators, associations, and research institutions tend to assess the market ramp-up more positively than energy traders and industry, said EWI. The majority of market players see a widespread use of hydrogen in energy-intensive industries and the energy sector in the long term, but only a small share expects its use in passenger transport or the buildings sector.

In the fight against climate change, green hydrogen is seen as a crucial tool for reducing emissions in hard-to-abate sectors, such as heavy industry and aviation. However, an early green hydrogen hype in Germany and Europe has faced serious headwinds. Numerous projects have been cancelled, including by German companies. Production is expensive, transport logistics are complex, and the market remains trapped in a chicken-and-egg dilemma between demand and supply for the clean fuel. The Federal Court of Auditors (Bundesrechnungshof) last week said that the federal government must “fundamentally revise its hydrogen strategy.”