The Urgency Facing Germany’s Green Hydrogen Sector

In a pristine, quiet manufacturing facility located near Hamburg, northern Germany, automated machinery stands poised to construct the essential components of electrolysers.

These innovative machines are designed to separate water into oxygen and hydrogen. The electrolysers produced by Quest One utilize proton exchange membranes to achieve this task.

The robotic arms assembling these electrolysers are both quicker and more dependable than the human workers they have replaced.

However, despite this impressive efficiency, the current demand for electrolysers remains significantly lower than the plant’s production capabilities.

This discrepancy between supply and demand is highlighted by the staffing levels at Quest One.

The Hamburg facility has the potential to accommodate nearly double its current workforce; nevertheless, earlier in the year, the company was compelled to reduce its employees by 20% in Germany.

“The market is not organically growing,” admits Nima Pegemanyfar, executive vice president of customer operations at Quest One. “The issue lies with demand, not supply.”

A key factor in the sluggish demand is the high cost of green hydrogen, which is produced through electrolysis powered by renewable energy, in comparison to traditional fossil fuels that are used for other hydrogen varieties.

Globally, low-emission hydrogen production, encompassing both green hydrogen and blue hydrogen—which is derived from natural gas with captured and stored carbon dioxide—accounts for less than 1% of total hydrogen output.

While scaling up production could help reduce the costs associated with green hydrogen, many initiatives remain on a smaller scale.

Quest One anticipates that the price of green hydrogen will eventually drop to €4 ($4.60; £3.50) per kilogram, roughly half of its current cost in Germany, according to the company’s estimates.

The disparity extends beyond just supply and demand; there also seems to be a disconnect between the industries that require green hydrogen the most—such as the chemical, steel, and shipping sectors—and the applications that, while garnering attention, are less competitive.

Christian Stöcker, a communications expert from Hamburg University of Applied Sciences, expresses his irritation regarding the focus on utilizing hydrogen for heating homes and powering vehicles, noting that these methods are significantly less efficient when compared to heat pumps and other electrification solutions.

Prof. Stöcker also raises concerns about green hydrogen’s associations with fossil fuel enterprises and automotive manufacturers, suggesting that these companies may seek to find justifications for fossil fuel infrastructure.

Quest One is a subsidiary of the Volkswagen Group, which is reportedly contemplating the sale of its ownership in Everllence, the parent company of Quest One.

Volkswagen has neither confirmed nor denied these speculations, nor provided any details regarding its future intentions concerning green hydrogen.

A spokesperson remarked, “We are currently evaluating strategic options for Everllence.”

German green hydrogen firms assert that making prices more competitive hinges on government policy, with no alternative plans available aside from supportive regulations for the sector.

Without such support, significant investments and infrastructure could end up being wasted.

This infrastructure encompasses a planned network of hydrogen pipelines stretching from the Port of Hamburg to various hydrogen producers and potential industrial consumers.

Additionally, it includes underground salt caverns being developed by Storengy Deutschland for hydrogen storage, which will be situated near an existing natural gas storage facility in Lower Saxony.

The company posits that the most effective way to store surplus renewable energy is by converting it into hydrogen, storing it at depths of at least 1,000 meters, and then utilizing it during peak demand in winter.

This process is lengthy and expensive, with regular operations not expected to commence until the 2030s at the earliest.

Plans are also underway to establish hydrogen transport networks connecting Germany with distant countries such as India, Saudi Arabia, Chile, and Namibia.

Hydrogen gas can be transformed into ammonia for transportation in liquid form; however, this process incurs efficiency losses, particularly during the extraction of hydrogen at the destination.

Moreover, there are concerns regarding the potential disruption of ecologically or culturally important sites in foreign nations to supply European industries, which could heighten the disparity in energy accessibility between hydrogen-producing and consuming nations.

The German government has declared that hydrogen is essential for meeting climate objectives; however, amid escalating costs, it is tempering its ambitions for green hydrogen.

Despite this, numerous green hydrogen companies within Germany are advocating for increased governmental backing to ensure domestic industries remain competitive and stable against China, the global leader in green hydrogen production.

Chinese enterprises currently hold nearly 60% of the worldwide capacity to manufacture electrolysers.

Overall, Ivana Jemelkova, CEO of the Hydrogen Council, acknowledges that the current demand for green hydrogen does not align with the overly optimistic expectations from five years ago.

In the past 18 months alone, 52 low-carbon and renewable hydrogen initiatives have been scrapped, according to her. “That represents a considerable amount of bad news.”

As project cancellations, delays, and bankruptcies continue to accumulate, the situation remains precarious.

For example, in May 2025, the Norwegian renewable energy firm Statkraft announced it would halt the advancement of new green hydrogen projects due to market uncertainties, opting instead to concentrate on fewer technologies moving forward.

Yet, Ms. Jemelkova remains optimistic, stating, “While some individual trees may be falling, the forest, in general, is still expanding.”

“It’s no longer a matter of hype, but it isn’t entirely bleak either.”

For the German entities poised to produce, store, and transport green hydrogen, the time for action is now. Some stakeholders argue that they can no longer afford to wait for a supportive market environment.