Eleven companies recently received more than €700 million in subsidies for hydrogen projects with a total capacity of 602 megawatts. At the same time, Tata Steel announced it will produce green steel with hydrogen technology by 2030. This is ten years ahead of schedule.
These investments suggest that hydrogen is the solution to sustainability. But the reality is more nuanced. Hydrogen must always be produced first, leading to CO2 emissions or significant energy losses. Moreover, the production costs of green hydrogen have recently increased due to higher investment and network costs.
So when is hydrogen the right choice for your organization? And when is it better to opt for other solutions to achieve your climate ambitions?
When hydrogen becomes essential
The story of hydrogen begins with a realistic analysis. Green hydrogen will remain limited in availability and relatively expensive in the coming years. This scarcity makes it crucial to deploy hydrogen strategically. So especially in sectors where no better sustainable alternatives are available.
Sectors that are difficult to make sustainable
For the steel and chemical industries, hydrogen is often the only realistic option. These industries require extremely high temperatures that electrification simply cannot provide. The same applies to heavy transport over long distances, where batteries are not a practical solution.
Realistic expectations
Even in sectors where hydrogen is the most logical choice, significant challenges remain. The main obstacles to a major breakthrough are limited availability of green hydrogen, inadequate infrastructure, complex transport logistics and high costs. Cost in particular is a barrier, partly because each part of the chain must meet strict certification requirements.
Practical considerations for your organization
Analyze your specific situation
Start with an honest analysis of your business processes. Do you have processes that are difficult to electrify? Are proven alternatives already available for your application? Cost can be an important factor: hydrogen cars, for example, are still more expensive than regular cars and even electric cars, with models starting around €65,000.
Timing and infrastructure
Hydrogen infrastructure development is not always on schedule. The national hydrogen network has been delayed and there is uncertainty about the availability of sufficient renewable electricity for green hydrogen production. The national transmission network is only expected to become available from 2030-2032 at major industrial areas. Therefore, plan flexibly and develop scenarios for different timelines.
The Tata Steel example: pioneer or risk?
Tata Steel is switching from traditional blast furnaces to modern hydrogen towers with DRI technology. This ambitious project will cost 65 million euros, with a 100-megawatt electrolyser set to produce 15,000 tons of hydrogen annually. Interestingly, the company is working in parallel with ECOLOG on hydrogen imports from Norway. This “betting on two horses” shows that Tata Steel expects that local production alone is unlikely to be sufficient to meet demand.
Three realistic implementation strategies
Incremental transition (from gray to blue to green)
For companies already using hydrogen, an incremental transition is often the most realistic. Blue hydrogen (with CO2 capture) costs €2 to €3 per kilo at normal gas prices: considerably cheaper than green hydrogen. It is important to realize that blue hydrogen is still fossil fuel based and therefore does not offer a final solution. However, it does serve as a practical intermediate step while the green hydrogen market develops.
Direct greening
Green hydrogen via electrolysis is the cleanest option, but the cost is hefty. TNO recently calculated a cost of €12 to €14 per kilo. So that’s about five times more expensive than gray hydrogen. Investment costs for a 100 MW plant have risen to over €3,000 per kilowatt.
For companies interested in exploring this route, the PRA subsidy offers a combination of investment and operating subsidies for plants from 0.5 MW. The cabinet set aside €1 billion for electrolysis projects in 2024, with another €3.9 billion for the years after that. For feasibility studies, there is the TSE scheme with subsidies of up to €4 million.
Imports and partnerships
Given the high cost of domestic production, the Netherlands is working on import routes with countries where green hydrogen can be produced more cheaply. CE Delft calculated that by 2050 the Netherlands will need to import between 40 and 70 percent of its hydrogen needs.
The Netherlands has cooperation agreements with countries such as Norway, Chile, Namibia and 11 more. Through the German H2Global initiative, both countries are investing €300 million each in long-term contracts with producers worldwide. First deliveries are expected from 2028, although import costs are likely to be even higher than domestic production until 2030.
Integration into your ESG strategy: realistic and targeted
Hydrogen should not become an isolated prestige project, but a considered part of your broader ESG strategy. In your CSRD reporting, you can position hydrogen as an element of your climate transition plan. But of course only when it demonstrably contributes to your reduction goals and fits within your capabilities.
Certification and reporting
Companies producing hydrogen can certify their product as RFNBO (Renewable Fuels of Non-Biological Origin) to comply with European directives. This certification requires thorough preparation, extensive documentation and continuous monitoring of the production chain.
KPIs that matter
Define concrete, measurable indicators that reflect the true impact of your hydrogen strategy. Think: the percentage of green versus gray hydrogen in your energy mix, the actual CO2 reduction per dollar invested, and the operational availability of your hydrogen plants. These metrics help you look beyond the hype and monitor actual progress.
Hydrogen: promising but not for everyone
Hydrogen is often presented as the solution to the energy transition, but the reality is more nuanced. The European Commission expects that hydrogen can cover 24 percent of global energy demand by 2050. That’s a significant share, but 76 percent will therefore have to come from other technologies.
For companies in hard-to-sustain sectors, hydrogen can be the missing link to climate neutrality. For other organizations, there are often better, more cost-effective alternatives. A hasty investment in hydrogen could mean not using scarce resources to their full potential.
So the question is not whether hydrogen is a game changer, but whether it is THE game changer for your particular situation. Empact helps you objectively analyze your opportunities. We do this without bias, with a focus on what really makes an impact for your organization. Contact us to discover which strategy best fits your climate ambitions.