October 2025
September marked another month of contrasts for the European hydrogen market. In this edition of Hydrogen Compass, we examine how Germany’s pragmatic policy shift, expanded H2Global auctions, and targeted UK initiatives signal a gradual move towards more flexible, market-driven frameworks, even as developers face persistent regulatory and commercial challenges. From delays in green steel projects and calls for regulatory reform, developments last month reflect a potential shift in the market where the urgency for flexibility and policy alignment is becoming impossible to ignore.
The next edition will be published in November. In the meantime, if you have any comments or feedback, please do reach out to Jun Sasamura ([email protected]).
Persistent market challenges highlight the need for regulatory reform
Market challenges force developers to pause investments
ScottishPower announced in September that it has paused all hydrogen projects despite securing UK government subsidies under the Hydrogen Allocation Round (HAR) scheme. This includes the Whitelee Phase 1 and Cromarty projects under HAR1, and Whitelee Phase 2 shortlisted for HAR 2 in April. The company cited challenging market conditions, with limited demand and commercial opportunities for renewable hydrogen in the UK but reaffirmed its support for the technology’s role in decarbonisation.
The announcement underscores wider structural barriers in the UK market, notably slow permitting, grid connection delays, and complex planning processes. These factors inflate project costs and reduce the commercial viability for a market that is already challenged by high capital intensity and uncertain adoption rates.
In the EU, Salzgitter AG has delayed the second and third phases of its €3.5 billion hydrogen-based steel programme by up to three years, citing similar financial and regulatory hurdles as faced in the UK. The first 100MW phase, however, remains on track for 2026, with hydrogen-based steel expected in 2027. Despite receiving over €1 billion in support, Salzgitter joins Thyssenkrupp and ArcelorMittal in scaling back near-term ambitions amid high costs and slow policy delivery.
Existing regulations may be undermining progress
Stegra, developer of Europe’s largest renewable hydrogen steel project in Boden, faces funding uncertainty after the Swedish government withheld most of a previously approved €265 million grant in September. This is because the final product is not entirely fossil-free, owing to the partial use of natural gas in the production process. After already securing €4.2 billion in debt, €2.1 billion in equity, and €250 million from the EU Innovation Fund, Stegra only received €100 million of the Swedish grant and is now seeking new financing. Despite the setback, they still target commercial operations in 2026, with half of its 2.5 million tonne output pre-sold.
Meanwhile, Denmark’s restrictive interpretation of the Renewable Energy Direct III (RED III) has drawn criticism. Its national law currently treats state-subsidised hydrogen projects as having the same emissions as fossil hydrogen, effectively excluding them from counting towards national targets.
These cases demonstrate how strict EU policy and rigid interpretations at a national level can penalise early movers. Harmonising definitions and easing overly strict criteria could help to maintain investor confidence and accelerate project delivery.
Calls grow for regulatory flexibility
Given ongoing regulatory challenges, eight major European electrolyser manufacturers including Nel, Topsoe, Siemens Energy, Sunfire, Thyssenkrupp Nucera, Bosch, John Cockerill, and ITM, warned that the EU’s Renewable Fuels of Non-Biological Origin (RFNBO) rules risk threatening the future of European hydrogen. In a letter to the European Commission, they have pushed for a relaxation of ‘additionality’ rules restricting use of renewable power from subsidised plants and for an extension of the ‘additionality’ exemption until 2035 – without which further project cancellations and stalled investments are likely to persist.
Not all stakeholders agree. Members of the Green Hydrogen Organisation have written to the Commission defending the existing framework, with Energy Commissioner Dan Jørgensen confirming that no change will occur before the 2028 review.
Without interim flexibility on RFNBO rules, manufacturers and developers could be placed under further risk. The Commission’s decision to wait until 2028 could prove costly if investment relocates before reforms take shape.
Emerging positivity and policy shifts
Germany announces a more flexible approach
Economic Affairs and Energy Minister Ketherina Reiche announced a policy refresh in September, aimed at accelerating hydrogen deployment. Germany will move away from the EU’s narrow RFNBO definition and support all forms of low-carbon hydrogen, prioritising industrial user’s willing to pay a premium, such as refineries, and high-temperature process heat applications. The government plans to implement flexible, demand-driven targets to replace the existing 10GW goal by 2030. The policy will also support carbon capture, utilisation and storage (CCUS) to decarbonise hard-to-abate sectors.
This pragmatic approach may serve as a signal for European hydrogen. By broadening its technology scope and aligning targets with industrial demand, Germany is an early mover towards realism, something that may be emulated by other member states going forward.
Expanded H2Global auctions and UK initiatives
Following Germany’s September decision to raise its contribution to the second H2Global auction by €412 million, it has partnered with the Netherlands to launch a joint global auction for renewable hydrogen imports. The scheme will support hydrogen produced anywhere in the world, provided delivery is made to Germany of the Netherlands. Unlike earlier tenders, this round targets pure hydrogen rather than derivatives, completing the four regional lots launched earlier this year for Africa, Asia, North America, South America, and Oceania.
Separately, H2Global will relaunch its pilot auction for e-methanol imports with a €437.5 million budget, after earlier tenders were hindered by regulatory uncertainty over captured carbon use.
In the UK, the government has pledged £448 million through the UK SHORE programme to decarbonise maritime transport via hydrogen, ammonia, methanol, electrification, and wind power. While project details remain limited, officials claim the initiative has already attracted £700 million in private investment, much of it focussed on port electrification and related infrastructure.
Recent dropouts from the European Hydrogen Bank’s second auction and delays in the UK’s HAR process underscore the need for more effective funding models. H2Global’s cross-border design offers a stronger market mechanism to bridge producers and offtakers. If executed effectively, this scheme could provide the long-term price stability and offtake certainty that hydrogen producers and end-users have been awaiting.
Key European Project Watch
| Project | Update |
| OranjeWind H2 | The Netherlands Enterprise Agency (RVO) has awarded €551mn ($645mn) to RWE to develop a 100MW renewable hydrogen plant in Eemshaven, powered by the upcoming 795MW Oranje Wind offshore farm, a joint project with TotalEnergies. Located near RWE’s Magnum gas-fired power plant, the project recently secured construction and environmental permits and will now move into front-end engineering and design (FEED). Aiming to supply hydrogen to regions including Rotterdam and Zeeland, the facility is part of the Dutch SDE++ scheme to drive industrial decarbonisation. This follows a €124.9mn award in April 2024 for RWE’s separate 50MW hydrogen plant in the same area, due in 2027. |
| CarlHYng | German steel producer SHS Group has signed a 10-year offtake deal with Verso Energy to buy at least 6,000 tonnes of renewable hydrogen annually from the €450mn CarlHYng project in France, starting in 2029, to supply its planned direct-reduction iron plant in Dillingen. This agreement forms part of a wider 2024 tender the steelmaker launched for up to 50,000 tonnes a year of renewable hydrogen. The hydrogen will be delivered via the mosaHYc pipeline which is expected in 2028, with SHS ultimately aiming to scale up consumption of renewable hydrogen to 120,000 tonnes a year, positioning itself as the region’s largest hydrogen consumer. |
| HydroHub Fenne | The 53MW HydroHub Fenne renewable hydrogen project in Saarland, Germany, has been cancelled despite being approved for €100mn in EU subsidies under the Important Projects of Common European Interest (IPCEI) scheme. Developer Steag Iqony explained that the final investment decision depended on reliable offtake, risk-sharing, and competitive conditions, which were not achievable under current market frameworks. High electricity prices in Germany, among the world’s highest, were cited as the main obstacle to hydrogen competitiveness. The developer has stated that it will focus now on district heating, battery storage, and gas projects. |
| Air Liquide Normand’Hy | Air Liquide’s 200MW Normand’Hy project in Port-Jérôme, France, has received nine of its twelve PEM electrolysers from Siemens Energy, marking a major step toward its planned 2026 start-up. Built at Siemens and Air Liquide’s joint gigafactory in Berlin, the units will support annual production of up to 28,000 tonnes of renewable hydrogen, with around 100MW dedicated to TotalEnergies’ Gonfreville refinery and roughly 25% allocated to fuelling up to 500 hydrogen trucks along the Seine Axis. Once operational, the plant is expected to prevent around 250,000 tonnes of CO₂ emissions annually and act as a cornerstone of France’s national hydrogen strategy. |
| Iverson eFuels | Iverson eFuels, a subsidiary of Hy2gen, has secured zoning approval for its planned 270MW green ammonia plant in Sauda, Norway, marking a major milestone for the project. Powered by local hydropower, the facility will produce around 200,000 tonnes of renewable ammonia annually for maritime and industrial use, with the potential to expand capacity in later phases. With approval in place, Iverson eFuels will move forward with technical development work ahead of a final investment decision. The project is expected to be operational by 2029. |
| Tyczka Hydrogen – Schweinfurt | Accelera by Cummins will supply two HyLYZER 500 PEM electrolysers, providing 5MW of capacity for Tyczka Hydrogen’s hub at the Port of Schweinfurt in Bavaria. Powered by solar and wind energy with access to the SüdLink DC grid, the system will produce up to 2.2 tonnes of renewable hydrogen per day, reducing more than 6,000 tonnes of CO₂ emissions annually. Supported by a €5mn Bavarian state grant as part of a €20mn investment, the project will also include a refuelling station capable of dispensing up to 1,000kg of hydrogen daily at 350 and 700 bar for heavy and light-duty vehicles. The project is expected to come online by the end of 2026. |
| Repsol – Cartagena | Repsol, in partnership with Enagás Renovable, has approved construction of its first large-scale renewable hydrogen plant at its industrial complex in Cartagena, Spain. The 100MW electrolyser, expected online in 2029, will require more than €300mn in investment and has been designated as an Important Project of Common European Interest (IPCEI), unlocking €155mn in Spanish government funding. Once operational, the facility will produce up to 15,000 tonnes of renewable hydrogen annually, helping avoid an estimated 167,000 tonnes of CO2 emissions each year. The renewable hydrogen will primarily be used as feedstock for Repsol’s industrial operations to manufacture lower-carbon products, aligning with its strategy to replace conventional hydrogen across its sites. |
Jun Sasamura, Manager – Hydrogen
[email protected]
