Will hydrogen supply grow to meet demand? IEA’s annual market check finds ‘growth uncertainty’

“Growth uncertainty has crept into some hydrogen markets” in NorthWest Europe, the International Energy Agency’s (IEA’s) annual report on the region’s hydrogen industry says, raising concerns over whether there will be enough customer ‘pull’ for production to reach the scale required by potential new markets such as hydrogen freight. The concern is that it may also affect green hydrogen cost, which is expected to fall as the volume produced rises.

Northwest European Hydrogen Monitor 2025 said less than 8% of the projects that will underpin the required supply of low-emissions hydrogen 2030 have reached Final Investment Decision (FID) or are under construction. Over 90%t are at the feasibility study or conceptual phase. The report said, “This highlights the urgent need for policies and support mechanisms to unlock the investments necessary to scale up low-emissions hydrogen production. Demand creation should also be prioritised to stimulate sufficient investment.”

According to IEA data, total European hydrogen demand reached about 7.6Mt (250 TWh) in 2023 (half of it in the ten countries covered in Northwest European Hydrogen Monitor). However demand was “overwhelmingly concentrated” in refining (60%) and ammonia production (35%).

Hydrogen demand growth in new sectors has to grow in step with expanded hydrogen production, and the transport sector is among those that are expected to increase demand. The EU’s RED III directive establishes origin requirements for hydrogen used in industry and transport. The 2025 target was that 1% of all fuel consumed in the sector must either fall under the advanced biofuel, biogas or RFNBO classification. This share will rises to 5.5% by 2030. In 2024 the European Commission clarified that use of hydrogen could count in reaching the transport sector RFNBO targets.

Despite the lack of on-the-ground progress the Monitor said most of its ten countries surveyed had not changed their targets.

In a country-by-country roundup it said Denmark was one exception: it had downgraded its expectations for the electricity demand required in 2035 for production of hydrogen and hydrogen-derived fuels by nearly half, “suggesting weaker market prospects in Denmark and neighbouring markets”. The Netherlands is currently Europe’s second-largest hydrogen consumer and aims to scale up hydrogen demand to decarbonise sectors that are difficult to electrify. However, in its November 2024 Climate and Energy Outlook, the Dutch Environmental Assessment Agency (PBL) scaled back forecast hydrogen demand in industry significantly, citing increasing electrolyser costs and electricity tariffs, as well as offtaker uncertainty and a reduction in the mobility sector.

Encouraging signs

There were more positive developments in some markets. Germany’s 2024 Import Strategy for hydrogen largely survived the coalition agreement that emerged from Germany’s newly formed government in April 2025. The coalition rolled back hydrogen ambitions in the aviation sector but maintained them for heavy duty transport, industry and electricity production.

Luxembourg updated its Integrated National Energy and Climate Plan (PNEC) in 2024 and projected medium-term hydrogen demand of 230GWh by 2030, split between industry and road transport. The plan suggested that road transport could catalyse early demand for hydrogen, but uptake in heavy industry applications would ramp up more quickly, accounting for over half of hydrogen demand by 2030.

Switzerland adopted a national hydrogen strategy based on the report Hydrogen: Overview and Options for Action for Switzerland in December 2024, S. Although the strategy does not define a target for hydrogen demand, it says hydrogen and Power-to-X derivatives are “flexible energy agents that can make a major contribution to a fossil-free energy supply by 2050”.

Sectors where it “makes economic and ecological sense” include heavy goods traffic, as well as high-temperature industrial heat, peak and reserve power plants and district heating systems. The Swiss strategy said “hydrogen infrastructure must be developed along the entire value chain (production, processing, transport and storage, as well as refuelling infrastructure for vehicles)” and the gas could be transported by road and rail as well as through new or refurbished pipelines. Switzerland’s federal energy department is also said to be “developing a concept to provide hydrogen filling station operators with suitable space in truck traffic control centres along national roads”.

The United Kingdom published a Hydrogen Strategy Update to the Market in December 2024. It named off-road machinery as a source of hydrogen demand, along with the potential for “a more important role in heavier transport segments such as shipping, aviation and some heavy-goods road transport”.

May 2024 also saw the European Union adopt a hydrogen and gas decarbonisation package – commonly referred to as the fourth gas package – which updated EU gas market rules while also introducing a regulatory framework for hydrogen infrastructure.

The package applies some of the fundamental EU natural gas market regulation principles to the new hydrogen market, such as ensuring the unbundling of network operation activities from production and supply. It also sets the groundwork for creation of a European Network of Network Operators for Hydrogen (ENNOH) to co-ordinate the planning, development and operation of EU hydrogen infrastructure. Finally, it sets out guidelines for converting existing natural gas infrastructure for hydrogen use.

The European Union is now expected to provide a clear definition for what constitutes “low-carbon” hydrogen and launch a hydrogen pilot mechanism that will connect hydrogen producers with European offtakers to address current supply and demand uncertainty and “make interest from both sides of the market more visible”. It said developing market structures will support EU ambitions to import large quantities of low-emissions hydrogen. Most current cross-border trade in ‘grey’ hydrogen is “confined to a few pipelines connecting industrial areas in Belgium, France and the Netherlands”, but a few pilot projects have demonstrated the feasibility of transporting hydrogen by ship. Ports including Rotterdam, Antwerp and Hamburg have already been working on strategic plans to position themselves as key import hubs for hydrogen and its derivatives.