The European Commission is reconsidering its hydrogen strategy through a consultation period ending November 23, 2026, following slower-than-expected growth in renewable and low-carbon hydrogen production and use across the continent. Rather than establishing predetermined hydrogen volume targets, policymakers should begin by analyzing the specific industrial applications and competitive sourcing options available to European manufacturers, according to a demand-led assessment submitted to the Commission.
Europe’s existing hydrogen consumption remains concentrated in industrial chemicals, with approximately 7.4 million tons used annually as of 2024, primarily in petroleum refining and ammonia production. However, manufacturers in these sectors face multiple sourcing choices that extend beyond domestic hydrogen production. Fertilizer producers can import ammonia made elsewhere, steel manufacturers can use recycled scrap or imported reduced iron, and chemical producers have flexibility in their supply chains. These competing options mean that hydrogen demand cannot be accurately predicted through volume targets alone.
Cost comparisons highlight the economic challenge of relying on domestic hydrogen production. Electrolysis costs range from €3.30 to €5.50 per kilogram depending on electricity prices, excluding equipment, financing, and delivery expenses. Green ammonia imported to Europe carries modeled 2050 costs of €755–839 per ton, compared to approximately €1,222 per ton for European ammonia produced using on-site hydrogen, creating a substantial price gap of €383–467 per ton.
The assessment proposes that European policymakers evaluate hydrogen infrastructure investments by comparing them against alternative industrial sourcing routes, including imported products and services. Rather than designing pipelines based on predetermined hydrogen policy targets, infrastructure planners should assess utilization rates under scenarios where industrial buyers can select competing production options. This approach would reveal actual binding customer commitments and project risks before major investments proceed.
The accompanying analysis uses reproducible modeling tools that allow stakeholders to adjust assumptions about industrial imports, technology costs, and production methods. Under a central-cost scenario, selected European industrial markets would require approximately 1.887 million tons of hydrogen in 2050, though this figure would increase to 3.206 million tons if import capacity for industrial products were halved, demonstrating how sourcing assumptions directly influence infrastructure requirements.
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