The Promise of Green Hydrogen Meets a Harsh Market Reality

In a spotless, robot-driven factory outside Hamburg, industrial arms stand poised to assemble the next generation of electrolysers, the machines that split water into hydrogen and oxygen. But despite the plant’s sophistication, the production lines are running well below capacity. Orders simply aren’t coming in.

Quest One, the company behind the facility, has invested heavily in automated manufacturing. Yet demand for green hydrogen systems is moving far slower than expected. “The market itself is not picking up organically,” said Nima Pegemanyfar, the company’s executive vice president for customer operations. “Demand is the problem. It’s not supply.” Earlier this year, Quest One laid off 20% of its German workforce despite the plant being able to support almost twice its current staffing level.

The weak order pipeline reflects a global pattern: low-emissions hydrogen, including both green and blue hydrogen, still accounts for less than 1% of worldwide production.

Price Pressures and Misaligned Priorities

One major barrier is cost. Green hydrogen remains far more expensive than hydrogen produced using fossil fuels. Quest One hopes future production costs will fall to around €4 per kilogram, roughly half today’s price in Germany. But for now, the economics remain unfavourable.

There is also tension over how hydrogen should be used. Scientists and analysts warn that the public debate is often dominated by inefficient applications such as home heating or passenger cars which are better served by electrification.

Professor Christian Stöcker of the Hamburg University of Applied Sciences expressed frustration that sectors with the highest need steelmaking, shipping and chemicals compete with attention-grabbing but unsuitable uses. He also noted concerns about hydrogen becoming a gateway for extending fossil fuel infrastructure, particularly where gas companies and automakers influence the narrative.

Meanwhile, Quest One’s parent structure adds another layer of uncertainty: the company sits under the Volkswagen Group, which is reviewing “strategic options” for the subsidiary that owns Quest One.

Infrastructure Growing Faster Than the Market

Despite an uncertain outlook, large-scale hydrogen infrastructure is already being built across Germany. Planned investments include a network of hydrogen pipelines stretching from the Port of Hamburg to industrial zones, along with deep underground salt caverns designed to store hydrogen at least 1,000 metres below the surface.

The idea is to convert excess renewable electricity into hydrogen, store it underground and tap it during winter when energy demand peaks. But these systems require enormous capital and won’t begin regular operation until the 2030s at the earliest.

Germany is also pursuing international supply routes, eyeing future imports from India, Saudi Arabia, Chile and Namibia. Hydrogen can be shipped as ammonia, but the conversion losses especially when turning ammonia back into hydrogen remain significant. Critics warn that developing hydrogen supply chains abroad could harm ecologically sensitive areas or deepen energy inequities between producing and consuming countries.

Sector at a Critical Turning Point

Globally, the hydrogen industry is in flux. Ivana Jemelkova, CEO of the Hydrogen Council, noted that demand today falls far short of the projections made five years ago. In the last 18 months alone, 52 renewable and low-carbon hydrogen projects were cancelled, sending shockwaves through the sector. Norwegian energy company Statkraft halted development of its green hydrogen portfolio in May 2025, citing severe market uncertainty.

And yet, Jemelkova remains cautiously optimistic. While some developers are scaling back or folding entirely, she believes the broader global industry still shows signs of long-term growth: “While some of the individual trees may be falling… the forest, as such, is really growing.”

For German companies that have already built out factories, pipelines and storage sites, the next few years will be decisive. Without stronger policy support including incentives, regulation and stable market signals they fear that billions in hydrogen infrastructure could stand idle.

“It’s crunch time,” one executive said. Germany’s manufacturers are ready to scale but they cannot wait indefinitely for a market that has yet to materialise.