EU hydrogen strategy should start with industrial demand

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A European fertilizer manufacturer purchases ammonia. Your immediate concern is getting the right product, at the right quality and price, with reliable deliveries. The manufacturer can produce ammonia using hydrogen manufactured at its own site, purchase hydrogen through a pipeline, or import ammonia manufactured elsewhere. The latter option preserves much of the downstream industrial work, but does not create demand for additional hydrogen production or pipelines within Europe. That distinction belongs at the beginning of Europe’s hydrogen strategy.

The European Commission has reopened the strategy for consultations and submissions are due on 23 November. The Commission recognizes that the production and use of renewable and low-carbon hydrogen has grown more slowly than expected. Europe’s public investment decisions now need a closer look at the industries expected to use hydrogen, the products they make, and the routes by which those products can be competitively supplied. The consultation is open until November 23, 2026.

I submitted a demand-based assessment to the Commission on November 11. My TFIE strategy report explains the industry case, and the open research report documents the model and its assumptions.

The existing hydrogen market in Europe is primarily a market for industrial chemicals. ACER estimated EU consumption at around 7.4 million tonnes in 2024, including 4.2 million tonnes for oil refining and 1.9 million tonnes of ammonia. Passenger cars, heating and power generation represent very little of that established market. Refining faces a structural decline as demand for oil changes, while fertilizer and chemical producers can continue making products even when some initial inputs come from elsewhere.

Steel production also has options that cannot be covered by a single hydrogen demand target. Producers can use recycled scrap, buy reduced iron manufactured where electricity is cheaper, or use hydrogen-based direct reduction where the economics work. The equipment, the quality of the raw material and the place of production determine the actual hydrogen needs. Industrial heat offers direct electric options for many tasks. The electrification of transport reduces, first of all, the amount of liquid fuel that must be produced. These options determine hydrogen demand long before anyone chooses the pipeline route.

Electricity costs show why industry comparison is important. Electrolysis that consumes 55 kWh/kg consumes €3.30 of electricity per kilogram at €60/MWh and €5.50 at €100/MWh. These prices exclude electrolyzer, financing, maintenance, compression and delivery. An industrial customer pays for the finished product, not for the complexity of the process used to manufacture it.

The new assessment compares qualified green ammonia imported into Europe at modeled 2050 delivery costs of €755-839/t with European ammonia manufactured using on-site hydrogen at around €1,222/t. The difference of €383-467/t puts a substantial price on the choice of the domestic route in this model. Emissions certification, quality, reliability and concentration of supply belong to the evaluation of acquisitions, along with the cost and strategic value of retaining European upstream production. They do not convert a forecast of ammonia demand into a forecast of domestic hydrogen demand.

Industrial policy has reasons to support European production beyond the immediate lowest price. National facilities provide employment, technical capabilities and security of supply. The right decision is to identify those benefits, calculate the extra cost and say who will pay for it. Hydrogen production quotas bury that choice in a volume target and risk making European industrial products less competitive.

The consequence of the infrastructure is the following. A pipeline needs industrial customers who can afford to supply hydrogen. A capacity reservation or a project announcement does not constitute a binding purchase agreement or a commercial argument for its long-term use. Germany’s reservations about the hydrogen grid and lower demand projections from the Netherlands already make that gap worth examining. Europe should evaluate its planned networks against the industrial customers that are likely to remain after process and supply options change.

European network planners already run scenarios covering industrial activity, technology and hydrogen supply. My November proposal proposes adding direct competition between ways of supplying industrial products and equivalent transportation services, including the location of production. The resulting hydrogen needs then become inputs for infrastructure assessment rather than predetermined outcomes of hydrogen policy.

The next step is practical. Keep the design, cost, capacity and planned opening date of the proposed pipeline unchanged. Evaluate that same investment first under a policy-aligned case that includes existing hydrogen mandates, and then under a separate economic competition case in which industrial buyers can select other emissions-qualified production routes. Publish projected utilization, binding customers, delivery costs, rates, and public exposure. After looking at the disadvantages of the original proposal, compare smaller pipelines, phased construction, local hydrogen supply or imported industrial inputs. Redesigning the process at the beginning of each scenario hides the risk of the investment that is actually being considered.

The accompanying research uses a reproducible Python model, an evidence book, and an interactive dashboard. Readers can change assumptions about industrial imports, technology and production costs and see how the modeled hydrogen requirement responds. On the strong path with central costs, certain European industrial markets and transport services will require 1,887 million tonnes of physical hydrogen in 2050. Halving the assumed import capacity for industrial products brings that result to 3,206 million tonnes. These figures describe selected markets and exclude hydrogen incorporated in imported finished products; They are not a forecast of total EU demand.

A competitive industrial economy may still need hydrogen for chemicals and some other applications. You need production and pipelines sized appropriately for customers, with any additional capacity supported by stated industrial or safety logic. The Commission’s renewed strategy should start with Europe’s industrial products and services and then calculate which hydrogen system is worth paying for.

Read the original TFIE strategic report, the Open Assessment of Hydrogen in Europe, and explore the interactive dashboard, evidence workbook and reproducible Python model.