Europe’s Green Hydrogen Dream Is Failing – Can U.S. Exports Save It?

In this episode of The Hydrogen Podcast, we unpack the sobering truths from Oilprice.com's May 2025 article, "Green Hydrogen Faces Reality Check in Europe."

💡 Despite bold promises, only 6% of hydrogen projects in Northwest Europe are being implemented. Why? High costs, weak demand, and poor bankability are creating a massive gap between ambition and reality.

🔎 Here’s what we cover:

• Why electrolytic hydrogen at $4–$6/kg is stalling progress
• Why Europe must embrace low-CI alternatives like SMR with CCS, natural hydrogen, and methane pyrolysis
• How ExxonMobil’s Baytown facility in Texas could supply low-cost hydrogen to Europe at half the price of local production
• What it would take to make a true hydrogen commodity market thrive in Europe

📊 All numbers and costs are sourced from the DOE, IEA, and BloombergNEF, offering a reality-based look at hydrogen’s future.

🌍 Whether you're watching the global energy transition or planning infrastructure investments, this episode provides key insights on hydrogen economics, policy, and strategy.

Transcript

Today, I’m unpacking a sobering Oilprice.com article from May 22, 2025, titled "Green Hydrogen Faces Reality Check in Europe," published via Yahoo News. First, I’ll dissect the article’s take on the sky-high costs stalling hydrogen development in Europe. Then, I’ll spend a few minutes arguing why Europe needs to broaden its horizons beyond hydrogen produced via electrolysis with renewable energy, embracing low carbon intensity (CI) production methods to drive down costs and scale the market. Finally, I’ll wrap with a spotlight on how ExxonMobil’s Baytown facility in Texas can supply Europe with low-CI hydrogen at a fraction of the cost, giving the U.S. a competitive edge. All of this on today’s Hydrogen Podcast.

Let’s dive into the Oilprice.com article, which paints a stark picture of the challenges facing hydrogen development in Northwest Europe, as highlighted at the World Hydrogen Summit 2025. The article notes that despite bold targets and public optimism from producers, technology suppliers, and governments—like those from the Netherlands, Oman, Algeria, and Australia—only 6% of announced hydrogen projects are being implemented. This gap between ambition and reality is driven by four key barriers: insufficient investment, weak demand, high price points, and poor bankability. According to the article, the absence of a functioning commodity market for hydrogen and its derivatives, like ammonia and methanol, is a critical hurdle. Without clear price points and projected income streams, financial institutions hesitate to back projects, as bankability hinges on feasible margins. The article cites the IEA’s observation that a competitive market is essential, with initiatives like the Netherlands’ 10-year hydrogen purchase agreements (HPAs) for ammonia and methanol attempting to create stability, yet still falling short due to low project volumes.

Economically, hydrogen produced via electrolysis with renewable energy costs $4–$6 per kilogram, per DOE and IEA estimates, driven by high capital costs for electrolyzers ($1,000–$2,000 per kilowatt) and electricity expenses ($50–$100 per megawatt-hour). In contrast, hydrogen from hydrocarbons via SMR costs $1–$2 per kilogram, though it emits 10–12 kg CO2 per kilogram without CCS, per BloombergNEF. The article underscores that Europe’s heavy focus on electrolytic hydrogen, backed by €992 million in EU Hydrogen Bank grants for projects like Deutsche ReGas’s Lubmin facility, struggles to scale due to these costs. For example, a 200–500 MW electrolyzer plant producing 40–100 tons daily requires $400–$600 million, with subsidies covering only 20–30% of costs, leaving producers exposed to market risks. Demand is another bottleneck: industries like steel and chemicals, which account for 30% of EU emissions (1 billion metric tons of CO2 annually), hesitate to commit without cost-competitive hydrogen. The article also notes infrastructure challenges, with Europe’s planned hydrogen core transport network (2025–2032) costing $10–$15 billion, and refueling stations, at $2–$3 million each, limited to fewer than 200 across the region, compared to 100,000 EV charging stations.

Technologically, electrolytic hydrogen faces hurdles in efficiency and scalability. PEM and alkaline electrolyzers consume 50–60 kWh per kilogram at 60–70% efficiency, with membrane durability (20,000–30,000 hours) and water purification adding $0.10–$0.20 per kilogram, per DOE data. Renewable energy intermittency requires grid balancing systems ($10–$20 million per plant), inflating costs. The article suggests that Europe’s optimism, fueled by projects like Lubmin’s wind-powered electrolysis, is tempered by these realities, with only 6% of projects reaching implementation due to financing and demand gaps. The Netherlands’ HPA model, offering 10-year contracts, aims to stabilize demand, but the article warns that without a commodity market, most projects remain unbankable. This reality check reveals that Europe’s singular focus on electrolytic hydrogen, while environmentally ideal, is economically unsustainable without massive subsidies or cost reductions, projected to reach $2–$3 per kilogram by 2030 only if renewable electricity falls to $20–$30 per megawatt-hour, per BloombergNEF.

So, why should Europe broaden its hydrogen strategy beyond electrolysis with renewable energy? Let’s explore why embracing a diverse portfolio of low-CI production methods—SMR with CCS, natural hydrogen, and methane pyrolysis—is critical to scaling the hydrogen economy cost-effectively. Europe’s laser focus on electrolytic hydrogen, driven by net-zero goals and the Paris Agreement, is commendable but overlooks economic realities. Producing hydrogen at $4–$6 per kilogram is a deal-breaker for industries like ammonia, steel, and chemicals, which need prices closer to $1–$2 per kilogram to replace hydrocarbon-based hydrogen, per IEA estimates. Subsidies, like the €112 million for Lubmin, are a temporary fix, covering only a fraction of the $50–$100 billion needed for 10 GW of electrolytic capacity by 2030, per EU targets. Meanwhile, demand lags because end-users won’t absorb the cost premium, with ammonia producers requiring hydrogen at $1.50–$2.50 per kilogram to stay competitive, per BloombergNEF. A commodity market, as the article emphasizes, is essential, but it demands affordable hydrogen to spark demand and attract financing.

SMR with CCS is a proven, low-CI alternative, producing hydrogen at $1–$2 per kilogram while capturing 90–95% of emissions, reducing the carbon footprint to 0.5–1 kg CO2e per kilogram, per DOE data. Europe’s 2 million miles of pipelines and expertise make scaling feasible, with projects like Equinor’s H2M Eemshaven in the Netherlands capturing 1–2 million tons of CO2 annually. The EU’s Emissions Trading System (ETS), pricing CO2 at €80–€100 per ton, complements CCS, adding $0.50–$1 per kilogram in revenue, per IEA. Scaling CCS to store 50 million tons of CO2 by 2030 requires $5–$10 billion in pipelines, but North Sea storage sites like Sleipner demonstrate viability. Challenges include leak-proof transport and geological stability, but advances in corrosion-resistant materials are progressing. Natural hydrogen, extracted from geological deposits, offers a near-zero CI option at $0.50–$1 per kilogram, per DOE estimates. Projects like Hydroma’s in Mali suggest potential, with Europe’s Alpine and Pyrenean regions holding similar deposits, requiring $10–$50 million per site for drilling, per BloombergNEF. Reservoir mapping, costing $1–$5 million per site, is a challenge, but leverages gas exploration tech.

Methane pyrolysis, splitting methane into hydrogen and solid carbon, delivers hydrogen at $1–$2 per kilogram with zero CO2 emissions, per IEA data. Companies like Monolith Materials show promise, with carbon byproducts sold for $500–$1,000 per ton, enhancing economics. Europe’s chemical industry, consuming 10 million tons of hydrogen annually, could adopt pyrolysis, with pilot plants costing $50–$100 million. Scaling requires energy-efficient reactors (20–30 kWh per kilogram), but plasma tech could cut costs by 10–20%. These methods align with the article’s call for a commodity market, as their $1–$2 per kilogram price stimulates demand, attracts financing, and supports infrastructure like the EU’s hydrogen network. By diversifying, Europe could decarbonize 100–150 million tons of CO2 annually by 2030, per IEA projections, while remaining competitive. The U.S.’s “One Big, Beautiful Bill Act” (H.R.1), repealing the Section 45V credit but retaining 45Q ($85 per ton), offers a policy model, incentivizing low-CI methods that Europe could emulate with ETS enhancements or CCS subsidies.

Lastly, let’s focus on how ExxonMobil’s Baytown facility in Texas can supply Europe with low-CI hydrogen at a drastically lower cost, capitalizing on the U.S.’s economic and technological strengths. Part of ExxonMobil’s $20 billion Gulf Coast hydrogen and CCS hub, Baytown is poised to produce 1 billion cubic feet of hydrogen daily by 2028, capturing over 7 million tons of CO2 annually for storage in Gulf Coast formations. Using SMR with CCS, Baytown delivers hydrogen at $1–$2 per kilogram, per DOE and IEA estimates, compared to Europe’s $4–$6 for electrolytic hydrogen. The 45Q credit generates $500–$600 million annually, offsetting the $3–$5 billion capital cost, while ExxonMobil’s hydrocarbon expertise and 2.6 million miles of U.S. pipelines ensure scalability. With a CI of 0.5–1 kg CO2e per kilogram, Baytown’s hydrogen meets EU low-CI standards, ideal for ammonia, refining, and chemicals. Exporting via ammonia or liquid hydrogen carriers, with transport costs of $0.50–$1 per kilogram, Baytown could deliver hydrogen to Europe at $1.50–$3 per kilogram, half the cost of local electrolytic production, per BloombergNEF.

Baytown’s scale could supply 10–20% of Europe’s 10 million-ton hydrogen demand by 2030, decarbonizing 50–100 million tons of CO2 annually and saving industries $10–$20 billion, per IEA projections. Ammonia plants, consuming 5 million tons of hydrogen yearly, could save $2–$3 billion, boosting competitiveness. Transatlantic shipping requires $1–$2 billion in terminal upgrades, but partnerships with ports like Rotterdam could streamline logistics. Europe’s ETS could incentivize imports by taxing high-CI hydrogen, aligning with the article’s commodity market vision. By embracing U.S. low-CI hydrogen, Europe can bridge demand gaps, scale its hydrogen economy, and adopt the U.S.’s pragmatic approach under H.R.1, driving market growth with cost-effective production.

Alright, that’s it for me, everyone.  If you have a second, I would really appreciate it if you could leave a good review on whatever platform you listen to. Apple podcasts, Spotify, Google, YouTube, etc. That would be a tremendous help to the show. And as always if you ever have any feedback, you are welcome to email me directly at info@thehydrogepodcast.com. So until next time, keep your eyes up and honor one another.