Can the UK avoid Germany’s green hydrogen mistakes?

Has Germany over-promised on hydrogen?

Germany has been Europe’s standard-bearer for green hydrogen, pitching it as the clean fuel to decarbonise steel, cement, and heavy transport. Yet despite fanfare and billions in subsidies, the reality has been sobering. Hydrogen in Germany remains far more expensive than fossil alternatives, industries are retreating from high-profile projects, and the country’s vast pipeline network will not be fully ready until the next decade.

The problems are not due to lack of ambition. Germany set targets for ten gigawatts of electrolyser capacity by 2030, announced a €19 billion hydrogen core network, and rolled out high-value subsidy schemes. But as the Financial Times recently reported, even a €1.3 billion subsidy could not persuade ArcelorMittal to convert two steel plants to hydrogen, underlining how shaky the economics have become. When the incentives do not align with industrial reality, confidence falters and political enthusiasm cools.

Is hydrogen a silver bullet or a fragile bet?

Hydrogen has been hailed as the fuel that can do what electrification cannot - power heavy industries and long-haul transport while offering a store for intermittent renewables. Yet Germany’s experience shows that the economics are precarious. Electricity costs dominate hydrogen production, and with Europe’s power prices elevated, the cost gap with fossil fuels looks stubborn.

The regulatory burden has also been heavy. EU rules stipulating that renewable hydrogen must be produced with new, additional renewable energy and matched in time and place to production sound sensible on paper but have created layers of complexity. The result is that many projects stall before they reach financial close.

For UK and Scottish policymakers, this fragility is a reminder not to frame hydrogen as a single, heroic solution. It must be developed as part of a balanced energy mix, with recognition that cost and regulatory risk can quickly undermine the most ambitious strategies.

How should the UK and Scotland respond?

The UK is already carving out a distinctive path. The government has trialled contracts-for-difference (CfD) models for hydrogen, providing the kind of long-term price certainty that has worked so well for offshore wind. Scotland has gone further, publishing a hydrogen action plan that seeks to position the country as both a producer and exporter, drawing on its vast offshore wind potential and industrial clusters in Grangemouth and the north-east.

Yet ambition must be tempered by realism. Germany’s challenges show the dangers of relying too heavily on subsidies that can be cut in leaner times, or on regulations that look elegant in Brussels but onerous on the factory floor. The UK should avoid binding the sector in red tape before it has matured, and focus instead on stable, pragmatic rules that encourage investment. Above all, it should ensure that public procurement - from infrastructure to defence and transport - provides guaranteed early demand for low-carbon materials and fuels. Without buyers, no amount of subsidy will make hydrogen fly.

If industry confidence has been an issue for projects in Germany, the same vulnerability is visible in the UK. Confidence in major schemes remains fragile, as shown by Air Products’ decision to shelve its £2 billion Immingham development and BP’s retreat from its flagship HyGreen Teesside project. Both highlight the uncertainties of building a viable business case when subsidy frameworks, long-term demand signals and investor confidence remain unsettled. 

But the UK’s first Hydrogen Allocation Round (HAR1) offers a counterpoint: by swiftly locking in support for 10 commercial-scale green hydrogen projects, it demonstrated an ability to adapt policy, mobilise private capital and keep momentum alive. Clearly, the UK faces many of the same risks that have dogged Germany, but its willingness to recognise vulnerabilities and recalibrate support mechanisms may give it a measure of resilience that could prove decisive.

What role should companies play?

If government sets the framework, companies must do the heavy lifting in shaping markets and building confidence. The German case shows that industry retreat - whether by steelmakers, car manufacturers or utilities - can quickly unravel national strategy. UK and Scottish companies must therefore take a proactive stance in three areas.

First, in public affairs and lobbying, they should argue for certainty and clarity, not just cash. Multi-year funding commitments, streamlined planning, and a predictable regulatory regime are more valuable than headline-grabbing subsidy packages that may be cut within an election cycle.

Second, in stakeholder engagement, companies must widen the coalition. Working with NGOs, local communities, investors and supply-chain partners builds credibility and resilience. Hydrogen is still viewed with scepticism in some quarters; broad-based alliances can help counter accusations of hype or greenwashing.

Third, in communications, honesty matters. Over-promising and under-delivering - a pattern visible in Germany - risks damaging trust with investors, policymakers and the public. A more effective approach is to emphasise phased progress: pilot projects, hybrid solutions, and derivative markets such as ammonia or e-fuels, which may scale more quickly than pure hydrogen.

Are we learning fast enough?

The UK’s advantage is that it can learn from Germany’s setbacks before its own hydrogen rollout accelerates. Already, there are signs of pragmatism: contracts are being designed with flexibility, ports and industrial clusters are aligning supply and demand, and policymakers are talking more openly about where hydrogen makes sense and where it does not.

But the window is short. Global competition is intense, with the US Inflation Reduction Act still offering generous production tax credits and China pushing ahead with state-backed electrolyser manufacturing. If the UK dithers, or gets bogged down in its own policy uncertainty, it risks losing the first-mover advantage that Germany’s slowdown has created.