Hydrogen progress hampered by high costs and slow transposition

ACER’s 2025 European hydrogen markets Monitoring Report looks at the latest sector developments and highlights the main regulatory and market challenges for the EU.

This year’s edition shows progress in electrolysers build-out and in advancing the EU’s regulatory framework. Yet, renewable hydrogen costs in 2024 remained four times higher than those of conventional hydrogen. This cost gap, together with incomplete national transposition of EU rules, is hindering market development. To overcome this, lower regulatory risks and more targeted funding are needed. 

What are the key findings? 

• Market growth remains insufficient to meet EU and national targets. Despite a 51% increase in electrolyser capacity to 308 MW in 2024, deployment remains way behind the 6 GW target for 2024 and 40 GW for 2030.
• Renewable hydrogen remains costly (four times higher than hydrogen from fossil fuels), with uncertain near to mid term cost reduction prospects.
• Delays in transposing EU rules at national level persist. Only 2 Member States have transposed the amended Renewable Energy Directive.
• A decarbonised electricity sector is key to renewable hydrogen. Electricity supply costs (excluding grid tariffs) may account for up to 50% of renewable hydrogen’s production costs.
• Rising electricity network tariffs may add pressure on costs. ACER’s 2024 Monitoring Report on electricity infrastructure development shows that electricity network costs could rise by 50-100% by 2050, also depending on how investments will align with evolving electricity grid demand. As electricity tariffs represent a significant share of renewable hydrogen’s production costs, this trend poses a substantial risk.
• Network development should align with evolving demand to reduce forecasted risks. Hydrogen networks are key to expanding the market, but infrastructure should be built gradually to match actual demand development.
• Low-carbon hydrogen could support market development, yet cost and technical uncertainties should be carefully assessed.
• The European Commission has already allocated over €20 billion to hydrogen through various programmes, and Member States have announced numerous additional support schemes. Accelerating the allocation of funding to advanced projects is key to increasing scale-up.

What are ACER’s recommendations?

• Accelerate the national transposition and implementation of the amended Renewable Energy Directive to ensure regulatory certainty and accelerate market development.
• Implement the (2024) Hydrogen and Gas Decarbonisation legislative package without delay to facilitate the deployment of infrastructure and a well-functioning hydrogen market.
• Prioritise and target funding towards projects in hard-to-abate sectors that are ready to transition to renewable and low-carbon hydrogen.
• Facilitate renewable hydrogen production through faster permitting and grid connection for both electrolysers and renewable electricity projects.
• Speed up decarbonisation of the power sector to lower electricity costs and enhance electrolyser utilisation.
• Enable flexibility in the electricity market, rethink electricity grid tariffs and grid incentives, as they can optimise electrolyser location and performance.
• Assess the risks of methane-based low-carbon hydrogen, including its underlying costs, infrastructure uncertainties and lock-in effects.
• Align hydrogen network development with market realities to manage market uncertainties and reduce the risk of stranded assets.

What’s next?

Register for ACER webinar: Progress in Europe’s hydrogen markets (Tuesday 9 December 2025 at 11:00 CET).