Targeting Hydrogen Demand Could Cut EU Support Costs by Up to 15%, Study Finds
European green hydrogen support could become more cost-effective if policymakers target projects that can stimulate demand among nearby industrial users, according to research published in Nature Energy.
Researchers at WU Vienna University of Economics and Business found that adding the location of potential hydrogen users to funding decisions could help accelerate adoption through regional demand spillovers.
The study modelled a funding system based on European Hydrogen Bank auctions, which provide subsidies for renewable hydrogen production. Existing criteria largely prioritise projects requiring comparatively low subsidies per kilogram of hydrogen, without explicitly considering the location of potential users or the demand that a project could generate nearby.
The researchers found that allocating 10% of funding scores to location-related factors, including the potential to stimulate demand in surrounding areas, improved the modelled cost-effectiveness of hydrogen support by 13% to 15%.
In an idealized scenario that removed differences in sector, installation size and cost competitiveness, the improvement reached as much as 41%. The researchers noted that these factors would need to be retained in real-world policy design.
“Much of the EU’s existing green hydrogen policy support focuses on scaling supply rather than demand,” said lead author Christian Rumpelnik of WU Vienna’s Institute for Data, Energy and Sustainability.
He said a hydrogen economy would require supply, infrastructure and demand to develop together. Policymakers, he added, should consider not only which projects need the lowest subsidy but also where support could unlock demand among surrounding industrial users.
The researchers analyzed a database of more than 14,100 potential green hydrogen users across Europe. They projected hydrogen demand from 2024 to 2100 under different scenarios and policy measures to identify locations where supporting one installation could encourage wider adoption.
Demand spillovers could arise when the adoption of hydrogen by one facility makes it easier or more attractive for nearby users to follow. Possible drivers include shared pipelines and storage systems, specialized supply chains and knowledge exchange between industrial facilities.
More than half of the installations ranked in the top 10% for spillover potential were concentrated in five regions along the North Sea coast and the Rhine-Ruhr industrial corridor. These were Düsseldorf, Cologne and Rheinhessen-Pfalz in Germany, and Antwerp and East Flanders in Belgium.
The regions contain major concentrations of chemical, iron and steel, non-ferrous metal and shipping industries. The researchers highlighted these sectors because replacing fossil fuels can be particularly difficult when affordable and accessible low-carbon alternatives are limited.
The study also compared its findings with the EU’s designated Hydrogen Valleys. These initiatives are intended to bring hydrogen production, storage, transport infrastructure and end users together within regional ecosystems.
The 22 Hydrogen Valleys examined in the research were more widely distributed geographically and only partly overlapped with the industrial regions identified as having the highest spillover potential. Together, the Hydrogen Valleys included in the analysis target approximately 1% of the EU’s 2030 green hydrogen demand goal.
The researchers said future EU programmes could give greater weight to the location of demand and the potential for supported projects to encourage adoption among nearby industrial users.
Possible applications include future European Hydrogen Bank auctions, hydrogen infrastructure investment under REPowerEU and future Hydrogen Valley funding calls. Funding programmes could also require applicants to secure commitments from large industrial sites capable of switching from fossil fuels to renewable hydrogen.
Both sides of the hydrogen market need to be supported together, said co-author Dr Behnam Zakeri, assistant professor at WU Vienna and deputy head of Ideas.
The research was supported by Austria’s Federal Ministry for Innovation, Mobility and Infrastructure through an endowed professorship focused on data-driven knowledge generation and climate action.