In November 2024, industry giant ArcelorMittal announced delays to final investment decisions (FIDs) on key decarbonisation projects, including green hydrogen-ready Direct Reduced Iron (DRI) plants. This reflects broader market uncertainty.
Meanwhile, IDTechEx forecasted in May 2025 that widespread adoption of hydrogen-based DRI could still be over a decade away – unless hydrogen becomes significantly cheaper and supporting infrastructure is rapidly deployed.
Why the Delay?
At the heart of the challenge lies one key issue: the high cost of green hydrogen.
Currently, green steel is around 50% more expensive than traditional, fossil-based steel. For cost parity, hydrogen prices need to fall to around $2–3/kg. Right now, Europe produces less than 0.5 million tonnes per year of green hydrogen – with plans to scale up to 10 million tonnes annually by 2030, and import a similar amount.
Enablers to Reach $2–3/kg Hydrogen by 2035
- Cheap Renewable Electricity
Around 60–70% of the cost of green hydrogen is down to electricity. A major buildout of wind (especially offshore) and solar is needed. The EU is targeting ~70% renewables by 2030. - Electrolyser Cost Reductions
EU-based players like Nel Hydrogen, Thyssenkrupp, and Siemens Energy are scaling up, aiming for 50–70% cost reductions by 2030 through gigafactories, automation, and standardisation. - Infrastructure & Market Development
Projects like the EU Hydrogen Backbone – which repurposes existing gas pipelines for hydrogen – are gaining momentum, particularly in areas like the Ruhr. Hydrogen hubs and industrial clusters are forming in places such as Antwerp, Rotterdam, and Teesside. - Public Funding & Regulation
The EU Hydrogen Bank has already pledged €800M+ to close early production cost gaps, supported by additional national subsidies (e.g. in Germany, France, and Spain). Carbon pricing under the EU Emissions Trading System (ETS) will further erode fossil fuel competitiveness.
Key Barriers & Risks
- Permitting Delays for wind, solar and electrolyser sites
- Competition for Renewable Energy (e.g. EVs, heat pumps)
- Water Scarcity in hydrogen production in arid regions
- Supply Chain Bottlenecks (e.g. iridium, membranes)
- Uncertain Demand: Corporate hydrogen off-taker agreements are still limited
Can Europe Hit $2–3/kg?
Yes – but only in the right conditions.
By 2035, Europe could achieve green hydrogen at $2–3/kg in selected hubs:
- Iberia (for local use and export)
- Germany/Benelux industrial clusters
- Coastal regions with strong offshore wind potential
However, scaling green hydrogen (and by extension, green steel) across Europe will require:
- Massive renewable energy investments
- Cross-border coordination
- Long-term policy stability
Until then, green steel will remain a premium, niche product — but the groundwork is being laid for it to become mainstream in the next decade.
