European green hydrogen support could become more cost-effective by targeting projects capable of stimulating demand among nearby industrial users, according to new research published in Nature Energy.
Researchers at WU Vienna University of Economics and Business found that considering the location of potential hydrogen users alongside production costs could help accelerate adoption through regional spillover effects.
Demand criteria could improve hydrogen support efficiency
The researchers developed a model based on the structure of European Hydrogen Bank auctions, which support renewable hydrogen production through subsidies.
Current funding criteria prioritise projects requiring comparatively low subsidies per kilogram of hydrogen produced, while demand and the location of potential users are not explicitly incorporated into the assessment.
The study found that introducing a relatively modest change, with 10% of the scoring based on location-related factors such as demand spillover potential, improved the modelled cost-effectiveness of stimulating hydrogen demand by between 13% and 15%.
Under an idealised scenario that removed differences including sector, installation size and cost competitiveness, the improvement reached up to 41%. The researchers note that these factors would need to be considered 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, a researcher at WU Vienna’s Institute for Data, Energy and Sustainability (IDEaS).
“A hydrogen economy depends on supply, infrastructure and demand developing together. Our results suggest that policymakers should look not only at which projects require the lowest subsidy, but also at where support can help unlock demand around them.”
Researchers analyse more than 14,100 potential hydrogen users
The study analysed a database containing more than 14,100 potential green hydrogen users across Europe.
Researchers then projected hydrogen demand between 2024 and 2100 under a range of scenarios and policy measures to identify areas where supporting one installation could encourage wider adoption.
These spillover effects could occur when hydrogen adoption by one facility makes adoption more attractive or practical for nearby users.
Potential drivers include shared pipelines and storage infrastructure, specialised supply chains and knowledge exchange between neighbouring industrial facilities.
Five industrial regions show high spillover potential
More than half of the installations ranked within the top 10% for spillover potential were concentrated in five regions along the North Sea coast and Rhine-Ruhr industrial corridor.
The regions identified were Düsseldorf, Cologne and Rheinhessen-Pfalz in Germany, together with Antwerp and East Flanders in Belgium.
These areas have significant concentrations of chemicals, iron and steel, non-ferrous metals and shipping activities.
The researchers highlighted these sectors because of the challenges involved in replacing fossil fuels where accessible and affordable low-carbon alternatives remain limited.
Study examines EU Hydrogen Valleys strategy
The research also compared areas with high modelled spillover potential with the EU’s designated Hydrogen Valleys.
Hydrogen Valleys are intended to bring hydrogen production, storage, transport infrastructure and end users together within regional ecosystems.
According to the study, the 22 designated Hydrogen Valleys examined have a considerably broader geographical distribution and only partially overlap with the industrial areas identified as having the greatest spillover potential.
Together, the Hydrogen Valleys included in the analysis target around 1% of the EU’s 2030 green hydrogen demand goal.
Researchers call for greater focus on hydrogen demand
The researchers argue that future European hydrogen policies could place greater emphasis on where demand is located and the potential for supported projects to encourage adoption by surrounding industrial users.
Potential applications identified in the research include future European Hydrogen Bank auctions, hydrogen infrastructure investment under REPowerEU and future Hydrogen Valley funding calls.
The researchers also suggest that funding programmes could require bids to include 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, and our study identifies the industrial regions across Europe where targeted support can unlock much wider adoption and accelerate decarbonisation,” said co-author Dr Behnam Zakeri, Assistant Professor at WU Vienna and Deputy Head of IDEaS.
“This gives policymakers the clarity to identify targets for place- and sector-based interventions.”
Professor Kavita Surana, Head of IDEaS and a co-author of the research, said the findings could help inform policy decisions at a time when resources for the energy transition are increasingly constrained.
“With increasingly limited resources and multiple challenges in the energy transition, our analysis provides an evidence base for more effective policymaking.”
The research was supported by the Austrian Federal Ministry for Innovation, Mobility and Infrastructure under the endowed professorship for Data-Driven Knowledge Generation: Climate Action.
How could EU green hydrogen support become more cost-effective?
Researchers at WU Vienna found that incorporating factors such as the location of potential hydrogen users and the potential for regional demand spillovers into funding decisions could improve the cost-effectiveness of stimulating green hydrogen demand.
How much could demand-based hydrogen funding improve cost-effectiveness?
In the study’s European Hydrogen Bank-style model, assigning 10% of project scoring to location-related factors improved cost-effectiveness by 13% to 15%. An idealised scenario produced improvements of up to 41%.
Which European regions have high potential for green hydrogen demand?
The research identified Düsseldorf, Cologne and Rheinhessen-Pfalz in Germany and Antwerp and East Flanders in Belgium as regions containing particularly high concentrations of installations with strong hydrogen demand spillover potential.
What are hydrogen demand spillover effects?
Hydrogen demand spillovers occur when adoption by one installation makes it more likely that nearby users will also adopt hydrogen. Potential drivers include shared infrastructure, specialised supply chains and knowledge exchange.
