Aiming to establish itself as a global leader in the hydrogen sector, Germany has launched two new Innovation and Technology Centres for Hydrogen (ITZ-H2). These facilities, located in Chemnitz and northern Germany, will receive 154 million euros in funding from the Federal Ministry for Digital and Transport (BMDV) to advance research and development in hydrogen technology, a key pillar of the energy transition.

“The main goal of these centres is to drive R&D in hydrogen-based technologies and support the industry’s transformation towards a more sustainable model,” explains Juan Zurbarán, director at the strategic consulting firm Octant Solutions.

The Hydrogen Innovation Centre (HIC) in Chemnitz will receive 84 million euros to focus on the development of components, systems, and testing for fuel cell applications, as well as integrating digital solutions through digital twins.

Meanwhile, the Hanseatic Hydrogen Centre for Aviation and Maritime (H2AM), located in northern Germany, will specialise in hydrogen applications for aviation and maritime transport, developing fuel cell systems, hybrid engines, and hydrogen logistics.

A strategy to reduce costs and scale up the industry

One of the biggest challenges for green hydrogen is its competitiveness against fossil-based alternatives. Currently, its price in Europe ranges between 4 and 7 euros per kilogram, whereas it needs to be around 1.5 euros/kg to be industrially viable.

“The high-tech testing environments at these centres will help reduce costs and accelerate hydrogen adoption in the industry,” says Zurbarán.

However, the current subsidy scheme grants funding per kilogram of hydrogen produced, which is often insufficient to make projects profitable. In countries like Spain, incentives do not bring costs in line with fossil fuel alternatives, slowing down the adoption of green hydrogen.

“At first glance, the total funding seems significant, but when you break it down, it amounts to just 0.50 euros per kilogram, which is not enough to make a project profitable. By contrast, Germany subsidises up to 9 euros/kg, ensuring projects can get off the ground,” Zurbarán explains.

Unless funding strategies are adjusted, some countries could see lower-than-expected project execution, delaying the scalability of green hydrogen. Moreover, spreading funds across too many projects could result in unviable initiatives that consume resources without creating a real impact.

Infrastructure: a critical barrier for hydrogen

The hydrogen sector faces not only economic barriers but also infrastructure challenges. According to data from Hydrogen Europe, 44% of companies consider hydrogen production and transport infrastructure to be “needs improvement”, while 30% rate it as “poor”.

This means that even with funding, the lack of infrastructure remains a major obstacle. “While incentives help improve economic feasibility, storage and distribution capacity remain a major challenge,” Zurbarán notes.

To tackle this, Germany has passed the Hydrogen Acceleration Act (Wasserstoffbeschleunigungsgesetz), which aims to simplify and speed up planning and approval processes for hydrogen-related projects. This legislation aims to:

• Cut bureaucracy and speed up environmental permits.
• Enable early project initiation without long administrative delays.
• Prioritise hydrogen infrastructure projects as high public interest, granting them preferential administrative and legal status.

Are subsidies sustainable in the long run?

While subsidies have played a key role in the growth of green hydrogen, their long-term sustainability remains a challenge. “Incentives cannot be permanent, but cost reductions will come through a combination of cheaper renewable electricity, lower CAPEX costs, and improved efficiency,” says Zurbarán.

Germany does not have a clear strategy to phase out subsidies, but it is actively working on initiatives to make hydrogen competitive without relying on financial aid. For example, optimised manufacturing plants are being designed, leveraging Germany’s expertise in the automotive sector to lower production costs.

In contrast, Spain and other European countries have yet to implement solid strategies to ensure green hydrogen remains competitive without subsidies, which could slow down deployment.

Germany leads, but hydrogen still faces key challenges

Germany’s new hydrogen technology centres represent a major step towards decarbonisation, yet the sector still faces challenges in cost, infrastructure, and the sustainability of incentives.

“Innovation investment is crucial, but for hydrogen to become truly competitive, financing and infrastructure strategies need to be more effective,” concludes Zurbarán.

While Germany strengthens its hydrogen leadership through investment and regulation, other countries must still define how to make this technology viable in the long run without subsidies.