The development of green hydrogen in Spain and Europe is facing a stagnation. Despite the significant public aid allocated to the sector, the projects are not progressing as expected .

For Marcos Rupérez, an independent hydrogen consultant, the problem is clear: current subsidies are not closing the profitability gap and the money is too dispersed among projects that fail to take off.

“We have been sold a massive deployment of green hydrogen when the technology is far from being profitable,” says the consultant in dialogue with Strategic Energy Europe, who believes that the sector is at an earlier stage than has been led to believe .

The current incentive model has proven to be insufficient to ensure project implementation.

“We have been giving aid to many people for three years and not a single project has been implemented. It is clear that they are not working,” warns Rupérez.

In this regard, he points out that the main reason is that the subsidies, although large in total volume, are too low when translated into each kilo of hydrogen produced .

This analysis coincides with data from the Andalusian Hydrogen Cluster, which reflect that 37% of companies rate access to financing as “bad” , while only 22% consider it “good” .

Uncertainty about the profitability of projects and the lack of consolidated demand hinder private investment and slow the progress of the sector.

A new strategy: more money for fewer projects

To correct this situation, Rupérez proposes a different approach: redirecting public funds to a smaller number of projects, but with greater financial backing per initiative .

“I would redirect all public money to grants that would provide money for projects with electrolysers of less than 15 MW and would give them no less than €3/kg of hydrogen produced. Allowing only one project per business group,” he proposes.

With this strategy, the dispersion of money would be avoided and each company could test the technology in a real environment without depending on insufficient subsidies .

“What I would do is get all companies to test the technology in full-scale pilot projects. Not large projects, but small projects, one per company and well funded by the State,” he adds.

The profitability problem: a price that is still too high

One of the biggest challenges for renewable hydrogen is its production cost , which remains uncompetitive with grey hydrogen (produced from fossil fuels).

In Europe, the price ranges between 4 and 7 euros per kilogram , while to be viable in the industry it should be around 1.5 €/kg.

Source: https://www.sgh2energy.com/economics

Rupérez explains that the problem with current aid is that it is awarded per kilo of hydrogen produced, but the amounts are not enough to make the projects viable and maintains that “Sometimes it is a lot of money in total, but when you analyse it, it is reduced to half a euro per kilo, and with that you do not make the project profitable.”

In contrast, countries like Germany subsidize up to €9/kg to ensure that projects can get off the ground.

In Spain and other European countries, incentives are insufficient to match costs with fossil alternatives, slowing the adoption of green hydrogen.

If the financing strategy is not modified, Spain could see a much lower implementation than expected .

Furthermore, spreading funds across too many projects could lead to unviable initiatives consuming resources without generating real impact .

“Far fewer projects will be done than expected, and because too many projects are being given money, some may not make sense. In reality, however, it is more likely that they will not even be successful because they are not profitable,” Rupérez believes.

The problem is not just financial. According to data from Hydrogen Europe, 44% of companies consider that the infrastructure for the production and transport of hydrogen can be “improved”, while 30% rate it as “poor” .

This means that even if projects do achieve funding, lack of infrastructure remains a critical barrier .

How should hydrogen projects be financed?

Rupérez argues that, rather than focusing on financing the initial investment of projects, incentives should be directed towards guaranteeing the purchase of the hydrogen produced .

In his view, the key is to secure the consumer market so that the industry can grow without being eternally dependent on subsidies.

“What should really be financed is the offtake, that is, the purchase of hydrogen. And also, with a higher percentage,” he emphasizes.

European Hydrogen Bank auctions , which have begun to prioritise long-term contracts with guaranteed prices.

However, for industry leaders, access conditions have been restrictive , favouring large market players to the detriment of emerging projects.

[Read: New rules and challenges mark the second European auction of green hydrogen]

There is a critical point: as long as green hydrogen remains more expensive than fossil fuels, its adoption will be limited , so success will depend largely on its ability to reduce costs and attract investment.

Access to financing remains difficult for small projects, infrastructure is insufficient and the consumer market is not yet consolidated .

Spain has a unique opportunity to position itself as a leader in the hydrogen sector, but this will require a clear industrialisation strategy and not just a commitment to exports.

As long as the price gap with fossil fuels is not reduced, green hydrogen will continue to depend on public incentives and the key will be to achieve a self-sustaining market in the long term.