Electrolyser Production Outpaces Market Demand
In a quiet factory near Hamburg, industrial robots stand ready to assemble electrolysers at a pace that exceeds current demand. Quest One, which manufactures proton exchange membrane electrolysers, has built automated lines that are faster and more reliable than the human teams they replaced. But order volumes remain far below the facility’s capacity, leading to a staffing mismatch. Earlier this year, the company laid off 20% of its German workforce despite the plant being able to support nearly twice its current staffing level.
Quest One’s executive vice president for customer operations, Nima Pegemanyfar, said the market is not expanding on its own. “Demand is the problem. It’s not supply.”
High Costs and Limited Adoption Slow Growth
Green hydrogen, produced via electrolysis using renewable electricity, remains expensive compared with hydrogen made from fossil fuels. Low-emissions hydrogen, which includes green hydrogen and grey hydrogen with carbon capture and storage, accounts for less than 1% of global hydrogen production. Many projects remain small-scale, even as companies aim to bring costs down. Quest One is targeting a production cost of €4 ($4.60; £3.50) per kilogram—roughly half of the current cost in Germany.
There is also a gap between the sectors that most need green hydrogen, such as chemicals, steel and shipping, and the less competitive uses that often dominate public discussion. Christian Stöcker, a communication professor at Hamburg University of Applied Sciences, said hydrogen for heating and passenger vehicles is inefficient compared with heat pumps and electrification. He also expressed concern about the influence of fossil fuel companies and automakers, which some critics say have an incentive to justify continued use of existing infrastructure.
Uncertainty Surrounds Hydrogen Companies Linked to Major Automakers
Quest One sits within the Volkswagen Group through its ownership by Everllence. Reports suggest Volkswagen may consider selling Everllence. The company told the BBC it is “reviewing strategic options” but did not confirm any specific plans related to green hydrogen.
Infrastructure Investment Depends on Government Policy
German hydrogen firms say policy support is essential for making prices competitive. Without it, large infrastructure investments risk becoming stranded assets. Planned networks of hydrogen pipelines from the Port of Hamburg aim to connect producers with industrial clients across northern Germany. Additional projects include underground storage in salt caverns in Lower Saxony, where Storengy Deutschland is building facilities around an existing natural gas site. The company expects hydrogen storage to serve as a way to capture excess renewable electricity and deploy it in winter, though operations would not begin until the 2030s.
International supply routes are also in development, connecting Germany with producers in India, Saudi Arabia, Chile and Namibia. Hydrogen can be converted into ammonia for shipment, but reconversion brings efficiency losses. Critics warn that large-scale hydrogen exports could disrupt ecologically or culturally significant regions and widen disparities in energy access.
Government Ambitions Softening as Costs Rise
Germany has stated that hydrogen is necessary for achieving climate targets. However, rising costs have led the government to scale back expectations for green hydrogen. Industry groups argue that without stronger support, domestic firms face growing competition from China, which holds almost 60% of the global electrolyser manufacturing capacity.
Hydrogen Council CEO Ivana Jemelkova said demand today falls short of the high expectations set five years ago. She noted that 52 low-carbon and renewable hydrogen projects have been cancelled in the past 18 months, calling the number “a lot of bad news.” The cancellations continue to accumulate, including Statkraft’s decision in May 2025 to halt new green hydrogen projects due to market uncertainty.
Despite setbacks, Jemelkova said the wider industry is still expanding. For companies in Germany preparing to produce, store and transport green hydrogen, the pressure to see demand rise has become urgent.
Featured image credits: Pickpic
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