The mood in Brussels this December is a stark departure from the unbridled techno-optimism that defined the early 2020s. The European renewable hydrogen sector finds itself at a defining historical juncture, characterised by a stark dichotomy between political ambition and industrial reality. On December 4, 2025, the Renewable Hydrogen Coalition (RHC), representing the vanguard of Europe’s clean energy and technology providers, issued a formal declaration calling for a “New Deal” to scale up the sector. This urgent plea arises against a backdrop of Europe having successfully established a “first-mover advantage” in policy design and technological innovation, but facing a stagnant commercial landscape where Final Investment Decisions (FIDs) lag critically behind the aggressive targets set by the REPowerEU plan.
Despite the European Commission mobilising a massive €5.2 billion funding package just days ago, the captains of Europe’s hydrogen industry are warning that money alone can no longer fix a strategy that is colliding violently with economic reality. As the year draws to a close, the sector is fighting for survival against a series of project cancellations, regulatory constraints, and a geopolitical pincer movement from the United States and China.
The “FID” Crisis
For years, the European hydrogen narrative has been sustained by a “pipeline” of projects with gigawatts of electrolysers that exist only on paper. As we close 2025, that pipeline is clogging. The industry is paralysed by a Final Investment Decision (FID) Crisis. Globally, only about 4% of announced hydrogen capacity has reached the construction phase, and Europe lags dangerously behind even this modest metric.
The fragility of the European model was exposed spectacularly earlier this year when seven out of fifteen winning projects from the second European Hydrogen Bank (EHB) auction withdrew during grant negotiations. These were projects that had theoretically “won” state support. Yet, developers pulled nearly 1.88 GW of electrolyser capacity off the table, forfeiting their wins because the economics simply did not stack up.
Throughout 2024 and 2025, European electrolyser manufacturing capacity expanded to approximately 10 GW, with projections to reach 15 GW by 2026. Yet, the actual deployment of these electrolysers into operational hydrogen production facilities has not kept pace. The hesitation among investors is driven by a lack of “bankability”, a term that has become central to the discourse. Bankability in this context refers to the certainty of revenue streams in the face of fluctuating electricity prices, uncertain regulatory compliance costs, and the absence of firm offtake agreements from industrial consumers who are themselves grappling with high energy costs.
The RHC’s manifesto explicitly links this stagnation to the “regulatory complexity” of the EU’s framework. Unlike the United States, where the Inflation Reduction Act (IRA) initially offered a streamlined tax credit mechanism, the EU’s support schemes have been layered with stringent sustainability criteria. While these criteria ensure environmental integrity, they have inadvertently acted as a brake on investment, forcing developers to pause projects while awaiting clarity on delegated acts and compliance methodologies.
The “New Deal” demanded by industry leaders from companies like Topsoe and EDP Renewables is a direct response to this failure. They are arguing that the current auction mechanisms, while well-intentioned, are insufficient to bridge the “green premium.” In late 2025, renewable hydrogen in Europe still trades between €7.00 and €10.00 per kilogram, while fossil-based incumbents remain at a significantly lower price of €2.00 per kilogram. This isn’t just a gap; it’s a canyon that the current “Innovation Fund” grants are failing to bridge for long-term operational viability.
The De-Industrialisation Warning
The most alarming signal, however, comes not from the energy producers, but from the energy consumers. The entire premise of the EU’s hydrogen strategy was that heavy industry, specifically steel and chemicals, would act as the “anchor tenant,” absorbing vast quantities of green hydrogen to decarbonise, but now that anchor has begun to drag.
In a watershed moment for European de-industrialisation, steel giant ArcelorMittal walked away from a €1.3 billion subsidy check from the German government this summer. The company cancelled its flagship Direct Reduced Iron (DRI) project in Bremen and Eisenhüttenstadt, a project that was supposed to be the poster child for “Green Steel.” When a multinational corporation rejects over a billion euros in free money because the long-term operational costs of green hydrogen make the business case unviable, it is an indictment of the entire policy framework.
ThyssenKrupp Steel followed suit, indefinitely pausing its own tender for procuring 151,000 tonnes of green hydrogen. The company cited bid prices that were “significantly higher” than any realistic business model could absorb. These cancellations are not just setbacks; they are existential threats to the EU’s industrial strategy. They suggest that without a radical change in energy costs, Europe’s heavy industry will not decarbonise—it will simply shut down or relocate to regions where energy is cheap.
The Regulatory Stranglehold of Purity
If cost is the economic barrier, regulation is the self-inflicted wound. The RHC’s demand for a “New Deal” is fundamentally an attack on the EU’s regulatory complexity, specifically the Delegated Act on Renewable Fuels of Non-Biological Origin (RFNBO).
Europe has spent the last five years building the world’s most intellectually rigorous definition of “green hydrogen.” Brussels policymakers have focused on additionality, which requires that electrolysers must be powered by new renewable capacity, and temporal correlation, which involves matching production with wind/solar generation down to the hour. While these rules satisfy environmental purists, they have strangled bankability.
Investors are voting with their feet, and they are walking toward the United States. Following the legislative adjustments to the Inflation Reduction Act, also known as the “OBBBA” changes of 2025, the U.S. has adopted a ruthlessly pragmatic approach. By prioritising carbon intensity over technology type, the U.S. has developed “blue” hydrogen, which utilises natural gas with carbon capture, making it highly bankable. The American philosophy is to build the market first, perfect the elements later. Europe’s philosophy, perfecting the elements first, has resulted in a market that exists mainly in theory.
The “New Deal” is a plea for Europe to relax these purity tests. Industry leaders are demanding an extension of the “phase-in” period delaying the strict hourly-matching rules until 2035. They argue that in the early scaling phase, the volume of hydrogen electricity demand is negligible compared to the total grid, so strict additionality is unnecessary and actively damaging.
The Competition From China
Looming over this entire strategic recalibration is the spectre of China. Chinese manufacturers such as LONGi and Peric can deliver alkaline electrolyser systems for approximately $300 to $600/kW. Meanwhile, their European counterparts are struggling to achieve a price below $2,500/kW.
This four-fold cost difference is driven by China’s massive state-driven scale-up and integrated supply chains. Europe now faces a brutal dilemma. To make green hydrogen affordable for steelmakers like ArcelorMittal, EU developers need access to cost-effective Chinese electrolysers. However, if they purchase Chinese equipment, they undermine the domestic manufacturing base (companies like ThyssenKrupp Nucera and Siemens Energy) that the EU Green Deal was intended to foster.
The European Commission has attempted to strike a balance with “Resilience Criteria” in the Net-Zero Industry Act (NZIA), effectively penalising auction bids that rely too heavily on Chinese technology. However, this protectionism comes at a heavy price: it keeps the capital cost of European hydrogen projects artificially high, further delaying the cost parity needed to replace fossil fuels. The “New Deal” implicitly accepts this protectionism but demands higher subsidies to offset the cost of “buying European.”
A New Industrial Strategy
So, where do we go from here? The “New Deal” manifesto is the blueprint for the upcoming “Clean Industrial Deal” (CID), which Commission President von der Leyen has promised as the cornerstone of her new term. Based on the “New Deal” demands and the funding signals from this week, we can forecast a significant strategic pivot in 2026.
First, the unrealistic target of producing 10 million tonnes of domestic hydrogen by 2030, which the European Court of Auditors has already dismissed as fantasy, will likely be quietly sidelined. In its place, we will see a “merit order” strategy. Instead of trying to put hydrogen in cars or home heating boilers where it makes no economic sense, the EU will concentrate its limited firepower on the sectors that must have it: maritime shipping and aviation. The dedicated €300 million “maritime basket” in the latest Hydrogen Bank auction is the first concrete sign of this strategic narrowing.
Second, the ideological war against blue hydrogen is nearing its end. The industrial reality is that Europe cannot build wind farms fast enough to power electrolysers for heavy industry by 2030. To prevent a total exodus of the chemicals and steel sectors to the U.S., Europe is being forced to hold its nose and accept low-carbon blue hydrogen as a “transitional necessity.” The new methodology for calculating low-carbon emissions released in July 2025 lays the groundwork for this shift.
Conclusion
The call for a “New Deal” signals the end of the “hype cycle.” The initial phase of the European hydrogen transition, characterised by lofty targets and regulatory perfectionism, has failed to trigger the necessary wave of investment.
The next phase will be defined by industrial pragmatism. The success of the “Clean Industrial Deal” will not depend on the ambition of its targets, but on the flexibility of its execution. Europe must decide whether it wants to be a purist regulator of a non-existent market, or a pragmatic builder of a messy, imperfect, but growing industry. The “New Deal” is a request for the latter. It is a demand to prioritise speed and scale over definitions and purity.
If Brussels listens, 2026 could be the year the FIDs finally start to flow. If it doesn’t, the “New Deal” may well become the eulogy for Europe’s ambitions of hydrogen leadership, as capital flows west to the pragmatism of the Americas and east to the scale of Asia. The window for this reset is narrow and closing quickly.
