In June 2025 ArcelorMittal walked away from €1.3 billion of approved German subsidies rather than build two hydrogen-based steel plants it had spent years planning. Eleven months later, nine hydrogen projects fought over a €1.3 billion European auction pot that was oversubscribed six times. Both things are true, and read together they describe the bet European manufacturing is actually making, which is narrower and more calculated than the strategy documents suggest.
Key takeaways
- REPowerEU set a 2030 goal of 10 Mt of domestic renewable hydrogen plus 10 Mt imported.
- Around 648 MW of electrolysis was operational in the EU in Q1 2026, with roughly 4 GW past final investment decision.
- The third European Hydrogen Bank auction drew €8.4bn of bids against a €1.3bn budget, closing February 2026.
- The European Court of Auditors called the targets unrealistic in July 2024 and asked for a reality check.
What Europe actually committed to
The headline commitment is two numbers and a quota. Under REPowerEU, adopted in 2022, the EU aims for 10 million tonnes of domestically produced renewable hydrogen and a further 10 million tonnes imported by 2030. The binding instrument sits elsewhere: the third Renewable Energy Directive, Directive (EU) 2023/2413, requires that 42% of the hydrogen consumed by industry come from renewable fuels of non-biological origin by 2030, rising to 60% by 2035, with a limited flexibility allowing member states to cut those shares by a fifth under specific conditions.
That quota, not the tonnage headline, is what sits in the business cases. It converts decarbonisation from an aspiration into a compliance cost with a date on it, and it is the single reason several of the projects below still exist.
What has actually been built
The gap between commitment and concrete is the central fact of this subject. According to European Hydrogen Observatory tracking, around 648 MW of electrolytic capacity was operational in the EU in the first quarter of 2026, with roughly 4 GW having reached a final investment decision. Producing 10 million tonnes a year would require something in the order of a hundred gigawatts.
| Measure | Position | As of |
|---|---|---|
| EU electrolysis operational | approx. 648 MW | Q1 2026 |
| Capacity past final investment decision | approx. 4 GW | Q1 2026 |
| EU funds allocated to hydrogen projects | €18.8bn | ECA audit, July 2024 |
| 2030 domestic production goal | 10 Mt per year | REPowerEU, 2022 |
The European Court of Auditors reached the obvious conclusion first. Its July 2024 report found the targets to be driven by political will rather than analysis, and identified the underlying trap: producers will not build without committed offtake, buyers will not commit without supply at a workable price, and each waits for the other.
The auctions work. The demand side still does not.
Where Brussels has intervened directly with a fixed subsidy per kilogram, the response has been strong. The European Hydrogen Bank runs a competitive auction in which producers bid the premium they need, and the pattern across three rounds is consistent oversubscription.
- First auction, closed February 2024: €720m awarded to 7 projects from 132 bids, covering an expected 1.52 Mt over ten years of operation.
- Second auction, closed February 2025: 61 bids, 15 projects invited to sign, with more than €700m added by Spain, Lithuania and Austria through the auction-as-a-service mechanism.
- Third auction, closed 19 February 2026: 58 bids from 11 countries chasing a €1.3bn budget, with roughly €8.4bn requested. Nine winners in Finland, Germany, Norway, Greece and Austria shared €1.09bn, at bid prices between €0.57 and €3.49 per kilogram, for almost 1.1 GW of electrolysis.
Read carefully, that spread of bid prices is the most useful number in this article. A sixfold difference in the support required per kilogram tells you the cost of renewable hydrogen is not yet a market price. It is a function of local power costs, and until it stabilises, industrial buyers are right to sign nothing longer than they must.
Why steel became the test case
Steel is where the argument gets settled because it has no easy alternative. Primary steelmaking needs a reducing agent, and the realistic options are coke or hydrogen. That is why three European projects have become the industry’s scoreboard, and why they are pointing in different directions.
ArcelorMittal: the cancellation that reset expectations
ArcelorMittal declared in June 2025 that direct reduced iron and electric arc furnace plans at Bremen and Eisenhüttenstadt could not proceed, and relinquished its claim to roughly €1.3bn in federal and state German subsidies that had been approved but never disbursed. The stated reasons were persistently high electricity prices and continuing uncertainty over energy infrastructure, not doubt about the chemistry.
thyssenkrupp: building the plant, deferring the hydrogen
thyssenkrupp Steel is proceeding with Germany’s largest direct reduction plant at Duisburg, supported by around €2bn from the federal government and North Rhine-Westphalia, sized at 2.5 million tonnes of DRI a year. The detail that matters is the sequencing. First hydrogen use is planned for 2028 with full hydrogen operation targeted in 2029, which means the asset starts on natural gas and converts later. The company said publicly in March 2025 that affordable green hydrogen availability made the economics uncertain.
Stegra: the one that got fully funded
Stegra is building at Boden in northern Sweden with a 690 MW electrolyser feeding direct reduction and two electric arc furnaces, designed for 2.5 million tonnes a year. A €1.4bn equity round led by Wallenberg Investments closed in June 2026 and completed the funding, with production targeted for the second half of 2026. Cheap Nordic power is not a footnote to that outcome, it is the reason for it.
So why bet at all
Three reasons survive contact with the cancellations. The RED III industrial quota carries a legal deadline that does not move because a project slips. Carbon border pricing changes the arithmetic for anyone exporting into or producing within the EU. And for ammonia, refining and primary steel there is no third option waiting in the wings, which is not true of transport or building heat, where hydrogen has quietly lost most of its argument. The bet has narrowed rather than collapsed, and narrowing was always the likely outcome. Our note on whether industry can go carbon neutral without going broke sets out the same tension across other sectors.
Three questions worth asking of any hydrogen announcement
Is the plant hydrogen-ready or hydrogen-fed?
Most European direct reduction plants under construction will run on natural gas first. Both designs are legitimate, but only one of them consumes hydrogen on day one, and press releases rarely make the distinction.
Where is the power coming from?
Electricity is the dominant input cost. A project in a low-cost renewable grid and one in a high-cost industrial grid are not the same investment, whatever the technology sheet says.
Is there a signed offtake agreement?
Announced capacity is not contracted capacity. The 100 GW of electrolysis announced across Europe includes a large volume that will never reach a final investment decision, and offtake is the cleanest filter available.
What we would take from 2026 so far is that the hydrogen story stopped being about ambition and started being about electricity prices. The projects clearing their funding are the ones sitting on cheap renewable power with a regulated customer at the end of the pipe, and that is a far smaller category than the 2022 targets assumed. It is also, for the first time, a real one.
Watching heavy industry retool?
Hydrogen is one thread in a much wider rewiring of Europe’s oldest sectors.
Sources: European Commission, REPowerEU plan, 2022; Directive (EU) 2023/2413 (RED III), Article 22a industrial RFNBO targets; European Court of Auditors, special report on the EU’s industrial policy on renewable hydrogen, July 2024; European Commission, European Hydrogen Bank auction results, rounds one to three, 2024 to 2026; European Hydrogen Observatory, operational electrolysis capacity, Q1 2026; ArcelorMittal statements on Bremen and Eisenhüttenstadt, June 2025; thyssenkrupp Steel press materials on the Duisburg direct reduction plant; reported financing of Stegra’s Boden plant, June 2026. Capacity figures are point-in-time and move quarterly. Updated August 2026.
