The clean hydrogen sector has passed its “peak of inflated expectations” and entered its “trough of disillusionment”. Next comes the industry’s period of “enlightenment”, followed eventually by its “plateau of productivity”, according to one speaker at the Hydrogen Technology World Expo in Hamburg, Germany in October.

 The terminology here may sound familiar—it is from Gartner’s Hype Cycle, a methodology used to try to illustrate the journey of new technologies from inception to deployment at scale.

Jorgo Chatzimarkakis, CEO of industry association Hydrogen Europe, used a simpler analysis: The sector has “bottomed out”, he told the conference.

The industry’s progress to its next stage of evolution, at least in Europe, is highly dependent on its development in Germany, the continent’s largest economy.  “Germany is the core country,” said Chatzimarkakis. “It is the most important demand market.”

“Germany is the core country... It is the most important demand market” Chatzimarkakis, Hydrogen Europe

The good news for the industry is that the new German government, which took power earlier in 2025, has acknowledged that mistakes have been made and has embarked on a reset of its approach to hydrogen, in the face of stalled progress on both the supply and demand side.

“We have learned the hard way,” said Christine Falken-Grosser, head of hydrogen coordination at the Federal Ministry for Economic Affairs and Climate Action. “We totally underestimated costs and prices, which are much more expensive and much more complicated than we thought, especially with infrastructure and how it all works together and how much nitty gritty detail we have to consider.”

Above all, the government has realised the need for greater flexibility. Regulation and rules around the timelines for project funding have been “super strict” in a way that has “suffocated” the industry, said Falken-Grosser.

Greater openness to different technologies looking for funding is also needed. She highlighted problems with hydrogen projects in the steel sector, where a lack of flexibility by the government has hampered progress.

In the power sector, more flexible thinking around the deployment of hydrogen is also feeding into policy, Falken-Grosser told Hydrogen Economist on the sidelines of the conference. New legislation in Germany has recently opened the way for the deployment of CCS at gas-fired plants, but there is a realisation in government that hydrogen may be the better option. “CCS is just as expensive as hydrogen and not as available as hydrogen,” she said, citing Germany’s lack of carbon storage and other CCS infrastructure. “We need to phase out carbon in the power sector. Hydrogen may be available earlier than CCS, although it is expensive,” she said. CCS in Germany is about four years behind clean hydrogen, she added. Federal Economics and Energy Minister Katherina Reiche believes there is “big potential” for hydrogen in the power sector, she added.

Defining green

In a recent analysis of the hydrogen sector, commissioned by the government, the EU’s Renewable Fuels of Non-Biological Origin (RFNBO) definition of green hydrogen, compliance with which is a prerequisite for producers bidding for EU funding, was described as “overly complex”.

Falken-Grosser acknowledged the industry has called on the government to seek changes to the RFNBO. However, the government is also aware that renegotiating the details of the RFNBO could undermine efforts to maintain the policy predictability that industry and investors need.

“There is a big discussion in the ministry about how far we want to go, and what signal (renegotiating RFNBO) sends to the market,” she said. “We want predictability and reliability. We are in hydrogen, and we are staying in hydrogen. We are committed to this.”

Germany is also promoting further discussion at the EU level around support for the demand side, with the potential for subsidised procurement of hydrogen by sectors such as fertilisers, an approach known as lead markets. Negotiations would be needed with the EU’s Directorate-General for Competition on the use of state aid, Falken-Grosser said. “We want to support German and European industry to achieve competitiveness as soon as possible,” she said.

The government is keen to focus demand on those sectors where the price gap between the cost of hydrogen and the price required by industrial consumers is narrowest.

“We want to focus on the industries where the economic achievability is very near,” said Falken-Grosser. She cited the aviation and maritime sectors as key demand sectors, despite the recent setback for the [International Maritime Organization] shipping decarbonisation strategy. “We still believe the shipping sector and aviation can have a big pull effect in the [hydrogen] market,” she said. “We still have the steel industry, where there are huge projects which are going to provide volume, though not as large as thought at the start. We still have the electricity sector, where [Reiche] still believes there is big potential for hydrogen.”

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Author: Stuart Penson