Myth-busting hydrogen & e-fuels: separating hype from reality

Executive summary

Widely shared headlines claim green hydrogen will soon cost less than conventional gas and that synthetic fuels are ready to decarbonise aviation and shipping. The reality is more nuanced. While the technology is advancing and a wave of projects has been announced, production costs remain high and supply chains are constrained. Europe currently has only about 0.4 % of its hydrogen supplied by electrolysis, with most demand still served by fossil-derived hydrogen. Average renewable hydrogen costs in Europe hovered around €6.6/kg in 2023, and spot prices in October 2025 were around US$7.96/kg. Meanwhile, electrolyser prices rose 50 % between 2021 and 2024, and European manufacturing capacity is only about 3.1 GW, far short of the 25 GW target for 2025.

This report busts the top myths about hydrogen and e-fuels and provides a practical framework for founders to navigate the hype. It explains why costs haven’t fallen as quickly as expected, where supply bottlenecks persist, how much water and energy these fuels really require, and why direct electrification remains a more efficient option in many cases. The brief includes real-world examples such as Yara’s 24 MW green ammonia plant, Denmark’s 42 kt/year e-methanol facility and Sweden’s 690 MW green steel electrolyser, plus guidance on evaluating opportunities and mitigating risks.

Why it matters

The European Union sees renewable hydrogen and synthetic fuels as central to its net-zero plans. Policy packages such as REPowerEU call for producing 10 million tonnes of renewable hydrogen domestically by 2030 and importing another 10 million tonnes. Yet Europe’s clean hydrogen pipeline, while nominally 14.4 Mt for 2030, will likely deliver only about 2.5 Mt on the current trajectory. Final investment decisions (FIDs) have been slow; fewer than 2 % of announced projects reached FID by 2023, and more than 50 hydrogen projects were cancelled between 2024 and mid-2025. Under-estimating these constraints could leave founders stranded in unviable projects or misallocate scarce capital.

Hydrogen and e-fuels also face competition from more efficient electrification options. Heat pumps, batteries and direct electrification often yield greater emissions reductions per euro invested. Understanding the realities—cost curves, supply chain bottlenecks, energy efficiency and resource requirements—helps founders identify where hydrogen and e-fuels genuinely add value and where alternatives may be superior.

Myth vs. reality: the big misconceptions

Myth 1: Green hydrogen costs are plummeting and will match grey hydrogen soon

Reality: Green hydrogen is still expensive. Renewable hydrogen in Europe averaged around €6.6/kg in 2023. Spot prices in October 2025 were about US$7.96/kg (≈€7.5/kg) due to limited electrolyser capacity, high electricity prices and elevated shipping costs. Grey hydrogen produced from natural gas costs €1–2/kg, while blue hydrogen (with carbon capture) costs €1.5–3/kg. Although technological improvements and cheaper renewables could reduce green hydrogen costs below €2/kg in regions with abundant resources, achieving parity in Europe requires large-scale deployment and supportive policies that are only starting to materialise. Regulatory uncertainty and financing delays mean only about 2 % of announced green-hydrogen projects reached FID in 2023.

Myth 2: Electrolyser manufacturing is scaling smoothly

Reality: Europe faces a manufacturing crunch. Electrolyser production capacity in Europe was about 3.1 GW in 2024 and is expected to reach 21 GW by 2025—still short of the 25 GW target. The European Clean Hydrogen Alliance lists three barriers: inconsistent regulation slows investment commitments, funding gaps deter private capital, and supply chains for critical raw materials are not yet mature. Platinum-group metals and fluoropolymers in PEM membranes are sourced largely from a few countries, and meeting the EU’s 65 % import diversification target is extremely challenging. Rising materials costs contributed to a 50 % increase in electrolyser prices between 2021 and 2024. Some manufacturers have shifted expansion plans to the United States to capture Inflation Reduction Act incentives, further straining European capacity.

Myth 3: Water requirements make hydrogen unsustainable

Reality: Producing green hydrogen consumes roughly 9 litres of water per kilogram of hydrogen for electrolysis plus 10–20 litres for purification and cooling. Total consumption of 20–30 L/kg is comparable to or lower than the 20–40 L/kg required for fossil-based hydrogen production. While water use must be managed responsibly—particularly in arid regions—technology options exist to use desalinated seawater or recycled wastewater, and the volumes involved are small compared with agricultural and municipal uses. Water supply is therefore not a fundamental barrier to scaling green hydrogen, but it does require careful planning and community engagement.

Myth 4: E-fuels offer unlimited scalability and near-term viability

Reality: Synthetic fuels such as e-kerosene and e-methanol are promising but face major obstacles. Producing one kilogram of e-kerosene requires about 0.8 kg of hydrogen and 3.1 kg of captured CO₂, and the process consumes roughly 50–56 kWh per kilogram of hydrogen. Overall conversion efficiency is only 20–30 %, meaning three to five units of renewable electricity produce one unit of fuel energy. This makes e-kerosene expensive—around €5 per litre, roughly 4–10 times the cost of conventional jet fuel. Europe’s e-kerosene mandate requires just 1.2 % of jet fuel to be synthetic by 2030, yet no large-scale facility has reached FID. Forty-one projects with a combined capacity of 2.8 million tonnes per year are in development, but each requires €1–2 billion in capital and faces renewable-energy and CO₂ bottlenecks. E-fuels will play a role in aviation and shipping, but claims of rapid, large-scale deployment by 2030 are over-optimistic.

Myth 5: Hydrogen is the most efficient decarbonisation solution across all sectors

Reality: Hydrogen is best reserved for hard-to-abate sectors such as fertiliser, steel, aviation and shipping. Direct electrification using heat pumps and batteries is usually more efficient. A study of synthetic fuel pathways shows that producing one megajoule of Fischer-Tropsch e-kerosene requires 2.4 times more energy than producing the same amount of hydrogen. Even within hydrogen pathways, fuel cell efficiencies vary: e-hydrogen has a round-trip efficiency of around 75 %, e-methane 52 %, and e-kerosene roughly 42 %. Misallocating scarce renewable electricity to inefficient uses can slow decarbonisation. Electrification of road transport, heat pumps for buildings and industrial electrification often deliver greater emissions reduction per unit of energy.

Myth 6: Europe is on track to meet its 2030 hydrogen targets

Reality: European hydrogen demand was 7.9 million tonnes in 2023 and fell 3 % from 2022; electrolysis accounted for only 0.4 % of supply. The EU’s Hydrogen Strategy target of 6 GW of electrolysers by 2024 will not be met. Renewable hydrogen costs averaged €6.6/kg in 2023 and are expected to fall as technology improves, but financing challenges remain. Hydrogen Europe projects a 14.4 Mt clean hydrogen pipeline for 2030, yet only about 1.7 Mt of that is electrolytic and the current trajectory would deliver roughly 2.5 Mt by 2030. Achieving the EU’s 10 Mt domestic target requires accelerating electrolyser deployment, expanding renewable generation, securing offtake agreements and addressing regulatory and infrastructure barriers.

What’s working

Pilot projects prove feasibility: Yara’s renewable-ammonia plant in Herøya, Norway uses a 24 MW PEM electrolyser to produce around 10 tonnes of hydrogen per day and 20,000 tonnes of ammonia per year, cutting 41,000 tonnes of CO₂ annually. In Denmark, the Kassø e-methanol plant operates three 52 MW electrolysers to produce 42,000 tonnes of e-methanol per year. In Sweden, H2 Green Steel’s planned 690 MW electrolyser will support the production of 2.4 million tonnes of green steel annually. These projects demonstrate that industrial-scale green hydrogen and e-fuels are technically achievable.
Policy support is building: The EU’s ReFuelEU Aviation mandate, the Hydrogen Bank auction and dedicated funds such as the Innovation Fund are creating demand signals and lowering cost gaps. Germany, France and the Netherlands have launched national subsidy schemes, and the U.S. Inflation Reduction Act has spurred global competition. Analysts expect levelized costs of green hydrogen in Europe to reach parity with grey hydrogen by 2026.
Technology learning continues: Improvements in electrolyser design, standardisation and manufacturing scale could cut costs by 40 % in the short term and as much as 80 % in the long term. Economies of scale can reduce costs by over a third when plant size increases from 1 MW to 20 MW. Innovations in catalyst materials and membrane technologies are beginning to reduce reliance on scarce platinum-group metals.

What isn’t working

Slow project progress: Only a small share of the 828 GW global green-hydrogen pipeline has reached FID. Europe’s e-kerosene projects remain at the planning stage. Regulatory delays, unclear certification rules and the 2027 ReFuelEU review create uncertainty that discourages investment. The Hydrogen Europe Monitor notes that the cost gap between renewable and fossil hydrogen increased in 2023 due to falling natural gas prices.
Supply chain constraints: Europe’s electrolyser manufacturing capacity remains insufficient. Critical raw materials such as iridium and platinum come from a handful of countries. Fluoropolymer restrictions in the EU pose additional risks. In 2025, a wave of project cancellations—more than 50 hydrogen projects and numerous low-emission steel and SAF projects—highlights the fragility of the pipeline.
Cost headwinds: Electrolyser prices rose 50 % between 2021 and 2024, partly due to component shortages and inflation. Electricity remains the largest cost driver, and European power prices remain higher than in the U.S. or Middle East. Spot prices for green hydrogen in Europe were around US$7.96/kg in late 2025, despite falling natural gas prices reducing grey hydrogen costs. Without abundant low-cost renewables, many projects cannot secure off-take agreements at competitive prices.

A quick framework for founders

Assess cost and policy context. Examine regional electricity prices, available subsidies and carbon pricing. Use tools like the EU Hydrogen Bank auctions to gauge potential revenues. Remember that current green hydrogen costs range around €6–8/kg and may not fall below €2/kg until the late 2020s.
Verify supply chain readiness. Investigate whether electrolyser manufacturers and component suppliers can deliver at the required scale. Check for exposure to critical raw materials and potential substitutes. Diversify procurement by considering suppliers outside Europe or emerging technologies like anion-exchange membrane electrolysis.
Secure feedstocks. Ensure access to renewable electricity (through power purchase agreements or co-located generation), water and, for e-fuels, sustainable CO₂. Evaluate whether local grids can deliver low-carbon power and whether water supply is adequate given consumption of 20–30 L/kg.
Prioritise applications. Focus on sectors where hydrogen offers the greatest value: fertilisers, steel, long-distance shipping and aviation. Avoid displacing more efficient electrification options. Use the energy efficiency hierarchy to guide decisions.
Plan for regulatory uncertainty. Build flexibility into project timelines and financing. Monitor EU policy reviews (e.g., the 2027 ReFuelEU review) and national rules on renewable hydrogen certification. Consider partnering with established industrial off-takers to secure demand.

Fast-moving segments to watch

Green steel and fertiliser: Projects like H2 Green Steel’s 690 MW electrolyser in Sweden and Yara’s green ammonia plant show that heavy industry leads in securing offtake. Demand for low-carbon steel and fertilisers will grow as carbon border adjustments take effect.
E-methanol for shipping: Denmark’s Kassø e-methanol plant demonstrates the feasibility of large-scale e-fuel production. Shipping lines are signing offtake agreements for e-methanol, but supply remains limited.
Electrolyser gigafactories: European manufacturers like De Nora, Cummins and Topsoe are planning gigawatt-scale plants, but supply chain risks remain. Watching how quickly these facilities come online will indicate whether Europe can close its capacity gap.
Innovative business models: Companies are exploring on-site hydrogen production for industrial clusters and developer-financed e-fuel projects that bundle renewables with electrolysers and carbon capture. Subscription models and long-term purchase agreements may mitigate demand risk.
Technology breakthroughs: Advances in solid-oxide and anion-exchange electrolysis, catalysts with reduced platinum-group content, and modular “electrolyser-as-a-service” offerings could lower costs and unlock new markets.

Action checklist for founders

Run a reality check. Compare your assumptions against current cost ranges and project success rates. Avoid over-optimistic forecasts.
Build a diversified supplier network. Secure multiple electrolyser suppliers and raw material sources, and consider partnerships outside Europe to mitigate bottlenecks.
Co-locate with renewable energy. Pair electrolysers with wind, solar or hydro generation to lock in low electricity prices and reduce exposure to grid volatility.
Plan for water and CO₂ sourcing. For hydrogen projects, ensure sustainable water supply. For e-fuels, secure long-term CO₂ contracts with biogenic or direct-air capture suppliers.
Secure offtake agreements early. Long-term purchase agreements with industrial users, airlines or shipping companies improve bankability and signal demand to investors.
Engage with policymakers. Participate in consultations on certification rules and subsidies. Advocate for clear, long-term regulations to reduce uncertainty and accelerate FIDs.
Prepare for alternate pathways. Evaluate opportunities in electrification and energy efficiency to diversify your portfolio and hedge against hydrogen project delays.

FAQ

Is green hydrogen really more sustainable than blue hydrogen?
Yes. Green hydrogen produced via electrolysis using renewable electricity emits negligible greenhouse gases. Blue hydrogen relies on fossil gas and carbon capture, which still emits residual CO₂ and locks in fossil infrastructure.

When will green hydrogen be competitive with grey hydrogen?
Analysts expect green hydrogen to reach cost parity with grey hydrogen in parts of Europe around 2026 if electricity prices fall and subsidies kick in. However, widespread competitiveness may not occur until the late 2020s due to supply chain constraints and financing delays.

Is water use a barrier to green hydrogen?
No. Green hydrogen consumes about 20–30 litres of water per kilogram. This is comparable to or lower than water use in fossil-based hydrogen production. Sourcing water responsibly and using desalination or recycled water can mitigate impacts.

How efficient are e-fuels compared with other energy carriers?
Producing Fischer-Tropsch e-kerosene requires about 2.4 times more energy than producing the same energy in hydrogen. Overall conversion efficiencies for e-kerosene are around 42 %, while hydrogen exceeds 70 %. Direct electrification via batteries or heat pumps is often more energy-efficient.

Can Europe meet its 2030 hydrogen targets?
Not without significant acceleration. Europe’s clean-hydrogen pipeline totals 14.4 Mt by 2030, but the current trajectory delivers only 2.5 Mt. Achieving the EU’s 10 Mt target will require faster permitting, more gigawatt-scale electrolyser factories, robust subsidies and clear regulatory frameworks.