According to a new report by Institute for Energy Economics and Financial Analysis, Germany risks overbuilding its hydrogen infrastructure and exposing taxpayers to tens of billions of euros in additional costs due to overly optimistic hydrogen demand projections.
The study warns that Germany’s hydrogen demand is likely to fall below official forecasts, increasing the risk of costly overinvestment in pipelines and related infrastructure. IEEFA estimates that failing to meet projected demand levels could require around €45 billion in additional public funding by 2055, equivalent to roughly €1,000 per German taxpayer.
Germany currently has one of Europe’s most ambitious hydrogen strategies, with plans for the fuel to play a major role across industry, heating, transport and power generation. However, the report argues that official outlooks underestimate the impact that electrification and cheaper alternatives could have in limiting future hydrogen consumption.
Institute for Energy Economics and Financial Analysis expects Germany’s hydrogen demand in 2045 to sit at or below the lower end of official scenario ranges.
Alasdair Docherty, sustainable finance analyst at IEEFA and co-author of the report, said the issue is particularly significant because Germany’s hydrogen network financing model assumes demand will grow fast enough for users to repay infrastructure costs over time.
“If that demand fails to materialise, taxpayers will be on the hook,” Docherty said.
The report estimates that a limited-demand scenario alone could leave German taxpayers responsible for at least €34.7 billion in pipeline-related costs by 2055. It also warns that weaker-than-expected hydrogen uptake would increase spending on hydrogen-ready power plants and extend reliance on liquefied natural gas (LNG) terminals.
The analysis further highlights concerns over Germany’s recent policy shift towards blue hydrogen — produced from natural gas combined with carbon capture and storage (CCS). Germany’s Hydrogen Acceleration Act, approved by parliament in February 2026, classifies blue hydrogen projects as being in the “overriding public interest”.
According to Docherty, a stronger reliance on blue hydrogen could deepen Germany’s exposure to volatile global gas markets while requiring additional carbon dioxide pipeline infrastructure.
“A pivot to blue hydrogen would add a network of costly carbon dioxide pipelines and re-entrench Germany’s dependence on volatile global gas markets, threatening long-term energy security and industrial competitiveness,” he said.
“Blue hydrogen is an expensive way to sacrifice energy independence.”
IEEFA recommends that Germany align future hydrogen infrastructure investments with confirmed demand and supply commitments rather than relying on optimistic growth assumptions. The organisation also suggests that importing hydrogen derivatives for specific industrial applications could reduce the need for a large-scale domestic hydrogen pipeline network.
In addition, the report argues that coordinating hydrogen investments with the gradual phaseout of support for LNG terminals would help avoid the risk of financing two overlapping energy systems facing the same demand uncertainty.
“It is better to recognise infrastructure risk early than to justify an oversized network by artificially propping up demand at indefinite taxpayer expense,” Docherty added.