Europe’s refining sector could become the launchpad for green hydrogen adoption, with regulatory pressure under the Renewable Energy Directive (RED III) driving demand that smaller industrial users alone could not achieve.
According to Wood Mackenzie’s latest Horizons report, refiners will need around 0.5 million tones of green hydrogen annually by 2030 to comply with EU rules—equivalent to replacing nearly 30% of today’s CO2-intensive hydrogen use. Refining, alongside ammonia and methanol production, accounts for 98% of global hydrogen demand, making it the critical front line for decarbonization.
Capital flows are already aligning with this policy signal. Of the 6 Mtpa of low-carbon hydrogen capacity that has reached final investment decision worldwide, European refiners account for more than US$5 billion in commitments. Recent EU Hydrogen Bank auction results reinforced this momentum: refiners submitted the highest bids, with an average willingness to pay US$9.23/kg, compared with Wood Mackenzie’s project-level cost estimates of US$7.04–8.30/kg. Notably, bid prices have begun to fall—down 18% in the latest auction, with German projects showing declines of more than 55%—pointing to the gradual emergence of cost competitiveness.
While near-term adoption centers on decarbonizing refineries themselves, the long-term demand signal lies in transport fuels. The ReFuelEU Aviation framework requires 6% of jet fuel from sustainable sources by 2030, including 1.2% from hydrogen-based e-fuels. By 2050, this could translate into 8 Mtpa of green hydrogen demand, implying a compound annual growth rate above 15%. Maritime regulation is following a similar trajectory: both the FuelEU Maritime Regulation and the IMO Net Zero Framework are anchoring expectations that hydrogen-derived fuels will dominate shipping segments where electrification is technically infeasible.
Still, policy misalignment remains a persistent obstacle. RED III sets a modest 1% RFNBO target for transport by 2030, and slow national implementation has created uncertainty that continues to delay projects. Industry analysts argue that refining could secure the early volumes and stable offtake required for cost reductions, but the absence of harmonized regulation risks undermining momentum.
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