In a high-tech factory near Hamburg, robotic arms efficiently assemble proton exchange membrane electrolysers designed to split water into hydrogen and oxygen. These machines, produced by Quest One, represent a level of industrial automation far ahead of the company’s current demand, highlighting a persistent imbalance in the green hydrogen market.
Despite the plant’s capacity to operate at near-full staffing, Quest One had to reduce its workforce by 20 percent earlier this year, reflecting sluggish orders and the broader challenge of scaling green hydrogen production. Nima Pegemanyfar, the company’s executive vice president for customer operations, notes that “demand is the problem. It’s not supply,” underlining a sector-wide issue: green hydrogen remains more expensive than conventional hydrogen produced from fossil fuels. Globally, low-emissions hydrogen, encompassing green and blue hydrogen, accounts for less than one percent of total production.
Quest One aims to cut production costs to approximately €4 per kilogram, roughly half of current prices in Germany. Yet the potential applications of green hydrogen, particularly for high-temperature processes in steel, chemical, and shipping industries, remain limited and unevenly targeted. Critics point out that policy and industry focus have often emphasized less competitive applications, such as heating and passenger vehicles, where electrification or heat pumps offer more efficient solutions.
The company’s ownership structure also adds uncertainty. Quest One is part of Volkswagen Group’s Everllence, which the automaker is reportedly considering selling. A Volkswagen spokesperson confirmed that strategic options are under review but offered no further details.
Infrastructure development remains a crucial challenge. Plans for a hydrogen pipeline network extending from Hamburg to industrial clients and underground storage in Lower Saxony are underway, yet full-scale operations are not expected before the 2030s. International supply chains, including imports of hydrogen converted to ammonia from regions such as India, Saudi Arabia, Chile, and Namibia, introduce further complexity and efficiency losses, as well as concerns over environmental and social impacts in exporting regions.
Government policy is a critical variable for domestic green hydrogen competitiveness, particularly as Chinese manufacturers dominate nearly 60 percent of electrolyser capacity worldwide. With high costs and limited incentives, German projects face an uphill battle. Ivana Jemelkova, CEO of the Hydrogen Council, notes that 52 low-carbon hydrogen projects were cancelled over the past 18 months, illustrating the volatility and uncertainty in the sector.
For companies like Quest One, ready to produce, store, and distribute green hydrogen at industrial scale, the challenge is immediate. Without supportive demand signals and policy frameworks, the existing infrastructure risks underutilization, leaving Germany’s green hydrogen ambitions constrained despite technological readiness.
