However, to meet its target of 11 GW — the highest in the EU — the country will need additional support from its subsidy programmes. Germany follows closely in second place with a target of 10 GW by 2030, but is currently projected to reach 4.5 GW, according to Rystad Energy's analysis.
Spain's optimal conditions for renewable energy, coupled with supportive policies, have positioned it as one of the most cost-effective regions for green hydrogen production. While the global hydrogen market has not met investors’ early and enthusiastic expectations, with only a few operational projects — such as the Puertollano green hydrogen plant, with capacity of 20 MW in Spain itself — the outlook is more promising. Our projections indicate Spain could significantly boost green hydrogen production by 2030, with most projects considered low-risk and on track for timely commissioning, thanks to strong government support. This funding is already driving progress, as seen in BP’s recent Final Investment Decision for the first 25-MW phase of the Castellón refinery hydrogen plant, which could expand to 2 GW of electrolysis capacity by 2035.
The European Hydrogen Bank (EHB) has highlighted the advantages and interests in the Spanish hydrogen sector, awarding subsidies to three major Spanish initiatives via a pilot auction which attracted 130 bids from European nations in total, including 46 from Spain. EHB support is complemented by the Spanish government's significant €794 million (US$885 million) state aid package under the EU’s IPCEI Hy2Use program, aimed at supporting hydrogen-related infrastructure including large-scale electrolysers and transportation networks for the production, storage and distribution of low-carbon hydrogen. Moreover, Spain’s hydrogen sector is set to benefit from a €2.3 billion subsidy programme recently announced by the government, of which €1.2 billion will be dedicated to developing renewable hydrogen hubs and €750 million to strengthening the nation’s green technology supply chain. With this Spain joins other European countries such as Germany, France, Netherlands in recently opening billion-dollar funding programs and auctions.
"Spain is positioning itself as a key player in Europe's hydrogen market but has yet to outline plans for generating domestic demand. Unlike Germany, which has set ambitious targets and ranks second in production capacity, Spain could focus on becoming a net exporter, particularly to Germany, which faces challenges due to less favourable renewable energy conditions. Seizing this opportunity could not only benefit Spain but also position it as a game-changer in the regional hydrogen landscape,” said Minh Khoi Le, Head of Hydrogen Research, Rystad Energy.
In the EHB pilot auction, bids from all applicants ranged from €0.37/kg to €0.48/kg of renewable fuels of non-biological origin (RFNBO) hydrogen, with projects receiving grants between €8 million and €245 million, significantly advancing each applicant country’s green goals. Spanish bids stood out, with lowest average levelised cost of production, benefitting from its lower renewable energy costs.
One of the awarded Spanish projects, DH2 Energy’s Hysencia, will have 35 MW of electrolyser capacity and bid €0.48/kg for 17 000 t of hydrogen over 10 years, requesting €8.1 million in funding. Located in Argon, the project recently secured an environmental permit and will include 49 MW of solar feedstock capacity. With incentives, the project’s estimated levelised cost of hydrogen is €6.24 per kilogram ($6.86 per kilogram). DH2 Energy will collaborate with ArcelorMittal and Fertiberia, which will use hydrogen in the steel and fertilizer industries, respectively.
The second successful Spanish project in the EHB pilot auction was El Alamillo H2 by Benbros Energy. This features 60 MW of capacity and bid at a price of €0.38/kg, requesting total funding of around €24.6 million for 65 000 t of hydrogen over 10 years. This makes the project’s estimated levelised cost of hydrogen, with incentives, €5.80/kg, with details on offtake agreements are not yet available.
The final Spanish project to win in the EHB auction is Renato PtX’s Project Catalina with 500 MW of electrolyser capacity at €0.48/kg for 480 000 t of hydrogen across a 10-year period. It plans to develop 1.1 GW of combined solar and wind power and will be connected to a green ammonia plant via a 221 km hydrogen pipeline. Supported by the EHB, the project’s estimated levelised cost of hydrogen is €4.61 per kilogram. The project aims to produce 84 000 t of green hydrogen and 247 000 t of renewable ammonia, using 504 MW of onshore wind and 571 MW of solar PV, with Fertiberia as the major offtaker for fertilizer production.
At a national level, Spain’s Ministry of Ecological Transition has unveiled a €1.2 billion funding initiative for large-scale green hydrogen projects and powerful electrolyser installations, financed entirely through the Recovery and Resilience Facility (RRF). Scheduled to launch in 4Q24, the programme aims to develop extensive green hydrogen valleys or clusters, boosting large-scale production and use of electrolytic hydrogen and its derivatives.
To qualify for funding, applicants must secure commitments to purchase at least 60% of their hydrogen production, have a minimum installed capacity of 100 MW, and ensure the hydrogen is produced from renewable sources. They must also meet additional criteria, including promoting job creation, gender equality, socio-economic development, small and medium-sized enterprises, circular economy practices and emissions reduction. Projects can cover multiple locations within 100 km of each other and can receive up to €400 million each.