On 4 June, Spain's Ministry for the Ecological Transition and the Demographic Challenge (MITECO) announced the allocation of 524 million in Recovery Plan subsidies to five industrial renewable hydrogen projects. These initiatives comprise a total of 425 MW in electrolyser capacity and aim to produce 55,200 tonnes of green hydrogen per year.
However, industry experts view this development with caution. The five selected projects were designated as Important Projects of Common European Interest (IPCEI) in 2021, enabling them to access public funding.
As such, the announced aid had already been expected since 2022. The projects include: Green H2 Los Barrios (Cádiz), which will install a 100 MW electrolyser to supply a steel plant and a chemical facility; Asturias H2 Valley, with another 100 MW electrolyser to serve a cement factory, a steel plant, and the industrial hub of Avilés; Bilbao Large Scale Electrolyser, near the Petronor refinery in Bizkaia; Cartagena Large Scale Electrolyser, linked to the Repsol refinery in Murcia; and Ver-Amonia in Utrillas (Aragón), which includes a 25 MW plant to produce 15,000 tonnes of green ammonia per year, led by EDP and Cervales. These subsidies reach up to 65% of project costs, which is exceptional given that the typical cap for large enterprises is around 40%. Despite public backing, Brais Armiño, a partner at atlantHy and expert in renewable hydrogen and synthetic fuels, cautions that "all of these projects will depend on grid-supplied electricity, which involves high costs for PPAs, grid tolls and balancing services". This occurs in a context where large-scale self-consumption is unfeasible, limiting competitiveness compared to decentralised models relying on direct self-supply. In conversation with Strategic Energy Europe, he explains that for large-scale industrial projects, developing 100 MW self-consumption systems is extremely complex. Grid connection entails not only power purchase agreements (PPAs), but also payment of grid tolls, balancing services and additional costs, significantly raising the total cost of hydrogen production. Asked whether there is a real risk that developers might reject the subsidies, as was the case with ArcelorMittal in Asturias, Armiño clarifies that the cases differ. "ArcelorMittal was a consumer, not a producer, and therefore had no control over the production cost and steel sale price," he notes. Nonetheless, he acknowledges that "there is a possibility that projects proposed in 2022, which are only receiving aid in 2025, may ultimately reject it" due to market shifts or major deviations from initial assumptions. Logistics, regulations and structural challenges Although these projects are embedded in industrial environments such as refineries, cement factories and steel plants, Armiño raises concerns about their ability to adapt to future market and regulatory demands. "There is a real possibility that some of these projects might end up rejecting the subsidies, as they were based on 2022 assumptions that may no longer hold," he states. He estimates total project costs at around 1.8 million per MW installed, but insists that "the main issue is not the subsidies, but the regulatory framework". He asserts that "the additionality requirement must be removed from the market unless legislation is amended, as otherwise many projects will be unfeasible". The current EU regulation, particularly the delegated acts of the European Commission mandating that renewable hydrogen must come from newly built renewable capacity installed after the electrolyser's commissioning, poses a significant barrier according to the expert. He believes that if this requirement is not relaxed, many projects could be excluded from the market for failing to meet these criteria. He argues that revising this regulation is essential to enable the execution of subsidised projects, given the limited pipeline of new renewable installations that can comply with the rules before 2028. Nonetheless, he stresses: "I am quite optimistic that these projects will make use of the aid.
Many developers are committed to the transposition of RED III, which will drive renewable hydrogen development and require all kinds of tools to boost competitiveness." What about the technology? On electrolyser efficiency, the atlantHy partner notes that "the most common models require between 55 and 58 kWh per kilo of hydrogen produced, although some reach 53 kWh". In his view, this level of efficiency provides a reasonable operational baseline. However, the difficulty of locating renewable developments close to major industrial centres, combined with current regulatory rigidity, hampers deployment, increases costs and jeopardises the scalability of these projects. Regarding supply logistics, the Repsol and EDP-Cervales projects serve as examples of effective integration, as they are co-located with their main industrial consumers, allowing direct hydrogen delivery and avoiding additional transport costs.
Yet Armiño argues these cases should be the exception, not the norm. He proposes that a more competitive logistical model would involve a network of smaller plants, between 30 and 40 MW, distributed across the country and directly connected to consumption points via on-site self-supply or micro-logistics infrastructure. This model would significantly reduce operating costs from grid use and hydrogen transport, while enhancing system resilience and flexibility in adapting to local market and regulatory conditions. What lies ahead: RED III transposition, European auction and H2MED The RED III (Renewable Energy Directive revision) is a key part of the European "Fit for 55" package, setting binding targets to increase the share of renewable energy across all economic sectors, including industry and transport. One of its core provisions is that EU member states must meet minimum shares of renewable fuels of non-biological origin (RFNBOs), such as green hydrogen. Spain has not yet transposed RED III into national legislation, despite the deadline passing on 21 May. Armiño points out that the delay is not unique to Spain, with only one member state meeting the timeline. "Europe underestimates the complexity of the process, which requires engaging with numerous stakeholders and sensitivities," he explains. The impact of RED III on the hydrogen market will be substantial.
Armiño believes that "domestic hydrogen production will be needed to meet demand", potentially requiring the deployment of over 1 GW of electrolysis capacity in Spain. This requirement is particularly relevant in the road transport sector, where a 1% mandate could trigger a surge in installations. On the upcoming European hydrogen auction, he warns: "The rules must change, because it"s not normal for companies to make such low bids that they can"t deliver". Although Spain secured seven projects in the latest auction, the slowdown in market development has created uncertainty over their implementation.
Armiño suggests that "most of the winning projects from the second European auction will not go ahead". He believes many of the bids were unrealistically low and, unless the rules are revised to reflect market price realities, "this will harm the sector"s credibility and create inefficiencies". Sector sources estimate that expected production costs for renewable hydrogen range between 3 and 5 per kilogram, well above some of the bids in the second auction, which even dipped below 0.50 per kilogram and failed to account for actual development, grid connection, storage and distribution costs. Finally, "2025 is a low point, but the sector will strongly rebound in 2026," concludes Armiño, pointing towards the investment decisions for H2MED, expected in 2027. He stresses that companies without secured land and technological progress before then risk missing out on future logistics and financing opportunities tied to this strategic infrastructure. Although enthusiasm has cooled compared to previous years, he maintains that both government and industry "remain firmly committed to renewable hydrogen".