The future of green hydrogen in Europe may hinge on an unlikely sector: oil refineries. According to a new report by Wood Mackenzie, European refiners are emerging as pivotal players in driving large-scale adoption of this low-carbon technology, considered vital for industrial and transport decarbonisation.

The study, entitled “Isn’t it ironic? How Europe’s oil refiners could offer a route to scale up green hydrogen”, estimates that refineries will require around 0.5 million tonnes of green hydrogen per year by 2030, replacing roughly 30% of today’s carbon-intensive hydrogen use. This shift is being driven by the European Union’s revised Renewable Energy Directive (RED III), which explicitly favours green hydrogen over blue.

“European refiners are set to become significant producers or buyers of green hydrogen, initially to decarbonise the refining sector itself and, subsequently, to supply marine and aviation fuels,” said Alan Gelder, Vice President at Wood Mackenzie.

Commitment is already evident: more than US$5 billion has been channelled into refinery-linked projects, within the 6 million tonnes per annum of low-carbon hydrogen capacity that has reached a final investment decision.

A market prepared to pay a premium

According to the report, recent EU Hydrogen Bank auctions highlight the sector’s appetite, with refineries showing the greatest willingness to pay premium prices. The average levelised cost of hydrogen in refinery bids reached US$9.23 per kilogramme, compared with Wood Mackenzie’s modelling of refinery-targeted projects, which places costs in the US$7.04–8.30/kg range.

Meanwhile, the average cost of green hydrogen across the bloc fell 18% in the latest auction round, with German bids dropping by more than 55%. Yet progress remains uneven, as many member states have been slow to transpose RED III into national law, creating regulatory uncertainty.

Aviation and shipping: the long-term growth story

While refinery decarbonisation offers the strongest short-term investment case, the greatest opportunities lie in transport fuels. The EU’s ReFuelEU Aviation regulation requires 6% of jet fuel to be sustainable by 2030, with 1.2% derived from hydrogen-based e-fuels. By 2050, this could demand 8 million tonnes of green hydrogen, representing annual growth of over 15% for the aviation sector alone.

Shipping is also set to play a major role, with the FuelEU Maritime Regulation and the International Maritime Organization’s Net Zero Framework spurring demand for hydrogen-derived marine fuels.

“The traditional sectors of refining, ammonia and methanol are demonstrating the fastest progress, ahead of many of the new hydrogen demand cases being promoted,” said Murray Douglas, Vice President of Hydrogen Research at Wood Mackenzie. “Parts of the refining sector can be decarbonised quickly – and at an acceptable cost. But policy support is essential to reduce production costs and guarantee refinery offtake.”

Policy gaps remain a stumbling block

Despite the momentum, major challenges remain. Current EU rules mandate that renewable fuels of non-biological origin (RFNBOs) account for only 1% of transport energy consumption by 2030 – a modest target that underscores the difficulties of scaling up supply. Slow national implementation of RED III continues to hamper project development across much of the bloc.

Wood Mackenzie concludes that while European refiners could become the driving force in scaling the green hydrogen industry, success will depend on further cost reductions and stronger policy frameworks to fully unlock demand across the continent.