Green hydrogen is essential for advancing the energy transition, as it is regarded as a CO2-neutral, flexible, and storable energy carrier. Particularly in steel production, which is known for its high energy intensity, hydrogen has great potential to replace conventional energy sources. In a game-theoretic, bi-level optimization model involving a power plant operator and a steel company, we investigate in which situations the production and use of green hydrogen is advantageous from an economic and ecological point of view. Through an extensive case study based on a real-world scenario, we can observe that hydrogen production can serve as a profitable and flexible secondary income opportunity for the power plant operator, and help avoid curtailment and spot market losses. On the other hand, the steel manufacturer can reduce CO2 emissions and associated costs while also meeting the growing customer demand for low-carbon products. However, our findings also highlight important trade-offs and uncertainties. While lower electricity generation costs or improved electrolyzer efficiency enhance hydrogen’s competitiveness, increases in coal and CO2 emission prices do not always result in greater hydrogen adoption. This is due to the persistent reliance on a non-replaceable share of coal in steel production, which raises the overall cost of both low-carbon and carbon-intensive steel. The model further shows that consumer demand elasticity plays a critical role in determining hydrogen uptake. These insights underscore the importance of not only reducing hydrogen costs, but also designing supportive policies that address market acceptance and the full cost structure of green industrial products.