Europe’s electrolyzer firms fear China’s rapid expansion
Chinese growth in the clean hydrogen sector has European electrolyzer developers concerned that the market will soon be flooded by cheap technology.
September 18 – China’s aggressive push into the nascent clean hydrogen market prompted European electrolyzer, opens new tab manufacturers in July to pen a letter warning that the continent’s Green Deal must have ‘Made in Europe’ at its core.
addressed to European Commission President Ursula von der Leyen, said.
The threat is real: the results of the EU hydrogen bank pilot auction reveal that less than half of the awarded projects plan to rely on European technology. By the time grant agreements are signed this number could be even lower, the letter,
China’s ambition in the sector already dwarfs much of what has been projected in Europe and North America.
The country aims to produce up to 200,000 tons of clean hydrogen a year by 2025, according to its ‘Medium- and Long-term Plan for the Development of the Hydrogen Energy Industry (2021-2035), released in 2022.
Chinese hydrogen consumption will be near 86 million tons by 2060, according to state-held oil and gas company Sinopec’s ‘China Hydrogen Energy Industry Outlook’. The share of hydrogen produced from non-fossil fuel energy sources was projected to rise to 93% with solar and wind making up two thirds of that production.
The EU has provided around 4 billion euros ($4.4 billion) in subsidies for pilot hydrogen projects and two thirds of globally leading manufacturers are based in Europe. However, Europe’s piece of global manufacturing capacity is overshadowed by China, which has grown from 10% of global share in 2023 to 40% today, according to the letter to von der Leyen.
China plans to install more electrolysers than the rest of the world combined by the end of 2024, at around 2.5 gigawatts (GW) of capacity.
Meanwhile, European developers point out, state-held companies can endure extended periods of losses as they scale up their hydrogen businesses while enjoying zero-interest loans.
Many European electrolyzer developers are worried the market will go the same way as that of solar, opens new tab photovoltaic panels, after a combination of Chinese state support and excess capacity resulted in cut-price panels being exported into Europe and local manufacturers unable to compete.
the letter said:
The threat of repeating the solar PV tragedy, where a thriving industry that supported tens of thousands of jobs was entirely lost in the course of little over two decades, could be repeated, potentially in an even shorter timeframe. The next 2-3 years are critical,
The introduction of tough resilience criteria through the European Hydrogen Bank (EHB) would be a step in the right direction, the letter said, calling for the implementation of proposals to support European manufacturing at the next EHB round.
European claw back
The results of the first EHB auction, held in April, may provide a clue as to how deeply Chinese companies, opens new tab may have already entered European electrolyzer markets.
The April auction awarded nearly 720 million euros ($795 million) to seven renewable hydrogen projects across four European countries and requires winners to prepare their individual grant agreements with the European Climate, Infrastructure, and Environment Executive Agency (CINEA) by November.
The results will include signed purchase orders and grant agreements, indicating how many European-financed projects will be relying on Chinese manufacturers.
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Europe is believed to be weighing defensive moves to back its own producers.
Constantine Levoyannis, head of EU affairs at Nel Hydrogen, one of the 20 manufacturers that signed the letter, says :
The EU could consider claw-back mechanisms or cases in which they can pull money from the project developers based on what they disclose in their electrolyzer procurement strategy,
The second auction, due by the end of 2024, will draw on lessons learned from the first, the European Commission says, and Levoyannis hopes the origin of the electrolyzers and components will be taken into account.
Levoyannis says.
The Commission want project developers to disclose the origin of the electrolyzers that they sign LOIs (Letters of Intent) with … they could also introduce a requirement to disclose foreign subsidies used by original equipment manufacturers,
The slew of related government support in China needs to be considered by the EU when dolling out EHB, opens new tab money, he says.
For the moment, EU safety and quality standards are expected to help ween out the cheaper imports.
Daniel Fraile, chief policy officer Hydrogen Europe, says :
We support the move of the Commission to introduce requirements on minimum safety aspects, expecting this could give a competitive position to technologies/companies which attain to the highest quality standards,
“This is an important first step, but more will need to be envisaged in future auctions to strengthen the resilience of the European value chain.”
In theory
The global hydrogen industry has expanded at a slower pace than many had predicted just a few years ago, so concerns over a flood of cheap Chinese electrolyzers are based on projections rather than actual supply agreements.
Western electrolyzer companies, such as UK-based ITM Power which did not add its name to the letter, are focusing on high-quality, cutting-edge technology such as Proton Exchange Membrane (PEM) electrolyzers, rather than alkaline electrolyzers which are expected to be the focus of mass manufacturing in China.
The imported electrolyzers are still to be tested at scale and under stricter European regulations. Only then will the market know whether the Chinese manufacturers pose a serious threat to Europe, says James Collins, head of business development for ITM.
he says:
The Chinese could make a system quite cheap, and I genuinely don’t know how good they are, but time will tell,
“For us, we just need to have the best system in the market, and for that we need to keep on innovating, to keep on pushing our research and development and engineering teams, in order to produce the best product.”
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Europe’s electrolyzer firms fear China’s rapid expansion, source
