EU to Change Hydrogen Subsidy Rules to Tackle Chinese Oversupply

https://www.windtaskforce.org/profiles/blogs/eu-to-change-hydrogen-...

The EU’s hydrogen sector could lose the ability to compete with Chinese firms, which have devoured solar and battery markets.

European Union Commissioner for Climate Action Wo(p)ke Hoekstra takes part in a hearing of the Committee on the Environment, Public Health, and Food Safety, as part of a plenary session at the European Parliament in Strasbourg, France, on Oct. 2, 2023.

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The European Union is working on new hydrogen subsidy rules to protect European manufacturers from “unfair” Chinese competition, the bloc’s climate chief said on Sept. 2.

Wopke Hoekstra, EU commissioner for climate action, made the revelation at the Eindhoven University of Technology in Eindhoven, Netherlands, where he spoke at the opening of the academic year.

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The announcement follows a request to the commission by European manufacturers of electrolyzers—machines that produce hydrogen-with-electricity—to create made-in-Europe criteria in the second European Hydrogen Bank subsidy auction later this year.

It also follows a warning from the industry, the EU’s hydrogen sector could lose the ability to compete with Chinese companies, which have already devoured the global solar and battery market.

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In his Eindhoven speech, Hoekstra said it is “unacceptable”, the Chinese regime has been “derailing” the EU’s economy and increasing the bloc’s dependence on China with “massive” subsidies in solar and other sectors, and vowed to “restore the balance” with "more subsidies" and "new special bureaucratic rules and regulations"

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Citing hydrogen energy as an example, the he said the European Commission will propose rules this month for the next auction.

 “While the first auction showed, European electrolyzers have a good presence, China is now oversupplying them at ever-lower costs,” he said.

“So I will ensure, the next auction is different.

We will have explicit criteria to build European electrolyzer supply chains", meaning any foreign suppliers would not "qualify"

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Hoekstra also suggested, data security requirements could be included in the EU’s subsidy rules, alluding to concerns about weaker data protection outside of the EU, such as a Chinese law that compels any company in China to hand over information to the state.

“If European cybersecurity and safety cannot be guaranteed, if our data cannot be guaranteed, they cannot get support,” he said.

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Electrolyzers are machines that use electricity to split water into O2 and H2.

Traditional, much less-costly hydrogen production processes, use plentiful, low-cost natural gas.

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According to the European Commission, hydrogen accounted for less than 2 percent of Europe’s energy consumption in 2022, and 96 percent of that hydrogen used was produced with natural gas. 

Meaning the hydrolyzer process is only 4 x 0.02 = 0.08% of Europe's energy consumption 

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As part of the EU’s drive to cut greenhouse gas emissions in the EU by 55 percent by 2030, the commission has set a goal to produce 10 million metric tons of hydrolyzer hydrogen and import the same amount by 2030. 

However, PwC warned in April, there’s a “significant gap between the capacity planned globally (includes China) of 840 gigawatt and the capacity of projects that have reached the final investment decisions or construction phases (15 GW).”

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In the EU’s pilot auction, held between November 2023 and February 2024, Brussels awarded 720 million euros (about $797 million) to seven hydrogen projects that were selected out of 132 bids from 17 European countries. Foreign companies were not allowed to bid.

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According to the International Energy Agency, China is leading both in terms of electrolyzer capacity and manufacturing capacity, accounting for 40 percent of global capacity.

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In January, the German technology association VDE, which is a member of Hydrogen Europe, said in a white paper on the hydrogen economy, China had “already taken pole position” in electrolysis technology.

The white paper noted, leading Chinese electrolyzer manufacturers include those already leading the photovoltaic industry, and warned, it was “becoming a realistic scenario that any development in Germany would have the same dismal prospect as European photovoltaics and European lithium-ion batteries.”