The EU’s second European Hydrogen Bank subsidy auction will limit the use of Chinese electrolyzers, requiring bidders to ensure that no more than 25% of equipment, including production and assembly, comes from China.
Europe wants the best of both worlds at the moment – not severing ties with Chinese electrolyzer OEMs completely but preventing them from monopolizing the market.
Europe’s goal is to have a fully developed domestic manufacturing industry to avoid potential future energy security issues – the continent has learned from the Russian natural gas fiasco. However, to inject momentum into the green hydrogen sector, it needs to create a regulatory framework that encourages low-cost production.
With an influx of more affordable yet high-quality electrolyzers, particularly alkaline models, entering commercial operation and bearing the hallmark of Chinese manufacturing expertise, it becomes increasingly challenging for Western domestic industries to thrive. This is especially true in a market characterized by relatively high electricity costs and struggling wind developers, both of which directly affect the future of green hydrogen.
The 25% cap on Chinese-origin components won’t be the last twist in this saga. Europe is keeping its options open, balancing between full openness to Chinese electrolyzers and full restriction. If the sector doesn’t gain enough momentum, that number could quickly increase to 30%, 40%, or even 50% and above.
In other words, Europe understands the sensitivity of the issue but lacks enough evidence to conclude that a domestic industry is impossible. However, it has enough evidence to suggest that it would be difficult and may only come at the cost of meeting its 20 MMTA green hydrogen quota by 2030, jeopardizing its goals.
Time will tell how the Chinese adapt to this, but for now, some are building electrolyzer gigafactories in Europe to gain access to a market worth hundreds of gigawatts while facing higher manufacturing costs than in China. The sentiment in the sector is that these factories will still outcompete EU domestic products on price.
Benefiting from domestic economies of scale and technology transfer are advantages no European OEM will enjoy, but supply chain sourcing is where the lines may blur regarding the 25% cap.
EU keeping options open with 25% cap on Chinese components
The EU’s second European Hydrogen Bank subsidy auction will limit the use of Chinese electrolyzers, requiring bidders to ensure that no more than 25% of equipment, including production and assembly, comes from China.
Europe wants the best of both worlds at the moment – not severing ties with Chinese electrolyzer OEMs completely but preventing them from monopolizing the market.
Europe’s goal is to have a fully developed domestic manufacturing industry to avoid potential future energy security issues – the continent has learned from the Russian natural gas fiasco. However, to inject momentum into the green hydrogen sector, it needs to create a regulatory framework that encourages low-cost production.
With an influx of more affordable yet high-quality electrolyzers, particularly alkaline models, entering commercial operation and bearing the hallmark of Chinese manufacturing expertise, it becomes increasingly challenging for Western domestic industries to thrive. This is especially true in a market characterized by relatively high electricity costs and struggling wind developers, both of which directly affect the future of green hydrogen.
The 25% cap on Chinese-origin components won’t be the last twist in this saga. Europe is keeping its options open, balancing between full openness to Chinese electrolyzers and full restriction. If the sector doesn’t gain enough momentum, that number could quickly increase to 30%, 40%, or even 50% and above.
In other words, Europe understands the sensitivity of the issue but lacks enough evidence to conclude that a domestic industry is impossible. However, it has enough evidence to suggest that it would be difficult and may only come at the cost of meeting its 20 MMTA green hydrogen quota by 2030, jeopardizing its goals.
Time will tell how the Chinese adapt to this, but for now, some are building electrolyzer gigafactories in Europe to gain access to a market worth hundreds of gigawatts while facing higher manufacturing costs than in China. The sentiment in the sector is that these factories will still outcompete EU domestic products on price.
Benefiting from domestic economies of scale and technology transfer are advantages no European OEM will enjoy, but supply chain sourcing is where the lines may blur regarding the 25% cap.