The announcement comes from newly appointed Climate Commissioner Wopke Hoekstra, who stated that the goal in the energy sector is not to sever ties with China, but to restore balance.
The Chinese electrolyzer market poses a threat to the EU industry
The upcoming Hydrogen Auction by the European Hydrogen Bank will include, so to speak, new protectionist criteria. This was recently announced by Wopke Hoekstra, the newly appointed European Commissioner for Climate. Speaking at the opening ceremony of the academic year at the Eindhoven University of Technology in the Netherlands, Hoekstra addressed one of the most contentious issues of recent times in the field of energy transition—and beyond: Beijing’s influence on the European economy.
‘China is challenging us so significantly that it would be naive to deny that Europe has a problem with China,’ stated the Dutch politician. ‘In the early 2000s, the photovoltaic industry was one of Europe’s crown jewels for clean growth. Over the past decade, Chinese players entered the market, undermined it in many ways with ultra-low prices due to massive government support, and nearly wiped out the European solar industry.’ It’s worth noting that the People’s Republic alone currently hosts over 80% of the global manufacturing capacity for photovoltaic modules. ‘Today, we see the same thing happening in other sectors. It is derailing our economy and increasing our dependence. This is unacceptable”.
European Electrolyzers vs. Chinese Electrolyzers
While the dominance of Chinese-made photovoltaics has been widely known for years, and there’s growing awareness about Chinese electric vehicles and batteries, other sectors where the Asian giant is gaining ground are perhaps less recognized. The latest industry facing this challenge? Electrolyzers for hydrogen production. In this field, Europe has long held a well-established market leadership. As of May 2023, the operational manufacturing capacity in Europe stood at 3.11 GW per year, with an additional 2.64 GW expected to come online by the end of the year. The sector is robust and reliable, backed by unparalleled research efforts. It’s worth noting that the EU has held the global lead in the number of patent applications for hydrogen technologies for years.
However, this leadership is beginning to show cracks. China is catching up in hydrogen research, and its electrolyzer industry is growing at an explosive rate, now accounting for 40% of global production. “The electrolysis market has developed rapidly in China,” explains Sam Lamboo, a researcher at TNO. “The Chinese have focused entirely on alkaline electrolyzers, while Europe is strong in both PEM and alkaline technologies.” Specifically, EU manufacturing capacity is divided between 56% for alkaline electrolyzers and 46% for PEM. There is a notable difference between the two approaches: the former is more cost-effective, while the latter is more efficient and faster, but significantly more expensive.
“It’s still a young market with many uncertainties about how it will evolve,” Lamboo emphasizes. “The recurring question is how to avoid a future where we are entirely dependent on China for equipment and components. Will the market be flooded with cheap alkaline electrolyzers from China in a few years, or will we pay the price for our independence by opting for more expensive, home-grown equipment?”.
New Criteria for the Hydrogen Auction
It is not surprising, then, that the European Union is seeking to curb China’s advance in its hydrogen market. “This month, we will propose new rules for the next European auction to support hydrogen projects,” revealed the Climate Commissioner. “Although the first auction showed that European electrolyzers have a strong presence, China is now oversupplying them at increasingly lower costs. Therefore, I will ensure that the next tender will be different. We will have explicit criteria to build European electrolyzer supply chains.”
