The European Union is adding new regulations to its hydrogen production subsidy program in order to exclude equipment from China. The EU hopes to avoid repeating the harm that occurred in the solar panel industry due to China’s dominance, which led to a significant decline in the EU’s photovoltaic industry.
On Tuesday, the European Hydrogen Bank will commence its second round of subsidy tender. According to the new regulations, if Chinese electrolyzers (key components of hydrogen production equipment) account for more than 25% of production capacity, they will lose eligibility for subsidies.
In the first round of tenders implemented in April 2024, among the enterprises confirmed to receive subsidies, 15% plan to use electrolyzers produced in China, with approximately 60% of the electrolyzers being assembled or processed in China. According to data from the International Energy Agency (IEA), China’s annual electrolyzer production capacity reached 15 gigawatt-hours in 2023, accounting for 60% of global total capacity.
To enhance the efficiency of hydrogen production, it is necessary to connect multiple identical stacks of electrolysers. A senior executive of a European electrolyzer manufacturer told Nikkei Asia that the new regulations essentially exclude Chinese-made electrolyzers entirely.
The European Union has been skeptical about allowing Chinese companies to participate in renewable energy infrastructure projects.
Currently, around 90% of the solar panels used in the EU are produced in China. Many European companies have exited this sector.
China’s low-cost turbines have also been introduced to Europe for offshore wind power projects, undermining the profits of major European companies such as Siemens Energy. The competition from Chinese companies forced the Swedish electric vehicle battery manufacturer, Northvolt, to file for bankruptcy protection in the United States last month.
The Biden administration has also raised the conditions for subsidies for decarbonization projects in an attempt to exclude Chinese products. The EU, which was relatively lenient toward China, is also changing its stance.
According to the Financial Times, the EU is considering requiring Chinese companies to establish production facilities within the EU in order to qualify for subsidies for electric vehicle batteries.