EU to Change Hydrogen Subsidy Rules to Tackle Chinese Oversupply

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 Monday.
Wopke Hoekstra, the commissioner for climate action, made the revelation at the Eindhoven University of Technology in the Netherlands, where he spoke at the opening of the academic year.
The announcement follows a request to the commission by European manufacturers of electrolyzers—machines that produce low-emission hydrogen—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 that the EU’s hydrogen sector could lose the ability to compete with Chinese companies, which have already devoured the global solar markets.
Citing hydrogen energy as an example, the commissioner said the European Commission will propose rules this month for the next auction.
“While the first auction showed that European electrolysers have a good presence, China is now oversupplying them at ever-lower costs,” he said.
“So, I will ensure that the next auction is different. We will have explicit criteria to build European electrolyser supply chains.”
He also suggested data security requirements could be included in the EU’s subsidy rules, alluding to concerns over weaker data protection regimes 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.
Electrolyzers are machines that split water and produce low-emission hydrogen using electricity, compared to traditional hydrogen production processes that use fossil fuel technologies.
According to the European Commission, hydrogen accounted for less than 2 percent of Europe’s energy consumption in 2022, and 96 percent of the hydrogen used was produced with natural gas.
As part of the EU’s drive to cut greenhouse gas emissions in the EU by 55 percent by 2030, the commission has set an aim to produce 10 million metric tonnes of green hydrogen and import the same amount by the same year, although PwC warned in April that there’s a “significant gap between the capacity planned globally (840 gigawatts [GW]) and the capacity of projects that have reached the final investment decision or construction phases (15 GW).”
In the EU’s pilot auction, held between November 2023 and February 2024, Brussels awarded 720 million euros ($797 million) to seven hydrogen projects that were selected out of 132 bids from 17 European countries.
According to the International Energy Agency, China is leading both in terms of electrolyzer capacity and manufacturing capacity for electrolyzers, accounting for 40 percent of global capacity.
In January, the German technology association VDE, which is a member of Hydrogen Europe, said China had “already taken pole position” in electrolysis technology in a white paper on the hydrogen economy.
The report noted that leading Chinese electrolyzer manufacturers include those already leading the photovoltaic industry and warned that it was “becoming a realistic scenario that the development we have seen in Germany in photovoltaics and in lithium-ion batteries today, will repeat itself.”