The European Union Tightens Hydrogen Project Rules to Reduce Chinese Influence

The EU is imposing new restrictions on the use of Chinese components in its hydrogen projects, limiting their usage to 25% of total capacity. This decision aims to protect energy supply security and boost the local industry.

Partagez:

The European Union is revising its strategy for hydrogen projects to reduce dependency on Chinese components. The hydrogen technology market is becoming increasingly strategic as part of the continent’s decarbonation ambitions. However, the high presence of Chinese components, especially electrolyzers, poses risks to the security of the supply chain. The new rules imposed by the European Hydrogen Bank now limit the share of components from China to 25% of the total capacity of the supported projects, a strict threshold designed to encourage European production.

These new requirements are partly motivated by previous EU auctions, where several winning projects relied heavily on low-cost Chinese technology. This situation has raised concerns among European industrial players, who fear a loss of technological control similar to that observed in the solar panel sector, where China now dominates the global market.

The framework of the Net-Zero Industry Act

The component restrictions are part of the Net-Zero Industry Act, a set of measures aimed at strengthening the EU’s industrial sovereignty and securing its supply of clean technologies. The goal is to support the local production of electrolyzers while encouraging investments in new production capacities on the continent. These measures come at a time when China already controls more than 50% of the global electrolyzer production, a competitive advantage that could threaten Europe’s autonomy in its energy transition ambitions.

The new rules also include non-financial criteria for projects, such as cybersecurity and emission requirements, to favor European companies. This legislative framework aligns with other industry protection initiatives, such as recent investigations into Chinese electric vehicles and potential tariffs to protect the local market.

Risks to project competitiveness

While the EU hopes to strengthen its supply chain resilience, these new rules could also complicate the development of some projects. Chinese components, often less expensive than their European counterparts, currently maintain the profitability of many installations. The new restrictions could lead to higher costs, making some projects less competitive in the global market and potentially slowing the adoption of hydrogen as a key energy solution for decarbonation.

Jorgo Chatzimarkakis, CEO of Hydrogen Europe, has expressed concerns about the administrative complexity that could accompany these new measures. Simplifying procedures is considered essential to avoid discouraging investors and project developers. The European Commission, under the leadership of Ursula von der Leyen, is committed to reducing these administrative hurdles to facilitate the deployment of technologies under the Green Deal.

A major geopolitical issue

The revision of auction rules comes as EU-China trade tensions are escalating. In response to European restrictions, Beijing could adopt retaliatory measures, further complicating bilateral relations in other strategic sectors. At the same time, the United States is following a similar path with its Inflation Reduction Act, which also favors local production of clean technologies to reduce foreign dependence. This dynamic creates a global competition to attract investments in local supply chains.

For the EU, the central question is whether these new rules will successfully boost European electrolyzer production without slowing down its decarbonation projects. The next auction round, scheduled for December 3, 2024, will be a key moment to evaluate the effectiveness of this strategy and determine whether the EU can maintain its leadership ambition in the hydrogen technology sector while reducing its dependence on China.

The European Commission grants €3.5mn to support preparatory work for a Franco-German cross-border network aimed at transporting hydrogen between the Grand Est region and Baden-Württemberg starting in 2029.
French company McPhy Energy awaits a court decision regarding offers submitted during its judicial reorganization, paving the way for probable liquidation and potential delisting of its shares.
The majority-Indigenous-owned Canadian manufacturer HyVera Distributed Energy is introducing an eCat pellet that instantly produces ultra-pure green hydrogen without external electricity and is counting on two pilot plants to simplify industrial supply.
Underground hydrogen storage, essential to support its growth, continues to face significantly higher costs than natural gas storage, along with major technical challenges hindering its competitiveness against conventional energies.
Singapore-based hydrogen specialist Hydrexia seals a protocol with Indonesian gas giant Samator to deploy purification, transport and storage of hydrogen, betting on rapidly growing local demand and export outlets to the Asia-Pacific region.
Cadiz Inc. signs a memorandum of understanding with British company Hoku Energy for a large-scale energy project including green hydrogen, solar power, and digital infrastructure in the Californian desert, projecting annual revenues of up to $10mn.
BP indefinitely halts its blue hydrogen project at the Whiting refinery in Indiana, raising questions about the future of federal funding and the impact on regional plans for a decarbonized hydrogen sector in the United States.
The Polish energy group ORLEN receives a non-repayable grant of €382 million from the National Recovery Plan to finance its renewable and low-emission hydrogen production initiatives.
Georgia Power and Mitsubishi Power announce successful completion of an unprecedented test incorporating 50% hydrogen into an advanced gas turbine, reducing CO2 emissions by 22% compared to natural gas alone.
Neoenergia has begun construction of one of Brazil's first green hydrogen plants, aimed at supplying heavy and light vehicles, with an investment exceeding 30 million Brazilian reais ($5.99mn).
The SA-H2 fund, supported by international partnerships and local institutional backing, mobilises 37 million USD to develop export-oriented green hydrogen from South Africa, with an initial concrete project announced.
Turbotech reports successful combustion testing of a hydrogen turboprop, developed through digital simulation with Ansys, marking an industrial milestone in light aircraft using alternative fuel.
France Hydrogène responds to the Cour des Comptes report published on June 5, criticising an incomplete reading of updated targets and the economic impacts of decarbonised hydrogen development.
The Belfort Commercial Court has opened a judicial reorganisation procedure for McPhy, while a renewed call for tenders for its asset sale is now set to close on 13 June.
Plug Power CFO Paul Middleton acquired 650,000 shares on the market, affirming his support for the long-term strategy of the hydrogen-focused company.
The Canadian government is funding an initiative to support 40 SMEs in British Columbia’s hydrogen sector, aiming to increase foreign investment and expand international market share.
Developer CWP Global has paused its $40 billion AMAN project in Mauritania due to a lack of buyers for green ammonia despite favourable local conditions.
A study reveals that the profitability of African green hydrogen exports to the European Union depends on political support from Europe, despite the abundance of ongoing projects on the continent.
Plug Power expands its partnership with Allied Green through a new 2 GW electrolyzer deal tied to a $5.5bn chemical plant in Uzbekistan.
Stargate Hydrogen launches 140 MW factory in Estonia with modular expansion model amid cautious hydrogen investment climate.