The EU has complained that the US Inflation Reduction Act (IRA) puts European firms at a disadvantage and could divert investment across the Atlantic, but many in the industry are far more upbeat, especially as the EU prepares its own measures in response.

Rheanna Johnston, policy adviser at energy transition thinktank E3G, is sceptical that the IRA could be harmful to the EU hydrogen industry. “The main barrier for hydrogen production in the EU are high electricity costs, and here the critical piece is to expand renewable energy,” Johnston says.

“Regarding hydrogen technology, EU companies have a leading position along the whole value chain and have already committed to increasing manufacturing capacity tenfold to 17.5GW in electrolyser capacity by 2025,” she adds.

While European manufacturers are excited about the opportunities in the US, they are not taking their eyes off their own region just yet. 

UK-based electrolyser manufacturer ITM Power tells Hydrogen Economist that most of its projects are EU-based, and that for now “we are concentrating on getting our UK-based manufacturing site up to capacity as quickly as possible… but in time I suspect we will address this huge market [in the US].”

“European plans are already going in the right direction, they just need to be executed quickly” Franc, Hy24

Norway-based Nel says it has received “record-size purchase orders” from US customers in recent months, and some are telling them the IRA has had a positive impact on their investment decisions. The firm is investing in increasing capacity in both the US and Europe. Its Heroya facility in Norway is running 24/7, and the firm plans to double capacity to 1GW/yr by April 2024 and 2GW/yr in a later stage.

The Green Hydrogen Organisation (GH2) argues the disparity in support between the US and Europe is overplayed. While the EU cannot compete with the dollar amount of funding, “on this side of the Atlantic, lawmakers have greater opportunities to set procurement rules and take other non-financial measures which can drive both supply and demand”.

On the other hand, the CEO of hydrogen infrastructure fund Hy24, Pierre-Etienne Franc, says that “several industrial projects, which had been in the works in Europe for two years, are reconsidering their strategy and location” as a result of the IRA. The slow pace of support, particularly for projects seeking state aid via an award of Important Project of Common European Interest status, has caused the EU to lose its “head start” in hydrogen. “European plans are already going in the right direction, they just need to be executed quickly,” Franc says.

Partly in response to the IRA, European Commission president Ursula von der Leyen recently announced plans for a Net-Zero Industry Act.

Details are vague, but von der Leyen said there would be four key pillars: speeding up planning procedures; simplifying state-aid rules to boost financing and investment; developing the skills needed to make the transition happen; and ensuring a level playing field in trade—either through free-trade agreements or responding “more robustly” when trade is not fair, with China highlighted as potentially distorting the clean energy market with its subsidies and market access restrictions.

Cheap imports

Cheap US hydrogen could ultimately be a boon to Europe, GH2 argues. “The EU desperately needs to import renewable energy for the sake of the climate, for the sake of European jobs and for its own security.”

The prospect of cheap US hydrogen flooding the market is a point of contention for Australia, which itself has grand plans to be a major exporter. The government has called on the US to take measures to minimise distortion to international markets arising from the subsidies. 

“The risks to Australia's market development are real and need to be managed,” says Fiona Simon, CEO of industry body the Australian Hydrogen Council.

On the other hand, Australian firm Fortescue Future Industries (FFI) calls the IRA “game-changing for the green hydrogen market globally”.

“Europe, Asia, Australia and the rest of the world might be complaining, but all they need to do is catch up with the US, not whinge about them pushing ahead,” FFI tells Hydrogen Economist.

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Author: Killian Staines