Europe should work with China and capitalise on its leadership in low-carbon hydrogen because it will likely miss its own targets amid ever-changing rules and regulations, according to speakers at the World Hydrogen Summit in Rotterdam.

With the US administration of Donald Trump looking set to repeal tax credits from the Inflation Reduction Act and other programmes supporting low-carbon hydrogen projects, China is likely to emerge as the world leader because Europe is getting lost in its own labyrinthine regulations.

“The Chinese are going faster, and they have cheaper energy available,” said Pierre-Etienne Franc, CEO of Hy24, a hydrogen private equity asset manager. “They are basically leading the race. The others follow. They seem… on all fronts fully unstoppable.”

“There is a path to develop partnerships with Chinese players in a win-win situation” Franc, Hy24

In 2023, nearly three-quarters of the new additions in global manufacturing capacity for assembling electrolyser systems were in China, which accounted for 60% of total capacity that year and is forecast to maintain this share in the short term, according to the IEA’s Global Hydrogen Review, published in October.

While the US appears to have dropped out of the low-carbon hydrogen race, Europe has started, but “has put forward the rules and it is a little bit lost in translation because the transposition of the regulation is difficult”, said Franc.

Credit and subsidy schemes in China are among "the most comprehensive”, which is “good for China, but I am not sure it is good for us”, he added.

Half of the global spend on electrolysis projects was in China in 2023 and one-third in Europe, the IEA said in the hydrogen report.

China’s only weakness is the risk of “swallowing its customer market”, but it can avoid this hurdle by finding a way “to restore fair value sharing partnerships with key geographies”, said Franc.

China and Europe are similar in their pursuit of relying less on energy imports on the road to self-sufficiency and angling for leadership in the energy transition space.

“They [the Chinese] want to show that they lead the world in the right direction in terms of energy and climate change and to appear as the leaders of the progressive world,” said Franc. “With so much automation and so much productive tools, it is very easy for China to relocalise some of these tools and factories in other countries like Europe to develop another base. There is a path probably to develop partnerships with Chinese players in a win-win situation.”

In 2024, China once again saw record expansion in renewables capacity, accounting for almost two-thirds of the total global supply connected to the grid that year, according to the IEA.

China is forecast to lead clean energy investment in 2025, at $630b, while all advanced economies together are set to invest $1t, the IEA said in its World Energy Investment report, published in June. China’s clean energy investment has doubled since 2015, compared with an 85% increase in advanced economies.

“It is really important as an initial player we keep a foot in Europe, but also outside,” said Damien Eyries, CEO of Rely, a joint venture (JV) between Belgium’s electrolyser maker John Cockerill and France’s EPC company Technip Energies.

“We are bidding outside Europe because a lot of things are happening outside Europe, in China for sure. This is where the largest initial plant operations are.”

China is likely to continue to account for the largest share of 30% for global electrolyser manufacturing capacity in 2030, followed by Europe with 20%, as it continues to build larger projects than any other country, according to the IEA.

India in contention

India is catching up to China and becoming a contender in the green hydrogen race.

“India is showing [itself] to be as cheap or even cheaper [than China] in a couple of industries, especially ammonia, which is also a sign that the dynamic we have on hydrogen development is not going to slow down because these two major continents are moving a lot,” said Franc.

The levelised cost of green hydrogen in India was $3.2/kg in 2023, lower than the $3.4/kg seen in China, and is set to decline further, to $1.8/kg by 2030 compared with $2.8/kg in China, according to a 2024 report by consulting firm Alvarez and Marsal. For green ammonia, costs in India are forecast to fall to $467/t in 2030 from $727/t in 2023, whereas costs in China will drop to $682/t from $772/t, the report added.

China and India are moving ahead at a time when the US is forfeiting its role in the low-carbon hydrogen industry under Trump.

“There was an expectation with these tax credits under the IRA and other funding from the US government that there was going to be a huge wave of investments into the US,” said Henry Rushton, director of hydrogen EMEA lead at ING Bank. “Actually, we did not see that acceleration in the US compared to other parts of the globe.”

Even under former President Joe Biden, the IRA did not deliver many benefits amid long-winded discussions for implementation and methodologies.

“The US is more about production than export, I think, to a large scale,” said David Burns, vice-president clean energy at German chemical company Linde. “It has not really changed direction. It was never really going in that direction.”

In the US, the cost of ammonia is still “significantly high” even with the incentives that were provided, according to Nikunj Panchal, global vice-president of energy, infrastructure transition, at British engineering consultancy Ricardo.

“A lot of stuff needs to happen in America. That means the cost of labour and the cost of supply chain will all add up,” said Panchal.

“We are bidding outside Europe because a lot of things are happening outside Europe, in China for sure” Eyries, Rely

That is why Europe should look for partnerships to cater to its low-carbon hydrogen needs, especially in nearby countries that are moving ahead with developments, including North Africa. Looking outside Europe will also help develop winning technologies for low-carbon hydrogen.

“At the end, we need to create a reference, we need to get plants in operation, and on this basis, we need also to look at what is happening outside Europe,” said Eyries. “We need also to build up the industry outside Europe, to import this knowledge into Europe to be able to reduce the cost in the long run.”

Power2X, a Dutch clean energy developer, is looking at projects in Saudi Arabia and Brazil due to the attractive costs of producing low-carbon hydrogen.

“It is the cost leadership we need to help close that gap and then we can ask for subsidies,” said CEO Occo Roelofsen.

For Saudi Arabia, the focus for developing green hydrogen projects is not financial incentives as much as having speed and clarity when it comes to rules compared to other countries, said Zeid al-Ghareeb, deputy minister of localisation at Saudi Arabia’s ministry of energy.

“Every year, the polices are changing, and the regulations are being developed,” said Ghareeb. “We see that vicious cycle.”

“We believe clarity is very important and it is very important and wise that we stop putting new policies and regulations, so that the private sector can focus on deciding on the investments.”

Swiss Army Knife

Europe should focus on allowing the private sector to develop green hydrogen projects before implementing strict mandates and regulations that dissuade developers from taking investment decisions.

“Years ago, everyone thought hydrogen was the Swiss Army Knife to sort everything,” said Roelofsen. “And now we are in this phase where it is slower and slower.”

Regulations need to come after the hurdles are identified to define the rules, he added. “It is not manageable for investors to decipher the new tricks of every rule, every six months,” said Franc. “It is a disaster for the industry.”

Hydrogen companies are also awaiting the development of an infrastructure backbone before taking investment decisions because transporting molecules requires pipelines and other facilities to connect buyers and customers.

“All that we are missing right now to cross the famous FID hurdle is the connection to the grid,” said Carlos Barrasa, EVP commercial & clean energies at Spain’s Moeve, formerly CEPSA. “We need to confirm we have enough grid capacity to connect 400MW, which is going to be the first tranche of our green Andalusian project.”

Moeve is relying on a mix of electrolysis and steam reformers as backup, and a necessary element to achieve balance in power supply in a country that suffered a major blackout recently, said Barrasa.

“I really hope we keep accelerating the development of renewables,” said Marcel Galjee, chief strategy officer at HyCC, a green hydrogen JV between Dutch chemical company Nobian and Macquarie's Green Investment Group. “You do see some countries actually taking a step back. Keep mandates up because that is the best guarantee to get the power into the market, but also get competitive  power.”

Europe also needs to revise its subsidy strategy, which is providing financial support to speculative projects that do not necessarily have the right components for green hydrogen and renewables production.

“Subsidies need to be well allocated,” said Jorge Palomar Herrero, global hydrogen development director at Spanish utility Iberdrola. “There are a lot of, let us call [them] speculative, projects, where there is not real demand, where there is not a real renewable supply which fits hydrogen.”

Companies also cannot rely completely on renewable power due to its intermittency, which can jeopardise the continuous delivery of hydrogen to downstream industries.

“It is only natural after this inflated peak of expectation [that] you come to this trough of disillusionment,” said Jan Taschenberger, COO of New Green Power & Gas at Germany’s Uniper.

“There is risk that the trough of disillusionment could also become the valley of death.”

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Author: Dania Saadi