The Future Is Now – China, US, and Europe Invest in Green Hydrogen

China: As the world moves closer towards a decarbonized future, the next challenge is set to center around the potential of Hydrogen. More and more companies are ramping up electrolyzer production, green Hydrogen plants are now under construction, and industry is taking meaningful strides towards industrial-scale deployment.

However, the threat posed by Chinese low-priced manufacturing still looms; with over 40% of all electrolyzers made today coming from China according to BloombergNEF, Western clean tech veterans are leery of repeating the mistakes of the past. Thankfully, advances in solar power and other clean technologies can now allow for extraction of carbon-free Hydrogen from water - transforming key industries such as steel, cement, and shipping in an environmentally friendly way. For demand to be met come 2030 however, worldwide electrolyzer production will need to grow 91 times its current size.

The solar market of a decade ago still looms large in the collective memory of many, with China's low prices dominating and wiping out Western competitors just as worldwide demand for panels began to soar. With the world continuing to move swiftly towards decarbonization, this same fear has returned - this time centered around electrolyzers and green Hydrogen production. While Chinese electrolyzers are less efficient than those made in the US and Europe, their lower cost brings them competitive advantage in the market- making it imperative that both the US and Europe take measures to protect their renewable technology industries from a similar fate.

Fortunately, President Joe Biden has taken note of these potential hazards and is determined not to let China control this new energy boom; his Inflation Reduction Act showers money on domestic Hydrogen production, while geared-up subsidies will help ensure local suppliers remain afloat. Both sides have an interest at stake here as Europe too seeks a foothold in this burgeoning industry.

With the Russian invasion of Ukraine, it has become glaringly obvious that Europe needs to be able to produce its own fuel sources. Hydrogen has been put at the forefront of Europe's ambitions for self-sustainability and yet, some within the European Union are concerned that it hasn't done enough to solidify its plans. The EU has proposed a goal to create 10 million tons of green Hydrogen production by 2030 but has not yet established what practices deemed "green." As a result, corporate investment in Hydrogen production is lagging, making it difficult for companies to commit. Jorgo Chatzimarkakis, CEO of the Brussels-based Hydrogen Europe group, expressed his fear that the electrolyzer business sector will be lost to countries outside of Europe if an effective plan isn't implemented soon. Analysts anticipate China will soon catch up with US and European technology as they have already begun producing electrolyzers for various industries such as polysilicon production for solar cells on a monumental scale. It remains a race against time for Europe to establish their green Hydrogen productions before companies move away from their market share.

Electrolyzers have been used to split water into Hydrogen and oxygen since the 1920s, and now many countries consider Hydrogen to be a vital resource for decarbonizing industries that don't rely on electricity. By powering electrolyzers with solar or wind facilities, or nuclear reactors, the process of producing Hydrogen can be carbon-free. These devices come in various forms, each with its own advantages and drawbacks. Chinese companies usually produce "alkaline" electrolyzers at low costs, but they require more electricity per kilogram of Hydrogen compared to other technologies.

On the other hand, U.S. and European firms tend to focus on "solid oxide" and "proton-exchange membrane" (PEM) electrolyzers that cost more initially but use less energy - a major incentive for areas where electricity is expensive. Chinese manufacturers are embracing PEM electrolyzers as well as perfecting their alkaline products in preparation to penetrate foreign markets. Xi'an-based Longi Green Energy Technology Co., the world's biggest solar equipment maker, built 1.5 gigawatts of electrolyzer manufacturing capacity within China and is aiming for foreign sales to exceed half of their total within three years according to Vice President Wang Yingge of Longi Hydrogen.

Meanwhile, state-owned PERIC received orders from seven different countries in 2022, including Australia, the US and Korea (according to BNEF). Shandong Saikesaisi Hydrogen Energy - one of few Chinese firms specializing in PEM - currently receives 10-15% sales from overseas but hopes to increase this amount due to growing demand from Europe and Australia says project director Huang Fang. The electrolyzer is just as essential for green Hydrogen production as a solar cell is for solar power; however, there are some key differences between them worth noting.

Compared to the convenience of solar power, which is essentially a ready-made technology, Hydrogen production requires more intricate and specific equipment. Plug Power Inc. is developing unique green Hydrogen production plants across the US and localizing their design. With the help of Belgium’s John Cockerill Group, electrolyzers are being produced in Asia for use in nearby markets - a process that calls for site customization and heavy machinery.

Unfortunately, government subsidies that have fostered growth in China's solar industry have not been allocated to the up-and-coming Hydrogen sector. Despite these obstacles, Hydrogen producers remain optimistic with their new state plan in place they may soon get the economic backing they need.

Roeland Baan, CEO of Topsoe A/S in Denmark, noted that the US incentive system is more convenient than the EU’s, spurring his company to invest in a 500-megawatt factory for producing solid-oxide electrolyzers. These advanced machines work at higher temperatures and provide greater efficiency than other types of electrolyzers. The first plant has been established in Denmark while the second may very well be located in the US.