Will Making Hydrogen ‘Green’ Depend on China?

May 07, 2024

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by Christian Robles (E&E News) Machinery that makes hydrogen fuel from water could become another energy technology whose production is centered in Asia.

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China leads the world in producing the essential technology for green hydrogen made from renewables: electrolyzers. The machines use electricity to make hydrogen fuel from water. The Biden administration has prioritized domestic electrolyzer manufacturing as part of its goal of producing 10 million metric tons of “clean” hydrogen annually by 2030.

Industry experts say the administration’s hopes for a domestic supply chain hinge on final regulations for the 2022 Inflation Reduction Act’s hydrogen tax subsidies known as 45V.

“The 45V tax credits will be important in determining the future of electrolyzer manufacturing in the US,” said Payal Kaur, a hydrogen analyst for BloombergNEF, in an email. “If the final guidance is not well received it may impact the pace of growth in the market.”

The Treasury Department proposed initial guidance for 45V in December, which said that green hydrogen producers receiving tax credits must use newly installed clean energy sources.

Companies are divided over whether the tax credits will jump-start U.S. industry and curb China’s influence.

In one view, the proposed 45V rules will cede electrolyzer leadership to China by restricting the development of U.S. green hydrogen projects altogether. In another view, the rules will push hydrogen companies to buy technologically advanced Western electrolyzers better suited for variable renewable energy.

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The Biden administration says its efforts are meant to help ensure electrolyzers will be made in America even as the country faces stiff competition from China.

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In March and April, DOE separately announced Nel Hydrogen, Electric Hydrogen, Topsoe and John Cockerill received millions of dollars from the manufacturing tax credit known as 48C to finance U.S. electrolyzer factories.

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Chinese electrolyzer plants already have a higher production capacity than what the world demands, according to 2024 BloombergNEF data. Analysts found that China is overproducing the device — the same issue Washington lawmakers have said is stifling U.S. solar, EV and lithium-ion battery manufacturing.

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Wilkins (Paul Wilkins, vice president for policy and government engagement for electrolyzer manufacturer Electric Hydrogen) said that Chinese alkaline electrolyzers at a large green hydrogen plant have been unreliable, requiring a higher minimum level of electricity to make fuel than advertised.

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Still, companies like Cummins and Nel Hydrogen argue initial 45V rules will depress U.S. electrolyzer manufacturing and give China more of an upper hand.

“Complex US rules will drive developers to lower-cost equipment to reduce capital expenditures, reducing demand for US equipment,” said Alex Savelli, managing director of electrolyzers for Cummins’ zero-emissions business Accelera, in a statement.

U.S. and European electrolyzers are roughly four times as expensive to install on average compared to Chinese machines today, according to 2024 BloombergNEF data.

Cummins said that turning machines on and off under hourly matching would cause “wear-and-tear on an expensive asset,” which would be factored into warranties and lead to higher prices in its 45V letter.

Savelli (Alex Savelli, managing director of electrolyzers for Cummins’ zero-emissions business Accelera) added that 45V rules need to advance green hydrogen projects in the first place to create demand for U.S. electrolyzers. Cummins itself has said it needs to see green hydrogen producers tap into 45V credits before it expands a PEM electrolyzer facility in Fridley, Minnesota. The plant has enough capacity to make 500 megawatts’ worth of electrolyzers annually but could double to 1 GW, according to the company’s 45V letter.

Nel Hydrogen — an electrolyzer manufacturer with a factory in Connecticut and one planned in Michigan — also argued that 45V needs to unlock green hydrogen projects in their letter.

Production scale “is essential to our ability to provide the market with low-cost, high-reliability electrolyzers that can both compete with emerging international competition and support the requisite production economics of emerging low carbon industries,” the company said.

The company added that the current 45V rules will increase the upfront cost of green hydrogen projects because hydrogen producers must use new clean energy sources to make low-carbon fuel. Hydrogen producers, therefore, could look to cut back on their high costs by buying cheap Chinese electrolyzers. That would depress demand for U.S. electrolyzers.

“This single handedly cedes manufacturing of electrolyzers to other countries who are likely to use less responsible supply chains and foreign labor,” the company warned.

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China has a complete and mature supply chain for alkaline electrolyzers, according to BloombergNEF. The East Asian nation has ready access to the critical minerals it needs for Alkaline machines such as nickel and aluminum.

U.S. manufacturers, on the other hand, are dependent on South Africa for the platinum and iridium minerals PEM machines require. READ MORE

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In the hydrogen battlefield, Europe tries to stay ahead of China (Politico)

Excerpt from Politico: Terrified Beijing may come to dominate yet another clean tech market, the EU aims to impose regulations — and is looking to Japan for help. -- ...

Europe has set a target to achieve net zero emissions by 2050, and by then, both the EU and Japan will be major importers of hydrogen. China and the U.S., on the other hand, are expected to be major exporters. And once bitten twice shy, Europe is now reluctant to rely on China for critical energy supplies.

When European countries had to cut off Russian gas after the country’s invasion of Ukraine, it led to a frenzy in policymaking to secure energy needs. This included encouraging the production of hydrogen gas. But now, the EU is worried that if China were to invade Taiwan, and ties between European capitals and Beijing were to further deteriorate, China could choke critical exports.

Mindful of this, Brussels has been scrambling to build alternative supply chains and sign deals with countries in Africa, the Middle East and the Indo-Pacific. Thus, some see the EU and Japan as natural partners in not just advancing this technology, but also creating demand and building a resilient supply chain protected from Beijing’s political and economic coercion.

A Japanese official who talked to POLITICO on condition of anonymity to speak freely said cooperation was essentially about “de-risking” from China. “We share a common view with EU in this regard,” they said.

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But the real battleground between Europe and China has now shifted to electrolyzers.

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China is currently producing the cheapest electrolyzers, prompting a familiar European dread of being outpriced. Businesses blame the higher cost on the Continent’s stricter standards and fairer pay practices for workers. They also insist European electrolyzers aren’t just more efficient but also safer.

Chatzimarkakis claimed there are security concerns regarding some of the Chinese electrolyzers, “which could lead to negative events and could cast doubt on the overall technology maturity.” He also insisted standards should only be certified by Europe-based accredited organizations.

The Japanese official POLITICO spoke with echoed this concern, stating that in addition to “issues of human rights” to consider, the bigger factor is safety. “The production line should be safer, hydrogen is very explosive,” they explained, also noting that “there’s the problem of cybersecurity” too. “Electrolyzers could technically be operated remotely. They could be hacked into,” they said.

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European activists, meanwhile, have been raising a red flag on hyping hydrogen as the panacea to the climate crisis.

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Davide Sabbadin of the European Environment Bureau said he was critical of the idea of importing large quantities of hydrogen from the other side of the world without first assessing the EU’s real needs and domestic production capacity.

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But if their product is cheaper and more in demand, China could still leave the EU and Japan behind. Indeed, “numbers will have a relevance on the definition of a much-needed global environmental standard for hydrogen,” Davide added. “We think the EU should lead the way together with other important world economies, starting first and foremost from its own production and consumption.”

However, some still think it may be a good idea to collaborate with China instead. For example, Bosch Hydrogen Powertrain Systems in Chongqing, China — which is a joint venture between a German and a Chinese firm — was the first stop on German Chancellor Olaf Scholz’s state visit to the country in April.

Germany, it appears, has learned very different lessons from China’s green tech ascendance. READ MORE