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

Anchal Vohra is a Brussels-based international affairs commentator.

While it was Germany that led the way on solar energy, it was China that stole the market right from under Berlin’s nose to become the biggest player. Currently, nearly 97 percent of the solar panels glistening on roofs and fields across the EU are imported — and most were made in China’s factories.

It was both Beijing’s economies of scale, which drove down the cost of solar panels, and the Chinese government’s subsidies that played an undoubted role in making European manufacturers uncompetitive.

And now, European businesses are terrified that China may apply the same principle and practices to green hydrogen, eventually coming to dominate yet another clean tech market. So, this time, they’re calling on Brussels to impose “Made in Europe” requirements to block Beijing — and they’re looking to Japan for help.

Green hydrogen is made by splitting hydrogen atoms from oxygen in water and, crucially, it doesn’t emit carbon dioxide. It’s been hailed as the future of clean energy and could potentially transform heavy polluting industries, such as steelmaking and aviation. And as the first country to unveil a national hydrogen gas strategy back in 2017, who better to bank on to help build this yet nascent industry than tech giant and strategic partner Japan?

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.

And in a clear dig at China, the joint statement made by European Energy Commissioner Kadri Simson and Japan’s Minister of Economy, Trade and Industry Ken Saito in early June blamed the “weaponisation” of a “wide range of non-market policies and practices, such as market-distorting industrial subsidies.”

Along these lines, when Simson visited Tokyo with a delegation of European business leaders, she inked several agreements to share know-how and set joint standards on safety and pricing for the global hydrogen market. “We want to cooperate with Japan to develop high-standards regulations and ensure a level playing field,” Simson said.

Similarly, according to written correspondence with Hydrogen Europe CEO Jorgo Chatzimarkakis, “Japan’s advanced technology and innovation make it a crucial partner in establishing globally recognized standards.” He also added that such collaboration “amplifies both countries’ influence in international standard-setting bodies.”

The EU and Japan will also share data on electrolyzers — the machine that splits hydrogen and oxygen from water — as well as on safe and large-scale liquefied hydrogen tanks to transport the highly flammable gas across continents. 

While it was Germany that led the way on solar energy, it was China that stole the market right from under Berlin’s nose to become the biggest player. | Ina Fassbender/AFP via Getty Images

For example, in a key development, Kawasaki Heavy Industries has built the world’s first liquid hydrogen carrier and succeeded in transporting liquid hydrogen from Australia all the way to Japan. And Kawasaki and the EU’s Daimler Trucks are now collaborating on the establishment of a “liquid hydrogen supply chain.”

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

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.

An industry insider working in collaboration with both Chinese and European manufacturers agreed with the overall sentiment that European electrolyzers are better for the European market as well, as they “consume less electricity for the process of electrolysis.” However, they remarked that “as demand grows, [the] Chinese will compete with us in quality too. They know how to do it.”

European activists, meanwhile, have been raising a red flag on hyping hydrogen as the panacea to the climate crisis. They say even green hydrogen should only be used in certain sectors where direct electrification through renewable means isn’t effective, and they warn against greenwashing — particularly since nearly all the hydrogen currently in consumption is extracted from natural gas. They also suspect EU subsidies could potentially be spent on infrastructure that may be exploited by fossil fuel companies. 

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. “If China exports legitimate green hydrogen, we don’t see a problem from a climate perspective, but transportation will remain a huge economic and technical challenge,” he said.

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.