'European electrolyser sector could collapse if EU green hydrogen auction subsidies go to Chinese equipment': CEO

Calls are growing for EU green hydrogen subsidies to go to European electrolyser makers rather than their Chinese rivals, amid fears that EU taxpayers might inadvertently fund the collapse of another European manufacturing sector.

A major problem for Western manufacturers is that Chinese competitors can undercut them in price, due to advantages such as lower wages and state funding. And with the EU green hydrogen auctions — the first of which will open tomorrow — being decided on price alone, this could be disastrous for European electrolyser makers.

The same problem was seen in the 2010s when European subsidies for solar power inadvertently helped to fund a boom in Chinese solar manufacturing, leading to the eventual collapse of the once-leading European PV industry.

Raphael Tilot — CEO of Belgian electrolyser maker John Cockerill Hydrogen — knows more than most about the threat from Chinese industry as his company actually builds machines in China, as well as Europe. And yet even he fears that the industry will tilt in China’s favour over the next one or two years unless the EU acts to protect its homegrown electrolyser makers.

“Investments in China are massive, [and] are happening today at a great pace,” he told European Hydrogen Week in Brussels yesterday. “And once they reach a scale that will be materially higher than what we see in Europe, we will see what we have seen in the PV industry [in the 2010s].”

He added: “Three years ago, we had two competitors in China. Today, we have 100 competitors in China. And about 20 of them are very large companies — and they are all coming to Europe.”

Håkon Volldal, CEO of Norwegian electrolyser maker Nel, told the same panel, entitled “Scaling up electrolyser manufacturing”, that he was “brought up to root for free competition, and I know Europe wants to be the champion of global trade”.

But he said that China was not playing fair.

“We [in Europe] could make a lot cheaper electrolysers if we used child labour, if we didn’t have pension plans, if we had horrible working conditions,” Volldal explained.

“I’m not saying that’s the case all over China, but there’s a reason why costs are lower [there].

“And that’s not the labour part of putting together the electrolyser. But it’s the labour component throughout the value chain — from when you buy the raw materials until you make modules and parts and components [that are] going into the electrolyser.

“It’s the accumulated effect of that. It’s the accumulated effect of not having any reporting obligations; cheap state financing. You can go on and on and on. It’s not fair. And to open up the European market to these companies when there’s no access for European companies in China, I think that’s unfair.”

He continued: “And that's why I, even though from a fundamental perspective I'm against trade barriers, I agree… that I think we need to have some protection.”

Volldal then called for the forthcoming EU green hydrogen auctions to not be 100% based on price.

“If we want European companies to treat workers or employees in a good way, then we cannot at the same time say that if it costs more, then we [ie, developers receiving EU subsidies at auction] won’t buy your products.”

Enthuasistic applause followed from the hundreds in the audience.

Tilot agreed that European subsidies should not go to Chinese manufacturers.

“In Europe, we don’t want to rely on a long-term basis on such critical equipment on ‘the far-away world’. We don’t want to have a sector that is heavily subsidised with so many jobs created not here, but far away.

“And it’s urgent that, indeed, we take actions.”

Are Chinese electrolysers really that much cheaper than those made in Europe?

Kerstin Jorna, director-general for the European Commission’s Internal Market, Industry, Entrepreneurship and SMEs department (DG-Grow), stated at the start of the session that Chinese electrolysers were half the price of those made in Europe.

But panellists argued that was not right.

“I don’t buy the idea that the Chinese electrolyser is half the price,” said Volldal. “Because it’s apple versus orange.

“If you take that Chinese product and you adapt it to codes and standards in Europe or Australia or the US, it will be much more expensive. And it won’t be as efficient.

“Is it cheaper still? Probably, but not by as much as that [ie, half].”

Werner Ponikwar, CEO of German electrolyser maker Thyssenkrupp Nucera, added that even though Chinese equipment may be cheaper to buy, they are less efficient, leading to higher costs over the lifetime of a project.

“Smart companies look at TCO — total cost of ownership — rather than just cheap at the beginning and then having to invest a lot of money in the operation [ie, operational expenditure],” he told the session.

“So I shouldn’t be too afraid of Chinese competition, as such. Let’s look at the total cost of ownership, and this is a completely different picture.”

Indeed, Tilot, pointed out that the electrolysers John Cockerill Hydrogen makes in China are different to those it manufactures in Europe.

“The market is very different over there. It’s a capex-driven market. Clients in China are looking for cheap solutions, which is driving technology choices that are different to what we sell to the market in Europe.

“The clients are looking for cheaper products, less energy efficient, which is leading to different electrodes and so on… Norms and standards are different.

“So I agree, we are, to a large extent, not comparing similar products when we look at China.”

However, Volldal pointed out: “We know that the Chinese learn fast — and they will rival us.”