A decade ago, China used low prices to dominate solar cell manufacturing, wiping out Western competitors just as global demand for panels began to surge. The US and Europe are determined to prevent the same from happening with hydrogen.
As the world strives to decarbonise, the next competition revolves around devices called electrolysers. Connecting these to clean power, such as solar power, makes it possible to extract hydrogen from water without generating any global warming emissions. This is an important step in creating green fuels that can decarbonize industries such as steel, cement and shipping.
Companies around the world are already ramping up electrolyser production, green hydrogen plants are under construction, and the industry is finally making the leap from pilot projects to industrial scale. His BloombergNEF in the Clean Energy Research Group estimates that global electrolyser production will need to increase 91-fold by 2030 to meet demand. But many Western cleantech veterans are eyeing new competition with a nauseating sense of déjà vu. According to BNEF, more than 40% of all electrolysers manufactured today are made in China.
Chinese electrolysers are not as efficient as those made in the US or Europe, but they are much cheaper, about a quarter of the price charged by Western companies. Chinese electrolyser manufacturers still primarily serve the domestic market, but they are starting to expand their sales abroad.
BNEF hydrogen analyst Xiaoting Wang said, “I hear too many government officials saying the solar power experience cannot be repeated again.
President Joe Biden served as Vice President at a critical time when China took the lead in solar manufacturing. Now he sees China as a competitor rather than a supplier, and has made clean his technology manufacturing back in the US a pillar of his climate policy. The US is determined not to let China dominate this new energy boom, and Biden’s Inflation Reduction Act is funding domestic hydrogen production.
“The reality is that the United States is trying to offer very generous subsidies to ensure that local suppliers survive.
Europe has its own reasons for wanting a part of this nascent industry.
Russia’s invasion of Ukraine reaffirmed the value of European-produced fuels and heightened the continent’s ambitions for hydrogen. Still, some hydrogen advocates say the European Union has not done so, putting both the US and China at a disadvantage. The union has set a target of 10 million tonnes of green hydrogen production annually by 2030, but has yet to decide which methods will be considered ‘green’. This makes it difficult for companies to undertake large-scale hydrogen production projects that drive orders for electrolysers.
Djorgo Chatsimarkakis, CEO of Hydrogen Europe, a Brussels-based lobby group, said: “I don’t think the market share of the electrolyser business will be taken away from Europe and shipped to other regions. I’m worried about it,” he said. “The EU is shooting themselves in the head. They are shooting in the head, not in the leg.”
Meanwhile, many analysts expect China’s electrolyzers to become more efficient, wiping out the technological superiority currently held by US and European companies. “China is definitely working on developing better electrolysers,” said Brigitte Van Dorsten, senior hydrogen analyst at research consultancy Wood Mackenzie. “The day China decides to no longer lag is the day they no longer lag.”
And some Chinese companies are off to a head start. Chemical equipment manufacturers have been manufacturing electrolysers for many years and have installed large-scale water electrolysis systems for a variety of manufacturing industries, including polysilicon manufacturing for solar cells.
Electrolyzers use electricity to split water into hydrogen and oxygen. Electrolyser versions have been on the market since the 1920s. Many countries now see hydrogen as the best way to decarbonise industries that cannot easily run on electricity. If the electrolyser is powered by a solar power plant, a wind farm or a nuclear reactor, the process of producing hydrogen is also carbon-free.
There are several types of devices, each with advantages and disadvantages. Chinese companies mostly make “alkaline” electrolysers, which have low initial costs but require more electricity to produce one kilogram of hydrogen than competing technologies. Companies in the US and Europe are turning to ‘solid oxide’ and ‘proton exchange membrane’ (PEM) electrolysers with high initial costs and low power requirements. This is a big selling point where electricity is expensive.
However, Chinese manufacturers have developed PEM electrolysers to purify alkaline products. And they are eyeing the growth of overseas markets.
Xi’an-based Longi Green Energy Technology Co., the world’s largest solar equipment manufacturer, will install a hydrogen unit in March 2021 and has already built 1.5 gigawatts of electrolyser manufacturing capacity in China. Wang Yingge, vice president of Longi Hydrogen, which develops PEMs, predicts alkaline electrolyzers will dominate the industry in the next five years. The company expects overseas markets to account for more than half of its sales within three years, he said.
“Europe and the US have the most aggressive incentive policies for the hydrogen industry, while the Middle East and Africa have the largest and most economical renewable energy,” Wang said. “Green hydrogen projects in these regions are highly profitable.”
Meanwhile, state-owned PERIC received orders from seven foreign countries in 2022, including Australia, the United States and South Korea, according to BNEF. Shandong Sikesaisi His Hydrogen Energy, one of the few Chinese manufacturers specializing in PEMs, currently earns about 15% of its sales from overseas, he said. Project his director Huang Fang said. Huang said it aims to improve its share of demand from Europe and Australia.
Electrolysers are essential for green hydrogen in the same way that solar cells are essential for photovoltaics, but with an important difference.
Solar panels are basically off-the-shelf technology. Whether installed on rooftops or assembled into giant desert arrays, the panels and the systems connected to them are not all that different. The electrolyser is just one part of the hydrogen production plant, and its size and design are determined by the energy source and customer needs. Plug Power Inc. is building a series of green hydrogen production plants in the United States, each one unique, said his chief executive, Andy Marsh.
“The Texas factory is different than the New York factory, and it’s different than the Georgia factory,” he said. “It’s all very local.” Based in Latham, New York, Plug also manufactures and sells PEM electrolysers.
There are advantages to manufacturing electrolysers in the markets they serve. The Belgian John Cockerill Group has set up a joint venture in China, Cockerill Jinli Hydrogen, to manufacture electrolysers for China but not for other countries. The company has also invested in his two factories in Europe and may also have investments in the United States and India.
The equipment is complex, heavy and requires extensive on-site customization for each customer, says Raphaël Tilot, Head of Hydrogen at Cockerill. “It’s not so easy to transport this from China to other parts of the world,” he said. “The level of on-site work to fit the client’s project is very important.”
China’s solar industry has enjoyed generous subsidies from the central government for many years, helping equipment makers control the global supply chain, but hydrogen still receives the same level of policy support. Absent. The country introduced its first state-level plans for hydrogen development early last year, but refrained from enacting financial support policies such as subsidies, dashing hopes from equipment makers.
Meanwhile, Roeland Baan, chief executive of Denmark’s Topsoe A/S, says the US incentive system has become easier to operate than the EU. His company has developed a 500-megawatt plant to manufacture solid oxide electrolysers that operate at higher temperatures and are more efficient than alkalines and his PEMs. “We decided to have our factory in Denmark,” Byrne said. “As for the second plant, we’ll have to check. It could definitely be in the US.”
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