The EU is changing auction rules for hydrogen projects to limit China’s presence

BRUSSELS, Sept 27 (Reuters) – The European Union has announced changes to its auction rules for hydrogen subsidies in an attempt to reduce the bloc’s dependence on China in its renewable energy supply chain, according to new terms published on Friday.

China has become a dominant force in solar and electric vehicles and is becoming increasingly competitive with European wind power producers. The European Commission is taking steps to reduce the build-up of systemic dependence on Beijing through new rules, investigations and possible tariffs on Chinese electric vehicles.

On December 3, the EU’s Hydrogen Bank will hold its second renewable hydrogen auction to provide subsidies for new projects worth up to €1.2 billion ($1.34 billion).

Earlier this year, the bank committed almost €720 million to seven renewable hydrogen projects, but European industry raised concerns that the winners were relying on cheaper parts made in China.

The EU’s climate chief said earlier this month that auction rules would be changed to favor local companies.

In the upcoming round, projects cannot include parts from China that exceed 25% of the plant’s production capacity.

“Chinese production capacity already accounts for over 50% of global production… it is assessed that there is a significant risk of increased and irreversible dependence of the EU on imports of electrolysers from China, which could threaten the EU’s security of supply,” the term sheet says.

A long-awaited report by former European Central Bank chief Mario Draghi warned of economic collapse in Europe unless it creates more coordinated industrial policy, speeds up decision-making and increases investment to keep pace with rivals the United States and China.

On energy, Draghi has pushed for a more differentiated approach to China and other cheaper competitors. He suggested that it is not worth competing in industries such as solar panels, which are already largely dominated by foreigners, and instead develop newer ones where the EU still has a competitive advantage.

“The introduction of resilience criteria is a key moment… This bold step, in line with the Net Neutral Industry Act and the recommendations of the Draghi report, underlines the importance of building a robust European supply chain,” Jorgo Chatzimarkakis, CEO of Hydrogen Europe, said in a statement.

“Equally important is the need to reduce bureaucracy. Simplicity of implementation is an absolute must for the new term.”

European industries have complained for years that bureaucratic hurdles are hurting expansion, particularly in the wake of the European Green Deal, which introduced a series of complex new regulations. European Commission President Ursula von der Leyen said cutting red tape would be one of her goals this term.

($1 = 0.8940 euros)

Reporting by Julia Payne; editing: Jonathan Oatis

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