EU limits Chinese participation in hydrogen auctions by changing the rules

In a bid to reduce the EU's dependence on China for its renewable energy supply, new terms published by the European Union on Friday revealed that it had made changes to its rules regarding auctions of hydrogen grants.

China is a major player in the solar and electric vehicle industries, and it has also become more competitive with European wind energy producers. The European Commission has taken steps to prevent a systemic dependence on Beijing through new rules, investigations, and possible tariffs for Chinese EVs.

The EU's Hydrogen bank will hold its second renewable hydrogen bid on December 3 in order to award grants of up to 1.2 billion euro ($1.34 billion).

The bank had allocated nearly 720 millions euros in the first half of this year to seven projects that use renewable hydrogen. However, Europe's industrial sector was concerned about the fact that the winning projects were using cheaper Chinese parts.

The EU climate chief announced earlier this month that the rules of auctions would be modified to favor local companies.

The upcoming round will not allow projects to exceed 25% of their production capacity with parts from China.

The term sheet stated that "Chinese production is already over 50% of global production... It is estimated that there is an increased and irreversible dependence of the EU on imported electrolysers from China, which could threaten the EU’s security of supply."

The former European Central Bank head Mario Draghi's much-anticipated study warned that Europe would face economic decline if it didn't create a better coordinated industrial policy and increase investment in order to compete with the United States and China.

On the energy front, Draghi advocated a nuanced approach towards China and other competitors who offer cheaper products. He said it was not worth competing with foreigners in industries such as solar panel manufacturing, but instead to nurture newer ones, where the EU has a competitive advantage.

"The introduction resilience criteria marks an important moment. This bold move, in line with the Net-Zero Industry Act, and the recommendations from the Draghi Report, highlights the importance of building up a robust European Supply Chain," said Hydrogen Europe CEO Jorgo Chazimarkakis in a press release.

The need to reduce red tape is also important. "The new mandate must be implemented with simplicity."

The European industry has been complaining for years about bureaucratic obstacles that hinder expansion. This is especially true with the European Green Deal, which introduced a number of new, complex laws. Ursula von der Leyen, the European Commission president, has stated that reducing red tape is one of her main goals for this term. Reporting by Julia Payne, editing by Jonathan Oatis.

(source: Reuters)