EU's New Hydrogen Auction Rules: A Strategic Shift to Limit China Dependence

The European Union announced revisions to its hydrogen grants auction rules to reduce reliance on Chinese supply chains. The updated terms, revealed on Friday, aim to curtail EU's systemic dependence on Beijing. A significant provision restricts Chinese parts to no more than 25% in EU hydrogen projects, safeguarding energy security.

The European Union has unveiled changes to its rules governing auctions for hydrogen grants, aiming to curb EU's reliance on China's renewable energy supply chain, according to terms published on Friday.

China's dominance in solar, electric vehicles, and increasingly wind power has prompted the European Commission to introduce new rules, conduct investigations, and consider tariffs on Chinese EVs to limit systemic reliance on Beijing. The EU's Hydrogen Bank will conduct its second renewable hydrogen auction on Dec. 3, offering up to 1.2 billion euros ($1.34 billion) in grants to new projects.

Previously, the bank allocated nearly 720 million euros to seven renewable hydrogen projects, raising concerns about reliance on Chinese-made parts. The EU's climate chief announced amendments to the auction rules to favor local companies. Under the new terms, projects cannot include Chinese parts exceeding 25% of production capacity, addressing the risk of increased dependency on Chinese electrolysers, threatening the EU’s supply security.