Hydrogen strategies: This is how the nations want to secure their position on the world market

China: Reducing dependence on raw materials imports

Already today, China dominates the hydrogen market. As the largest producer worldwide the country generates 33 million tonnes of this gas per year. However, only 0.1 percent of this quantity is "green" hydrogen, produced by electrolysis of water using power from renewable sources. The country also leads the production of electrolysers: About 40 percent of these devices for green hydrogen synthesis manufactured worldwide are made in China. Due to massive government subsidies they are 72 percent cheaper on average than Western competitor products. 

With its national hydrogen strategy, China is aiming to maintain and expand its market position. The plan is to increase the electrolyser capacity to 80 gigawatts and produce 100,000 to 200,000 tonnes of green hydrogen by 2025. Given the size of the country's economy, this is a moderate target. It has to be mentioned, however, that China has also got numerous hydrogen plans for individual regions, whose targets go far beyond the national strategy. The target for Inner Mongolia, for example, is to produce more than twice the hydrogen specified in the national strategy. This seems an achievable target considering the projects that are already being built. The region aims to produce 480,000 tonnes of renewable hydrogen by 2025.

Regarding the use of green hydrogen generated, China focusses on road vehicles. The country would like to transfer its global success with electric cars to buses and trucks. As these vehicles travel very long distances, it is hard to power them electrically – fuel cells are better suited for this purpose.

The Chinese hydrogen strategy pledges to have 50,000 hydrogen-powered vehicles on the road by 2025 with the corresponding network of hydrogen charging stations. For China, hydrogen mobility is not only an important lever for lowering CO₂ emissions; seeing that its economy depends strongly on the import of fossil fuels by sea, it is also of strategic and geopolitical significance.

USA: Creating jobs

In the USA, the Biden administration has been progressing the transformation of the energy economy with the Inflation Reduction Act (IRA) that entered into force in August 2022. A total of US$ 396 billion are going to be invested into climate protection measures. Protecting the climate and creating jobs are not the only objectives of the IRA; another aspect is to prevent depending on China for hydrogen technology as it is already the case with solar cells and lithium-ion batteries for electric vehicles. Industry observers consider the IRA to be the start of an international "arms race" for funding green technologies.

Attention was caused by a generous tax credit suggested in a draft that would give companies up to three US dollars per kilogramme of hydrogen produced. This would practically immediately make green hydrogen competitive with grey hydrogen in some applications, such as in refineries and the ammonia industries. The objectives of the U.S. National Clean Hydrogen Strategy and Roadmap comprise a target price of one US dollar per kilogramme of hydrogen within ten years and the production of 50 million tonnes of green hydrogen per year until 2050. This quantity was said by David Turk, Deputy Secretary of the U.S. Department of Energy to be "equivalent not only to every bus and train but every plane and every ship in the US combined".

The IRA does not link subsidies for producing green hydrogen with measures to boost demand, such as emission trading or environmental regulations for companies. Industry observers see this as a hint that the USA is planning to mainly export the gas to Europe. The US government is combining climate protection targets with measures to protect their national economy. Solar power, wind power, inverter and battery components have to contain a minimum share of US-made products to qualify for tax benefits. This measure has been heavily criticised by trade partners, such as the EU.

EU: Importing from partner countries

The European Union is one of the largest energy importers. This situation is not going to change in a decarbonised global economy either. The EU’s hydrogen strategy aims to increase the production of hydrogen in Europe as well as to establish partnerships for the production and import from surrounding countries.

The targets of the original hydrogen strategy of 2020 have been increased following Russia’s attack on Ukraine and are specified in the REPowerEU Plan 2022. The EU would have to install electrolysers with a capacity of 40 gigawatts (GW) and support the production of the same quantity again in neighbouring countries such as Morocco, or in the United Arab Emirates. Europe would have to double its power generation from renewable energies from 1000 terawatt hours (TWh) per year to approximately 2000 TWh per year. According to these plans, the EU is to generate 10 million tonnes of hydrogen from renewable energies by 2030 and import the same quantity again from partner countries.

To be able to reach these objectives, the EU has opted for a package of measures that is to increase both production and demand for hydrogen: Emissions trading is to incrementally raise the price of grey hydrogen produced from natural gas, which will make the price of green hydrogen more attractive. The EU is planning to use any income from these measures to subsidise hydrogen projects. For funding, companies can take part in an auction by the European Hydrogen Bank. The bid goes to the suppliers who can produce hydrogen at the lowest subsidy per kilogramme. In its first auction worth € 720 million of funding, the hydrogen bank had signalled it would pay up to 4.5 euros per kilogramme of hydrogen produced – obviously an attempt to exceed the US government's offer of three US dollars. The outcome of this auction gives a glimpse of the future geography of hydrogen production in Europe: The seven winning projects were all from Scandinavia and the Iberian Peninsula. The reason is that both these regions can offer green power from green sources at a very low price. Spain and Portugal generate cost-efficient solar and wind power; in Scandinavia, Norwegian hydropower stations push power prices down.

In addition to the EU hydrogen strategy, the European countries have got their own plans that differ considerably in parts. For installing electrolysers, Germany’s target of 10 gigawatts by 2040 is the most ambitious. In reality, however, the country is lagging behind Spain. Here, on the Iberian Peninsula, companies are already in the concrete planning stage for 14 gigawatts.

Russia: Maintaining its position on the energy market

Russia’s economy is largely based on exporting fossil fuels. However, European plans threaten Russia’s position as a significant exporter of natural gas. In June 2020, the Russian Federation published its energy strategy until 2035. Its objective is for the country to become one of the main players on the global hydrogen market.

Priority for Russia is to become a globally leading producer and exporter of hydrogen energy. Official targets are an export to the world market of 0.2 million tonnes by 2024, 2 million tonnes by 2035, and 15 to 50 million tonnes by 2050. This includes the export of grey hydrogen whose production causes carbon dioxide emissions. The country wants to increase its socio-economic development and maintain its leading role in the global energy sector.

However, the country’s ambitions have been jeopardised by the invasion of Ukraine in February 2022. This has led to Russia losing some major political and economic partners in Europe as well as in Asia. Combined with the toughest sanctions in the country’s history this may paralyse its nascent hydrogen sector. Russia will therefore have to look for alternative markets for its energy exports. And it will endeavour to do business with China, the only country that can compete with Europe’s energy hunger.