The Rise of Green Hydrogen: The global focus in clean energy is dramatically shifting from traditional solar and wind to the exciting potential of green hydrogen. While hydrogen has long been a vital industrial component for processes like oil refining and producing ammonia and methanol, its conventional production heavily relies on fossil fuels, leading to significant carbon emissions. Today, however, green hydrogen technologies – encompassing production, storage, transportation, and application – are experiencing rapid advancements. At the heart of this revolution are electrolysers, essential for green hydrogen production, much like photovoltaic (PV) modules are for solar power. And just as China’s formidable influence on the solar PV supply chain is undeniable, a strikingly similar narrative is now unfolding within the electrolyser market.
Is China Already a Major Force in the Green Hydrogen Sector?
Indeed, by 2024, China solidified its position as the world’s leading hydrogen producer, boasting an impressive annual output of 36.5 million tonnes. Remarkably, 120,000 tonnes of this was green hydrogen, accounting for nearly half of the global total. In the crucial electrolyser market, China commands almost 85% of the world’s manufacturing capacity for Alkaline (ALK) electrolysers. These ALK units, alongside Proton Exchange Membrane (PEM) electrolysers, are the primary technologies employed in commercial plants today. ALK electrolysers, being a more established technology, offer lower costs but are less efficient in integrating with fluctuating renewable energy sources. PEM electrolysers, conversely, provide superior efficiency under varying loads and yield higher purity hydrogen. Currently, China’s strong market position is largely driven by its robust manufacturing of ALK electrolysers, catering to both its domestic needs and a growing export market.
This swift expansion of China’s electrolyser manufacturing and the rapid deployment of large-scale green hydrogen production facilities are inevitably sparking global concerns. Many are watching closely as China’s influence over the green hydrogen production and supply chain continues to grow, raising questions about potential market concentration.
What Factors Fueled China’s Dominance?
China’s proven strategy for capturing global markets, exemplified by its success in solar PV modules, involved a powerful combination of state subsidies, deeply integrated supply chains, strategic control over raw materials, and an unparalleled speed in establishing new production facilities. This playbook is clearly visible in the electrolyser sector. Chinese-supplied ALK electrolysers consistently boast significantly lower prices compared to international counterparts. For example, using Chinese ALK electrolysers could cut hydrogen production plant setup costs in Europe by up to 45%. These prices are driven even lower within China by maturing supply chains and intense market competition. In 2024, a 1,000 Nm3/h (5MW) ALK electrolyser system was priced at approximately six million yuan (roughly 1,200 yuan/kW or $167/KW), marking a 20% reduction from 2023. Similarly, a 200 Nm3/h (1MW) PEM electrolyser system, while more expensive, saw its price drop by 32% from 2023 to about six million yuan (~6,000 yuan/kW or $838/KW).
A key advantage for ALK electrolysers is their reliance on abundant materials like nickel and steel, both readily available within China. In contrast, PEM electrolysers depend on precious metals such as iridium, platinum, and titanium, which makes substantial cost reductions considerably more difficult, even for a manufacturing powerhouse like China. Paradoxically, despite its vast manufacturing capabilities, China remains a major importer of these crucial materials. Furthermore, green hydrogen production isn’t just about the electrolyser; it demands complex system integration tailored to the desired hydrogen purity and its ultimate application. Therefore, simply offering the lowest price might not be enough in this industry; manufacturers who can deliver comprehensive, fully integrated systems will likely hold a significant competitive edge.
Major Chinese solar and wind equipment manufacturers, including industry giants like LONGi and Envision, are strategically expanding into the green hydrogen sector. Beyond just producing electrolysers, these companies are actively securing international contracts to build comprehensive hydrogen production facilities. For example, China’s Guofu Hydrogen is collaborating with German firms to establish electrolyser systems and hydrogen production plants in Germany. Demonstrating their ambition, Envision Energy recently inaugurated what is currently the world’s largest green hydrogen and ammonia plant, powered exclusively by renewable energy sources.
Can Other Nations Compete with China’s Green Hydrogen Ambition?
While China is clearly positioning itself to be a dominant player in the global green hydrogen equipment market, with its companies aggressively scaling up production and expanding their international footprint, this projected dominance is not without its caveats. It hinges critically on continued technological breakthroughs and a deeper integration of its supply chains.
Despite China’s aggressive expansion, its firms will likely encounter substantial obstacles in mirroring their previous successes in other industries. The green hydrogen sector is distinct; unlike solar, it is a high-priority area for many nations, which are actively implementing national strategies to foster local competitiveness. Consequently, Chinese imports are expected to face rigorous scrutiny, various restrictions, and stringent regulatory frameworks. This will make it considerably harder for them to compete solely on price, as they did with solar PVs. Furthermore, growing global concerns about supply chain security will play a much larger role in shaping the green hydrogen technology market, potentially creating barriers to the unrestricted flow of Chinese products.
This analysis was contributed by Bhumika Sevkani, a Research Analyst at The Takshashila Institution.