After an intense week at the World Hydrogen Summit 2024 in Rotterdam, where we engaged in conversations with over two dozen electrolyzer suppliers, including those from China and European markets, we have many thoughts to share about the future trajectory of the Chinese green hydrogen value chain and the misconceptions on the Chinese market.
Chinese Electrolyzer Supply Chain: Ready for Global Markets
Chinese electrolyzer makers, including Shuangliang, Sinohy (rebranded as HyGreen), and Envision, have showcased their technologies in the 2024 World Hydrogen Summit & Exhibition, despite taking a less dominant spot in the exhibition held in Rotterdam Ahoy compared to companies from some other regions (say, India.)
Notably, none of the Top Five Chinese market leaders were present, with several smaller Chinese suppliers attending, seeking international opportunities.
The cold reaction from both sides — international suppliers towards China and Chinese suppliers facing the world market– is odd, considering the significant size of China’s green hydrogen market. According to Energy Iceberg’s research, China by 2024 May has built up a 70GW demand for electrolyzers. It is a top two market in terms of demand and investment for green hydrogen and electrolyzers.
Meanwhile, Chinese suppliers are facing growing competition in the domestic market, as the number of contenders in the market rise from just a dozen in 2018 to over 300. The blood-shedding price competition has pushed some to look into overseas opportunities instead. But it is not yet the key focus of those major players.
The phenomenon is also completely understandable. This reflects the fragmented nature of the global electrolysis market, with Chinese players primarily focused on meeting domestic demand, and their overseas peers are busy with testing and launching in Europe, the US and emerging markets like the Middle East.
The question is: how long will this “paralleling world” continue?
Our anticipation is that — not that long. We anticipate increased international activity, especially from tier-2 players in China, due to the intense competition within China. Since the end of the COVID-19 lockdown in 2023, companies like Guofu Hydrogen, Mingyang, Shuangliang, Kylie, and LONGi have made significant strides internationally, announcing joint ventures, completed orders, and contract signings in late 2023 and early 2024.
Two main factors are driving this competitive shift:
- Proliferation of New Players: The number of Chinese electrolyzer suppliers has surged from a dozen in 2018 to over 300 today, with new entrants from renewable manufacturing, fuel cell technology, and other sectors. These experienced manufacturers are investing heavily in R&D and engaging in cost competition, pushing traditional, smaller electrolyzer-specific firms to seek alternative market growth solutions.
- Increased Competition from Major Renewable Manufacturers: Leading companies in wind turbine and solar cell manufacturing have entered the electrolysis market, leveraging their existing relationships with renewable developers. Firms like LONGi, Sungrow, Envision, SANY, and state-owned Shanghai Electric have quickly ascended to top positions, using their ability to engage in cost competition and their smaller capital expenditure on electrolyzer sales compared to overall renewable PtX projects.
Strategic Focus for Chinese International Expansion
In the next two years, Chinese electrolyzer companies are likely to focus on the Asia-Pacific, MENA, and South American markets. However, a few have already entered the European market. Building strong connections with international developers will be critical, as these developers play a significant role in green hydrogen projects aimed at European market exports. Currently, only a small fraction of Chinese developers are showing strong interest in international green hydrogen investments, with CEEC being a notable exception. Most Chinese energy investments will remain focused on Central Asia and MENA regions, where leveraging domestic cooperation relationships can yield success.
Reflecting on trends in the solar market and geopolitical developments, private Chinese players recognize the importance of long-term strategies for overseas expansion. These strategies include establishing local manufacturing bases. However, challenges persist, particularly scrutiny over the Chinese supply chain. This scrutiny does not differentiate between private and state-owned suppliers.
China’s Electrolyzer Supply Chain: Misconceptions
International markets and policymakers often hold misconceptions about the Chinese hydrogen industry. One common belief is that Chinese government subsidies give local renewable manufacturers an unfair advantage. However, the electrolyzer supply chain in China, despite being in its early stages, has benefited minimally from subsidies. Most government support has been directed toward the fuel cell sector, and the scale of funding has been relatively small. Despite this, Chinese manufacturers will continue to face scrutiny regarding perceived unfair advantages.
A final point: while the international expansion of Chinese electrolyzer suppliers is set to intensify, these companies must navigate significant challenges and misconceptions to succeed globally. Their strategies will need to adapt to the unique dynamics of each regional market, leveraging both domestic and international partnerships to thrive in the competitive green hydrogen landscape.