China’s Green Hydrogen Surge: What the West Must Do to Stay in the Hydrogen Game

As China rapidly drives down the cost of hydrogen production technology, the United States and its allies face a strategic crossroads. New data from the China Renewable Energy Engineering Institute (CREEI) reveals that the average price of Chinese alkaline electrolysers fell by 33% between 2022 and 2024, while PEM (proton exchange membrane) electrolyser prices plummeted by 40% over the same period (CREEI, 2024). These figures are a wake-up call: if the West wants to lead in the hydrogen economy, it must act now.

The dramatic reduction in electrolyser costs—down to approximately $167/kW for 5MW alkaline systems—signals China’s clear intent to dominate global hydrogen supply chains. This is not merely an industrial shift; it’s a geopolitical challenge. Just as China captured solar panel and battery production over the past decade, it is now poised to corner the electrolyser market, a key enabler of green hydrogen.

Strategic Response: How the West Can Compete

To avoid dependence on Chinese equipment, the U.S. and Europe must scale up electrolyser production through industrial policy, tax incentives, and public-private partnerships. The Inflation Reduction Act (IRA) in the U.S. has already introduced key subsidies for hydrogen production, but policymakers must go further by supporting domestic equipment manufacturers with grants, loans, and guaranteed offtake agreements.

While China currently leads in cost, the West can focus on technological differentiation. Solid oxide electrolysis cells (SOECs), high-efficiency PEM systems, and modular, decentralized electrolysers represent innovation opportunities where Western firms can lead. Targeted R&D investment and streamlined regulatory pathways will be critical.

A coordinated approach among the U.S., Canada, the EU, and strategic allies like Japan and South Korea can create a resilient supply chain. Joint ventures, shared standards, and interoperable technologies would reduce reliance on Chinese equipment and increase bargaining power globally.

Electrolysers require rare earth metals and catalysts like platinum and iridium. Western governments must secure sustainable supplies of these materials through domestic mining, recycling initiatives, and trade agreements with friendly nations. Without control over the inputs, the West cannot control the outputs.

Export credit agencies and development banks in the West should provide financing for hydrogen infrastructure projects in emerging markets using non-Chinese technology. This strategy mirrors China's Belt and Road Initiative but aligns with democratic values and ESG principles.

The Clock Is Ticking

The hydrogen economy is expected to exceed $500 billion in market value by 2050, with green hydrogen a cornerstone of global decarbonization efforts (IEA, 2022). The West must learn from past mistakes in solar and semiconductor industries, where price competition outpaced innovation and manufacturing leadership shifted eastward.

Winning the hydrogen race is not only about energy security—it’s about climate leadership, industrial competitiveness, and geopolitical independence. China’s cost advantage is real, but not insurmountable. With the right combination of policy, innovation, and collaboration, the U.S. and its allies can compete—and lead.

References

China Renewable Energy Engineering Institute (CREEI). (2024). China Renewable Energy Project Cost Management Report 2024. Beijing: CREEI.International

Energy Agency. (2022). Global Hydrogen Review 2022. https://www.iea.org/reports/global-hydrogen-review-2022

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