De-risking: The greater risk is not expanding to China

Those who see climate change as the world’s greatest threat do not have it easy. We count ourselves as part of this group. To make a significant contribution to decarbonisation, we will use Enapter to reduce the cost of electrolysis technology to such an extent that it can be used to produce green hydrogen that is cheaper than fossil fuels. And this on a global scale.

26. juillet 2023

German and chinese flag with blue sky and white clouds in the background
by Sebastian-Justus Schmidt
Founder of Enapter

Sebastian-Justus Schmidt is part of the founding trio of Enapter and a welcome guest and speaker on the topic of energy transition and green hydrogen at conferences and trade fairs worldwide. This text reflects the personal observations and opinions of the author. At the end of the article, there are references and comments on all publicly available topics that are taken up or quoted during the text.

Those who see climate change as the world’s greatest threat do not have it easy. We count ourselves as part of this group. To make a significant contribution to decarbonisation, we will use Enapter to reduce the cost of electrolysis technology to such an extent that it can be used to produce green hydrogen that is cheaper than fossil fuels. And this on a global scale.

Due to the many enquiries we regularly receive from China, we also are observing developments in this market with great interest. On top of this, I had the opportunity to listen to representatives of the Chinese delegation during the eighth Global Conference on Energy Efficiency1 hosted by the International Energy Agency (IEA) in June. They reported impressively and confidently on the measures they had already taken to achieve their energy efficiency and green energy goals.2

Germany’s China strategy and Enapter

On 13 July 2023, the German Foreign Minister Annalena Baerbock presented the German government’s China strategy. This paper3 (currently not available in Chinese or English) warns German business against engagement in China but does not officially rule it out, because the “systemic rivalry” with China does not mean, according to the German government, that no cooperation is possible. On the contrary, the German government is seeking cooperation; however, the conditions should be fair from the German point of view.

China, which is still building many coal-fired power plants, now wants to engage in an intensive dialogue on the coal phase-out. The strategy paper positively acknowledges that half of the total global renewable energy generation capacity has been installed in China alone. It contains the following sentence: “China is a leader in many green technologies.” However, the position paper also makes clear that ratification of the negotiated EU-China Comprehensive Agreement on Investment (CAI) cannot take place at present. This could well have an impact on Germany’s foreign trade promotion with its instrument of investment guarantees, which recently issued a significant portion of its investment guarantees to projects by German companies in China.

In any case, it will lead to the Federal Ministry of Economics taking a closer look at investments in the Chinese market. However, at the same time efforts are being made in Germany to establish that de-risking is not the same as de-industrialisation.4

Next to its German operations, Enapter also has a well-utilised production site in Italy with an established R&D department. In 2019, Italy was the only G7 country to launch a cooperation with China in the course of the “Belt and Road Initiative” – and this against strong opposition from the EU and the USA. This resistance and, moreover, unfulfilled expectations still lead to discussions today, and further decisions on the continuation of the cooperation are still pending. Italy’s Prime Minister Giorgia Meloni made it clear in May 2023: “…good ties with China are possible without Belt and Road membership”. 5

And finally, the USA: On July 19, John Kerry, the US Climate Special Envoy, concluded his four-day visit to China. It was a visit that led to mostly positive news both in the USA and in China. It was already seen by observers as part of a push by Washington to repair fractured relations. 6 Kerry also stated on Twitter that the climate crisis requires the world’s two largest economies to work together to limit global warming.7 A common theme unites.

The dragon becomes green

John Kerry, like the German Federal Republic, is sceptical about coal-fired power plants. But it is precisely here that China brings up the argument of “energy security” and relies on independence. Basically, this is exactly what is behind Germany’s new China strategy. China argues that energy security and economic well-being come before environmental protection: a climate paradox that stems from the country’s specific energy market dynamics. There is a mismatch between the demand for energy from the more industrialised areas on the coast and the supply of energy from more resource-rich areas in the centre of the country.

But China is also now stepping up all renewable energy efforts and further expanding the considerable green power generation capacity already installed. Wind power and photovoltaics reached an all-time high of 820 million kW at the end of April 2023. Of this, the installed capacity of wind power generation is 380 million kW (the EU total is 255 million kW), and that of photovoltaic power generation is 440 million kW (EU total 209 million kW). China’s growth is unabated and new gigawatt projects are implemented and opened almost every week. 8

And the hydrogen market in China is also growing. The country regards electrolysis for the production of hydrogen as a strategic technology in which it aspires to a global leadership role. Interestingly, quite little information on this is shared in Western media. This may partly be due to the fact that the Chinese market is highly dynamic in its development and the players are largely preoccupied with themselves. When people in Germany talk about China’s hydrogen market, they tend to see it as a threat. I, on the other hand, see it as an opportunity. The emerging competition should serve as an incentive and ensure that optimal, technology-open conditions and, if necessary, equivalent support programmes are created for all market participants – regardless of their size.

Green hydrogen technology made in China

If one believes the market observers, one could get the impression that only a few Chinese hydrogen systems are exported to Europe. But in reality, China is already present worldwide in major large-scale projects based on alkaline electrolysis technology. Here, they are working closely with European integration and installation partners who are installing the plants. China’s push towards green hydrogen will target all stages of the value chain. State-owned enterprises and publicly funded R&D centres are pushing for further development of hydrogen technologies. The optimistic forecasts for future demand also lead private companies to invest themselves, which then contributes to further capacity expansion in green hydrogen production technologies. For Enapter, it is particularly interesting to observe that not only China’s national strategy but also investments by local state policy and companies are making the green hydrogen industry “ready-for-competition ».

And if you look a little closer, you cannot really speak of a disconnected market. Essential components that are necessary for the development of the hydrogen infrastructure and mass production in Europe come from China. According to Chinese press reports, the German company Bosch, for example, received a test bench for a 400-kW high-performance hydrogen fuel cell system in April from the independently operating “Bosch Intelligent Manufacturing Solutions China Division” based in China 9. In fact, there is already close cooperation between European and Chinese companies, especially in the areas of stack development – the “motors” of the electrolysers and the fuel cells – as well as in power supply units and the associated electronics. 10

The future of water electrolysis

In the field of electrolysers, China has so far been known mainly for large and inexpensive alkaline electrolysers. PEM (Proton Exchange Membrane) electrolysers from China have only recently become visible on the market.11 There is also an emerging trend towards the cost-effective, robust AEM (Anion Exchange Membrane) technology, which other companies that have been working with PEM systems are currently discovering: In confidential talks, major PEM manufacturers declare that they see the future in AEM, while Siemens Energy published AEM job advertisements in Germany at the beginning of the year, making its development ambitions visible, and the Fraunhofer Institute announced joint developments on AEM technology with the German company Sunfire 12 These announcements help Enapter enormously, because its position as the AEM pioneer often also brings scepticism: “…if AEM is so good, why doesn’t anyone else do it?”.

The Mercator Institute, where Foreign Minister Baerbock announced Germany’s China strategy, published an article worth reading as early as June 2022 under the title: “China’s nascent green hydrogen sector: How policy, research and business are forging a new industry”. 13 It says: “Industry experts in China expect it to take at least five years for domestic technology to catch up with global industry leaders.” The Mercator study concludes: “European companies work with Chinese firms as suppliers and R&D and joint venture partners. The benefits for the European side should be weighed against the risks associated with accelerating the development of Chinese manufacturers.” If you ask me, I give us (Enapter) a head start of about 3 years for AEM technology; for other technologies like PEM and especially alkaline technology I see the head start of European companies as even smaller.

Hydrogen waits for no man

One aspect that also plays a major role is this: Chinese companies are comparatively open and willing to experiment when it comes to innovations and new technologies.14 Thus, within a very short period of time, we have been able to observe the development of a whole series of projects and companies in China that are now intensively involved with AEM technology. This speed is absolutely remarkable.

During my visit to the World Economic Forum in Tianjin, China in June – also known as « Summer Davos » and this year titled « Meeting of the New Champions » – the WEF presented their position paper “Green Hydrogen in China: A Roadmap for Success”.15 This position paper also focuses on decentralised energy systems. Decentralisation and local energy storage would also contribute significantly to reducing primary energy consumption in Germany. What has been demanded in Europe for a long time and always meets with resistance in Germany is already in part lived practice in China – and is being developed further.

Decentralised systems require modular storage solutions – and this is where Enapter’s AEM electrolysers are predestined to help. They are electrolysers that are already on the market with the most promising technological development in the field of hydrogen production: the anion exchange membrane (AEM). A technology that requires neither iridium nor titanium and with which several thousand devices already produce green hydrogen worldwide. This allows us to draw on excellent, field-tested and machine-related data, which we use for the permanent further development of our products.

This increases our R&D speed and allows us to further extend our lead over the competition. On the one hand, we must of course protect our intellectual property (IP) but also constantly develop it further. At the same time, we have to be fast and open to innovation. I am, therefore, very interested in working closely and in a spirit of trust with partners around the world, including China. In the future, this will include joint research and development projects as well as the future expansion of production services in other countries, because climate protection knows no borders.

With its AEM technology and modular electrolysers, Enapter is pursuing the ambitious goal of producing green hydrogen more cheaply than fossil fuels – and replacing fossil fuel use completely. If we and the other players in the electrolyser sector succeed in this endeavour, China and all other countries can do without coal-fired power plants. That would be a significant step for all of us. And then we would even have helped the German government.

[1] International Energy Agency 06.-08.06.2023 Paris, Versailles, 8th Annual Global Conference on Energy Efficiency

[2] One of Chinese officials at the meeting was Zhao Chenxin, H.E. Vice Chairman, National Development and Reform Commission (and Party Leadership Group). He is also an outspoken advocate for foreign investment towards China. Few days ago he was interviewed to the topic of energy: Source: Xinhua 12.07.2023

Another Chinese speaker was Ji Zou, Energy Foundation China, Chief Executive Officer and President. The Energy Foundation China is a grant making charitable organization registered in the US and since 1999 in China, supporting sustainable energy development. Link to the organization here:

To complete the topic of the IEA Meeting in Versailles, here the Statement Source: IEA, 08.06.2023

Sebastian’s post for the visit in IEA in Versailles 10.06.2023

[3] Germany Position on China / 13.07.2023
China Strategy of the Federal Government of Germany (« China Strategie der Bundesregierung ») (in German only)

[4] CNN: ‘China has changed.’ Germany unveils strategy to cut reliance on world’s no. 2 economy / 13.07.2023

China-Expert Frank Sieren: short opinion regarding the German China Strategy / LinkedIn post (German only) / 17.07.2023

South China Morning Post: Opinion piece from Emanuele Scimia / 22.07.2023

Capital: China-Geschäft: Deutsche Konzerne blenden Risiken aus / von Bernd Ziesemer / 21.05.2023–deutsche-konzerne-blenden-risiken-aus–33483740.html

Investment Guarantees: an instrument to promote foreign trade and investment provided by the German Ministry of Economic Affairs and Climate Action – the largest portion of investment guarantees has been given towards Company-Investments in China. This will change. / March 2023

Politico: Rust Belt on the Rhine / The deindustrialization of Germany – If Europe’s economic motor stalls, the Continent’s already polarized political landscape will shudder / 13.07.2023
The Article « … hit Brussels like a shell shock today » wrote Ann Mettler 14.07. (Breakthrough Energy)

[5] Reuters: Italy PM says good ties with China possible without Belt and Road / 28.05.2023
BTW: The Italian Prime Minister will make her first visit to the US on July 27 on invitation of President Joe Biden.

[6] New York Times: China’s Xi Rebuffs Kerry’s Call for Faster Climate Action / 19.07.2023


[8] CGTN: China’s total installed capacity of wind, photovoltaic power generation exceeds 800 mln kW / 26.05.2023

[9] AI Automobile Manufacturing: « Good news | Bosch China’s first 400kW fuel cell system test bench … sent to Germany » / 21.04.2023

Handelsblatt: Bund fördert Projekt von Bosch mit rund 160 Millionen Euro / 12.07.2023

[10] UK company Johnson Matthey, shareholder >3% at Enapter, started large scale FC/CCM investment in China / 12.07.2023

[11] HydrogenInsight: ‘World’s largest PEM green hydrogen project’ announced in China, backed by $4.5bn of investment / 03.07.2023


[13] MERICS: China’s nascent green hydrogen sector: How policy, research and business are forging a new industry / 28.06.2022 (English)

[14] Der Spiegel: Wie Europas Bürokraten den Vorsprung bei Wasserstoffanlagen verspielen – Parallelen zur Solarindustrie befürchtet – 27.01.2023

Sascha Pallenberg / ME TACHELES: Podcast und Fakten zur Energiewende in China / only in German / 23.07.2023

[15] World Economic Forum (WEF) 26 – 27 June 2023, Tianjin, China

WEF: White Papers, Green Hydrogen in China: A Roadmap for Progress, Published: 27 June 2023

Sebastian’s post for the visit WEF in Tianjin / 01.07.2023