Brussels is proposing new legislation that would tie public subsidies for renewable hydrogen projects to equipment manufactured within the bloc.
The European Commission’s proposed Industrial Accelerator Act would require projects receiving public funding through member state auctions to use electrolyser stacks produced inside the European Union. The measure would apply to green hydrogen facilities supported through public procurement or subsidy schemes, effectively excluding systems manufactured outside the EU from qualifying projects. This includes equipment produced in neighboring Norway by companies such as Nel and HydrogenPro.
The proposal represents a significant evolution in European energy policy. While earlier legislation focused primarily on emissions reduction and renewable deployment, the new framework reflects a broader industrial strategy aimed at strengthening domestic supply chains for net zero technologies. The Commission argues that linking public funding to local manufacturing can help ensure that investments in the energy transition also reinforce European industrial competitiveness.
This shift comes amid intensifying global competition in clean technology production. China already dominates manufacturing across several net zero sectors, including solar panels, batteries, and increasingly electrolysers. European policymakers are concerned that without stronger industrial policy, the rapid expansion of clean energy infrastructure could rely heavily on imported equipment, potentially weakening domestic manufacturing capacity and exposing the region to supply chain vulnerabilities.
Hydrogen technology illustrates this tension clearly. The EU’s strategy calls for producing 10 million tonnes of renewable hydrogen annually by 2030, a target that would require large scale deployment of electrolysis systems across multiple sectors, including heavy industry, transport, and chemical production. Achieving this output would demand tens of gigawatts of installed electrolysers, far beyond the current deployment level.
Manufacturers have already begun scaling production capacity in anticipation of this demand. Several European electrolyser producers expanded manufacturing lines during the early phases of the hydrogen policy rollout, expecting a rapid pipeline of commercial projects. However, project development has progressed more slowly than anticipated, leaving some production capacity underutilized and raising concerns about the long term competitiveness of European suppliers.
By mandating EU manufactured stacks for subsidized projects, the Commission aims to create a more predictable demand signal for domestic equipment producers. Policymakers believe such requirements could encourage developers to source locally while supporting investment in European factories and supply chains.
The Industrial Accelerator Act extends beyond hydrogen technology. The legislation proposes broader procurement rules requiring “Made in Europe” and low carbon criteria across several strategic sectors, including steel, cement, aluminum, automotive manufacturing, batteries, solar panels, wind turbines, and electrolysers. The Commission argues that public funding should be used strategically to reinforce domestic production of technologies critical to the energy transition.
The proposal also introduces structural measures intended to accelerate industrial investment. These include digital permitting systems designed to streamline approvals for manufacturing projects and the creation of designated Industrial Acceleration Areas where clean technology production facilities could cluster. Such zones aim to reduce regulatory delays and support supply chain integration for emerging industries.
Foreign investment in strategic sectors would also face new conditions under the proposed legislation. Projects exceeding €100 million in industries where a single non EU country controls more than 40 percent of global manufacturing capacity would need to demonstrate clear economic benefits for the bloc. Requirements could include commitments to job creation, technology transfer, and local value generation, with at least 50 percent of employment tied to European workers.
Supporters of the initiative argue that these policies reflect the realities of global industrial competition. Major economies including the United States and China have increasingly used targeted subsidies, procurement rules, and domestic content requirements to support clean technology industries. European policymakers fear that relying solely on market mechanisms could lead to the relocation of manufacturing capacity outside the region.
Critics, however, warn that stricter domestic content rules could complicate project economics in a sector already struggling with slow deployment and high capital costs. Hydrogen developers have faced rising equipment prices, regulatory uncertainty, and delays in securing long term offtake agreements. Limiting the pool of eligible equipment suppliers could potentially increase project costs or slow near term deployment.
The Commission’s proposal will now enter negotiations between the European Parliament and EU member states. The outcome will determine how far Europe is willing to integrate industrial policy into its climate strategy and whether the bloc prioritizes rapid deployment of hydrogen infrastructure or the development of a domestic manufacturing base capable of supporting the energy transition at scale.
