China’s Hydrogen Roadmap: four Issues You Ought to Know – Nikkei Asia

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China has boosted investment in hydrogen, a renewable and potentially clean energy source. The country's central and local governments have included the hydrogen industry in the 14th Five-Year Plan (2021-2025) as one of China's six future industries.

The China Hydrogen Alliance, a government-backed industry group, predicts that the output value of the country's hydrogen energy industry will reach 1 trillion yuan ($ 152.6 billion) by 2025, and that China's hydrogen needs will reach 35 million tons by 2030 for at least 5% of the Chinese energy system.

Increased use of hydrogen – a gaseous element in abundance – could help support the government's goals to drastically reduce China's emissions of carbon dioxide, one of the major greenhouse gases driving climate change. Hydrogen fuel cells use chemical reactions to produce zero-emission electricity that can be used in transportation and other applications. Expanding hydrogen production and developing a refueling infrastructure can help increase the number of new energy vehicles on the roads and help China peak carbon emissions by 2030 and be carbon neutral by 2060.

To achieve these goals, however, technological barriers must be overcome to reduce the cost of extracting, storing, transporting and delivering the material to end users. China's advantages are strong government support and a huge market. Here are four things you should know about the country's hydrogen plans.

What is China's policy on hydrogen development?

China's 14th five-year plan describes hydrogen as a “border area” that the country wants to push forward. While no national strategy for hydrogen development has yet to be developed, 16 provinces and cities have published their own five-year plans specifically targeting hydrogen. Beijing, for example, plans to accelerate the planning and construction of hydrogen filling stations. The Jiangsu Provincial Plan provides for the development of hydrogen fuel cell vehicles and a hydrogen refueling infrastructure.

China is launching a four-year program to help local governments research hydrogen technology and build an industrial chain. Five city groups, including the Beijing-Tianjin-Hebei cluster, the Guangdong and Henan provinces and Shanghai, have been selected for demonstration projects, the participants informed Caixin, although the central government has not published the names of the cities in the program. Local governments that achieve certain goals receive up to 1.7 billion yuan in tax bonuses.

Five ministries, including the Ministry of Finance, the Ministry of Industry and Information and the National Energy Administration, delayed the publication of the final list because of the strict requirements of the review process and fierce competition between provinces, participants said.

What are the main challenges in implementing the plans?

High production costs have prevented hydrogen-powered cars from being commercialized in China and elsewhere. The difficulties in storing and transporting the highly explosive gas add to the cost. At current market prices, hydrogen to power a fuel cell car in China costs around 70 yuan per kilogram. According to an estimate by Fu Guanyun, a researcher with the National Development and Reform Commission, China's state planner, the figure will have to drop to less than 40 yuan per kilogram before hydrogen-powered cars can compete with traditional gasoline-powered vehicles.

The most sophisticated method for the large-scale production of hydrogen without obtaining it from fossil fuels is water electrolysis, in which water molecules are split into oxygen and hydrogen with the help of electricity. The biggest challenge in electrolytic hydrogen production is the cost, including the initial capital and electricity costs.

Electricity accounts for more than 70% of the cost of producing hydrogen from water. Around 60 kilowatt hours of electricity are required to produce 1 kg of hydrogen. At an industrial electricity price of 0.65 yuan ($ 0.10) per kilowatt hour, the cost would be up to 39 yuan per kilogram of hydrogen.

In addition, China generates most of its electricity from burning coal, which emits huge amounts of carbon dioxide into the atmosphere. Based on the average CO2 emissions from power generation, extracting 1 kilogram of hydrogen from water would produce around 35.84 kilograms of carbon dioxide. That would be three to four times the CO2 emissions from producing 1 kilogram of hydrogen from fossil coal or oil.

One solution would be to use renewable energies – such as hydropower, wind or sun – for the electrolysis of water. Beijing Jingneng Power, a state-owned coal-fired power producer, is building a 23 billion yuan green hydrogen power plant in Ordos, northern China's Inner Mongolia Autonomous Region, that will run on solar and wind power. China Petroleum and Chemical plans to launch its first solar and wind powered green hydrogen project in 2022, also in Ordos. As of 2019, China has more than 30 green hydrogen projects in the works.

The mainstream view in the industry is that green hydrogen will only be economical if the cost of renewable electricity falls below 0.2 yuan per kilowatt hour. The cost of wind and solar power is currently around 0.3 yuan per kWh. Zeng Tao, chief energy and new energy analyst at investment bank China International Capital, said he believed that green hydrogen could cost less than coal-based hydrogen by 2040.

In terms of delivery, most of China's hydrogen is transported by truck, which is more expensive and less efficient than pipelines. China mainly uses trailers with a capacity of 300 kg of hydrogen, which is less than half of the trailers common in western countries.

Transporting hydrogen through a pipeline would be efficient, but it requires high up-front investments. Building a national hydrogen supply infrastructure would also be a major challenge. The state-run China Oil & Gas Pipeline Network (PipeChina) has included hydrogen pipeline exploration in its 14th five-year plan. The state-owned China Petroleum and Chemical (Sinopec) is accelerating the construction of infrastructure for hydrogen, including pipelines and filling stations.

Where does China stand in the global hydrogen race?

According to a report published in February by the Hydrogen Council, a global initiative by leading companies led by CEOs, more than 30 countries have developed hydrogen roadmaps and announced 228 large-scale hydrogen projects along the entire value chain. The council estimates that hydrogen could meet 18% of total global energy needs and create a $ 2.5 trillion market with more than 30 million jobs by 2050.

Japan is a leader in hydrogen fuel cell technology while the United States is a leader in laboratory research. Europe is more focused on upstream hydrogen production and China has the largest hydrogen market, said Wang Cheng, director of the hydrogen fuel cell laboratory at Tsinghua University

“Basically, China is on the same starting line as the US and European countries when it comes to green hydrogen production technology,” Wang said.

How is the industry leader doing?

Toyota Motor is a leader in hydrogen fuel cell vehicles. The Japanese automaker presented the world's first mass-produced hydrogen fuel cell car in 2014 and launched its second generation Mirai – the Japanese word for “future” – last year. According to energy market researcher SNE Research, Toyota sold 2,000 fuel cell vehicles in the first quarter, which is half of global sales.

Despite its world-leading technology and sales volume, Toyota's fuel cell vehicle portfolio is clearly at an early stage. As in China, infrastructure is a serious barrier to fuel cell vehicle adoption in Japan, according to a February report by Weekly Toyo Keizai. There are only 135 hydrogen filling stations in the country – all subsidized by the government – compared to 30,000 public charging stations for electric cars.

The Japanese government set up a committee to get automakers and energy companies to work together on promoting hydrogen energy. In practice, however, companies have their own interests and hydrogen projects have difficulty moving forward quickly, said Ma Tiancai, deputy director of China's National Research Center for Fuel Cell Vehicles and Power Systems Technology. China has a stronger environment for promoting the fuel cell vehicle industry, Ma said, as all parties are more willing to sacrifice short-term interests and promote the industry. In addition, China is rich in hydrogen resources and has far more production capacities than Japan, Ma said.

Toyota has intensified its cooperation with China's hydrogen fuel cell industry since 2020. In March, Toyota and the Chinese manufacturer of hydrogen fuel cell engines Beijing SinoHytec agreed to set up a 50-50 joint venture to manufacture fuel cells for commercial vehicles in China. In August last year, the Japanese automaker founded United Fuel Cell System R&D with five Chinese companies, including Beijing SinoHytec, to develop hydrogen fuel cells for commercial vehicles.

Toyota could play a role in a segment of China's hydrogen fuel cell vehicle industry similar to Tesla's role in battery-powered cars, Ma suggested. As the world leader in electric vehicles, Tesla's arrival in the Chinese market has encouraged smaller domestic players to innovate and compete, which in turn could fuel the growth of the entire industry.

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