China’s state-controlled oil and gas suppliers are studying the possibility of using existing infrastructure to transport and store a blend of hydrogen and natural gas, a move that could cut costs and open the country up to hydrogen imports.

UK-based sustainability consultancy ERM Group has been tasked by one of China’s state energy giants to study different scenarios for transporting hydrogen in natural gas pipelines, according to Martin Tai, a partner in Beijing at sustainability consultancy ERM Group.

The effort aims to learn how hydrogen affects pipeline materials and related equipment, and the ideal ratio for a blend of gas and hydrogen, Tai said during a panel discussion held by UK business association the British Chamber of Commerce in Shanghai last week. China had more than 110,000km of long-distance gas pipelines and 850,552km of city gas pipelines by the end of 2020.

The study is expected to inform China’s future regulations for transporting hydrogen and safety rules governing how far households should be located away from pipelines carrying the gas.

850,552km – Distance covered by China’s city gas pipelines

Utilising existing infrastructure could be a game-changer for the development of a hydrogen economy in China as it would open up the fuel to the massive city gas market—which accounted for up 30.8pc of Chinese gas demand in 2020, according to CNPC.

“This also creates a hydrogen import market because hydrogen can be imported from anywhere in the world, and you just can pipe into any of the LNG terminals that are along the coast of China. It will be a big benefit to the China hydrogen market,” says Tai.

Expensive gas

High gas prices both at home and abroad are encouraging local governments in China to consider hydrogen in their energy mixes. The overall price of trucked LNG in China from both coastal import terminals and inland liquefaction plants averaged RMB8,355/t ($1,323/t) on 24 February, equivalent to nearly $25/mn Btu and up by two-thirds from RMB5,012/t at the end of 2021, according to data from the Shanghai Petroleum and Natural Gas Exchange.

Asian spot LNG prices meanwhile surged by more than 50pc in the last week of February, to $37.5/mn Btu, as Russia’s invasion of Ukraine brought the issue of Europe’s gas supply to the fore.

“For certain regions, they will have a quota for hydrogen to be part of the replacement of natural gas. That is why they are looking at using the existing natural gas pipeline or facility rather than building a new hydrogen facility or pipeline, which is costly and will increase the cost of hydrogen,” says Tai.

While local governments are keen to add hydrogen to their energy strategies, the likelihood is that carbon taxes and other financial mechanisms will be needed to incentivise hard-to-decarbonise industries in China to switch to zero or low-carbon hydrogen.

“Carbon pricing is going to be a very important element of enabling hydrogen for decarbonising transport industries and energy,” says Wang Wanyi, China programme manager for the hydrogen economy at the UN Development Programme (UNDP).

“In addition to carbon pricing, there is also the issue of using cheaper renewable electricity subsidies or other financial solutions to help cut down the cost of green hydrogen production,” Wang said at the Shanghai event.

“Carbon pricing is going to be a very important element of enabling hydrogen for decarbonising transport industries and energy” Wang, UNDP

The UNDP has cooperated with the Chinese government on hydrogen since 2003, when it supported the importation of three fuel-cell buses from German automaker Daimler to help local policymakers understand how to manage such vehicles and where refuelling infrastructure needed to be built.

A second phase of engagement began one year before the 2008 Summer Olympics in Beijing and doubled the number of UNDP-supported fuel-cell vehicles in the country to six. But a third phase since 2016 is when the collaboration took off through the commercialisation of fuel-cell electric vehicles (FCEVs).

Wang says there are more than 9,000 FCEVs on China’s roads—some 3,000 of which are in seven demonstration cities including Beijing and Shanghai—and that they have collectively avoided 230,000t of CO₂e.

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Author: Shi Weijun