China sees its planned scale-up of green hydrogen production as a way to address the twin challenges of reducing its reliance on oil imports and smoothing out power grid constraints caused by its massive deployment of renewables, according to government and industry speakers at a recent conference in Shanghai.

China has added renewable power capacity at record levels this year, with new solar capacity of 142.56GW installed in the first ten months up by 63% from the full year of 2022, according to figures from trade body the China Photovoltaic Industry Association. Total installed renewable generation capacity topped 1,200GW last year and capacity could exceed 3,000GW by 2030, according to attendees at the conference, which was organised by research company BloombergNEF.

The extensive renewables buildout comes as China remains dependent on imports to meet three-quarters of its annual crude oil consumption.

“From the perspective of national security, China is highly dependent on foreign crude oil, so our country is vigorously developing new energy,” said Zhang Tianfu, director of the Carbon Neutrality Research Centre at the State Power Investment Corporation Research Institute, at the conference. “We can use this green power to make green hydrogen to generate green fuel and reduce the foreign dependence on oil,” he said.

“We can use green power to make green hydrogen to generate green fuel and reduce the foreign dependence on oil” State Power Investment Corp

Green hydrogen is set to play a role in helping China decarbonise commercial transportation as it can be used to produce hydrogen-based synthetic fuels such as green methanol and green jet fuel, which can lower emissions in shipping and aviation respectively. This is attractive for local governments that have overseen the development of renewables in their jurisdictions as producing green fuels can develop local industries and project bases, according to Zhang.

While China’s renewable energy growth is surging, future expansion still faces challenges, including grid transmission bottlenecks. Grid constraints have already emerged in provinces such as Henan. If excess green power cannot be sent to the grid, it can be used instead to produce green hydrogen.

“At the same time, the transportation cost of hydrogen is too high. Therefore, we need to extend green hydrogen downstream to produce green ammonia, green methanol and green jet fuel. But there are also many pain points in this process,” said Zhang.

Intermittency

The most important issue challenging this development pathway for green hydrogen in China is balancing the intermittency of renewable energy with the stability required by the chemical industry. “Supporting energy storage and hydrogen storage is the key,” said Zhang. High costs are also a factor as the cost of green hydrogen represents the biggest cost of producing green synthetic fuels.

Chinese green hydrogen producers are working to mitigate the volatility of renewables on their operations. “Through our electrolyser energy management and integrated management, we believe that there is no problem in dealing with fluctuations in renewable energy power generation,” said Ma Jun, president of Longi Hydrogen Energy Technology, which has developed more than 10GW of green hydrogen projects to date.

“In terms of hydrogen production costs, we believe that as long as we vigorously develop off-grid hydrogen production, we can effectively reduce the cost of hydrogen production. In addition to the energy consumption of the equipment itself, the main cost in the hydrogen production process comes from electricity,” she said.

1,200GW – Renewables capacity

Power costs account for 70% of the cost of green hydrogen production in China, according to Ma. “If the cost of solar power drops below RMB0.1/kWh (1.4¢/kWh), based on the production of 5kWh of electricity for 1cm of hydrogen, the cost of hydrogen production can be less than RMB10/kg ($1.4/kg).”

Green methanol

Production of green methanol from green hydrogen is gaining traction in China. In November, Danish company AP Moller–Maersk signed the shipping industry’s first large-scale, long-term offtake agreement with Chinese wind power developer Goldwind. The deal is for 500,000t/yr of green methanol beginning in 2026 to supply the first 12 large methanol-enabled vessels that Maersk has on order. The volumes combine a mix of hydrogen-based e-methanol and bio-methanol to be produced at a new facility in Hinggan League in Inner Mongolia, around 1,000km northeast of Beijing.

China has many advantages in producing green methanol, such as access to the necessary natural resources, a complete equipment industry chain and government support, said Karim Fahssis, head of decarbonisation in China for Maersk.

As the energy density of methanol is less than half of traditional fuels, Fahssis said the acceptable price should be half the price of traditional fuels. “We consider prices above this level to be a premium. At present, we believe that this premium can be reduced through policy drivers and passing the premium on to downstream companies,” Fahssis added.

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Author: Shi Weijun