Europe is leading China when it comes to industry coordination and policymaking for establishing a hydrogen economy, with a high level of cooperation between power grids and hydrogen developers that the world’s largest energy market could learn from, according to an energy researcher at China’s dominant transmission system operator (TSO).

“They are leading the way,” said Zhang Siyu from the State Grid Energy Research Institute, in reference to the EU’s hydrogen sector at an event in Beijing jointly held by the EU-China Energy Cooperation Platform and China Electricity Council.

Europe is operating at a higher R&D level and has developed a more mature framework for hydrogen, according to Zhang. “In the EU system operators for gas and  electricity actually work in tandem to plan out their power-hydrogen infrastructure, including refilling stations and transmission infrastructure. I feel that as they are able to do the planning together, it will be more accommodative of green hydrogen development,” the researcher said.

Coordination between the green hydrogen and power sectors is important because producing the fuel could have an important role to play in the future power grid. The dynamic operation of electrolysers—which can be turned on or off, or ramped up and down easily—can reduce variable renewable energy curtailment, especially as wind and solar increasingly displace fossil fuels in the power mix. Electrolysers could provide grid-balancing services while hydrogen itself can serve as long-term energy storage to back up renewables.

1.2% – 2022 growth in China production capacity

China could look to Europe for guidance on how to integrate grid development and power demand sectors. “China is in the midst of a power market reform, and the only place where you have experience in coordinated grid planning in a market condition at a pan-continental scale is in Europe,” said Lars Bregnbaek, a partner at Danish consultancy Ea Energy Analyses.

So far hydrogen producers in China have been reluctant to engage with the power grid, which is dominated by TSOs State Grid Corp of China and China Southern Grid. “The main reason[…]is because of the high economic costs to produce green hydrogen, we cannot provide a good economic revenue when they are providing these grid-balancing services. The value of providing grid-balancing services cannot be equal to their income,” said Zhang.

Banking on hydrogen

Zhang also singled out the state support offered by the European Commission’s European Hydrogen Bank as another idea that China could implement. The scheme aims to incentivise green hydrogen production within the EU by providing fiscal support for green hydrogen demonstration projects and green hydrogen certification. The pilot auction for the scheme will open on 23 November and award producers a total of up to €800m ($846.96m) in the form of a fixed premium, with priority given to the lowest bidders.

“China’s green hydrogen is accelerating, the cost is falling, and we are running more pilot programmes. With better technology the costs will be lower but if we are not able to unlock the potential demand it will not develop very fast. I think maybe we can give some subsidies in order to incentivise the demand side,” said Zhang.

China’s hydrogen production capacity in 2022 expanded by 1.2% on the year to 48.82mt/yr, while actual output grew by 1.9% to 35.33mt, the China Hydrogen Alliance  said in September. Only a fraction of this was green hydrogen, but there were more than 350 production projects planned or under construction at the end of August—if all are built, they will have a combined capacity of nearly 3.5mt/yr.

---

Author: Shi Weijun