China is poised to build the greenest hydrogen production capacity and own the most electrolyser manufacturing capacity in the world, but significant uncertainties remain for both the upstream and the downstream along the value chain.

Insufficient demand, slow buildout of transportation pipelines and storage infrastructure, and immature electrolyser technology were cited as significant barriers by experts at the recent BNEF Summit in Shanghai.

“High cost-effectiveness” and “high-performance” are key to today’s green hydrogen industry, according to Peng Chaocai, vice-president of China’s largest solar equipment manufacturer, Sungrow, and chairman of its hydrogen subsidiary.

“Domestic demand for green hydrogen may be focused on the application of hydrogen heavy trucks and fuel cells” Wang, CEEC Hydrogen Energy

Chinese electrolyser manufacturers need to focus on low-cost innovation to make high-performance products, especially under the trend of electric-hydrogen integration in which renewable power generation is used to produce hydrogen through green electrolysis, said Peng. Electrolysers that adapt to fluctuating power sources will have a competitive advantage, he added.

“During this period, our R&D personnel have done a lot of work. At present, we have applied for more than 480 patents [and] also obtained many certifications. We need to build our internal strength, for it may be that we have no other way to make a cost-effective product,” said Peng.

China is set to lead global electrolyser installations with nearly 70% of projected capacity this year, according to the IEA’s Global Hydrogen Review 2024, published in October. Green hydrogen accounts for just 1% of Chinese production.

Peng disclosed that Sungrow Hydrogen will supply 16 alkaline electrolyser systems for the Songyuan Hydrogen Energy Industrial Park, which is being built by state-owned China Energy Engineering Group and will be the world’s biggest green hydrogen-ammonia-methanol integrated project—producing 110,000t/yr, 600,000t/yr and 60,000t/yr of each fuel, respectively.

Sungrow Hydrogen announced mid-year that it had won a tender to supply the RMB29.6b ($4.1b) project in northeastern China’s Jilin province, which will include 3GW of solar and wind generation capacity. CEEC began construction on the first phase in late September.

Road transport

On the demand side, with the support of national policies, fuel cells and hydrogen-fuelled heavy trucks are a more certain application at this point, according to Wang Zhongyan, deputy general manager of marketing for CEEC Hydrogen Energy.

“The current cost and usage radius for green hydrogen cannot exceed 200km, so we believe that domestic demand for green hydrogen may be focused on the application of hydrogen heavy trucks and fuel cells because we have also seen that various provinces in the past two years have introduced a lot of policy support for hydrogen-based transportation,” said Wang.

70% – Share of global capacity

“If hydrogen heavy trucks are exempted from highway tolls, their full-cycle use cost will be greatly reduced. Therefore, we believe that under policy and market demand for low-carbon transport substitution, expanding the use case of hydrogen may lie in fuel cells and hydrogen heavy trucks.”

Speakers at the conference were less enthusiastic about the possibility of hydrogen being used to create ammonia for power generation as ammonia co-firing is not the best way to decarbonise China’s coal power fleet, not just because of the prohibitive costs, but also because of the nature of the combustion, which will make the plant less flexible as a power source. Instead, hydrogen turbines have a better combustion efficiency and are more advantageously positioned as a flexible power supply.

As Chinese developers push ahead with millions of tonnes of production despite weak demand, more and more domestic manufacturers are looking to sell overseas. Certification is the top priority for projects targeting overseas buyers.

Foreign buyers are focused on the carbon intensity of hydrogen made in China, with domestic producers responding by seeking International Sustainability and Carbon Certification (ISCC) for their products. But the ISCC system needs to be revised as it uses an outdated carbon intensity factor for China’s grid power that is almost double of the actual carbon intensity today—meaning Chinese producers would need to use as little grid power as possible and oversize their renewables.

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Author: Shi Weijun