Resta Energy: China will break the national hydrogen target and consolidate its leading position in the global electrolyzer market
June 5, 2024
Mainland China's national plan identifies hydrogen as a key element of a low-carbon energy transition strategy. The country is committed to decarbonising with hydrogen, with Resta Energy expecting to install about 2.5 gigawatts (GW) of hydrogen electrolysers by the end of the year. This capacity is expected to produce 220,000 tonnes of green hydrogen per year, 6,000 tonnes more than the rest of the world combined. According to its national plan, China aims to produce 200,000 tonnes of green hydrogen per year by the end of 2025, but our analysis shows that this production will be exceeded by the end of this year.
Mainland China installed a cumulative 1 GW of electrolyzer capacity in 2023, consolidating its world leadership in the application of this technology. However, a significant portion of China's hydrogen supply comes from grey hydrogen, which is produced through coal gasification or steam methane reforming (SMR). If China intends to achieve its dual carbon goals of peaking emissions by 2030 and achieving carbon neutrality by 2060, a shift to low-carbon hydrogen production will be crucial.
In early 2022, China's National Development and Reform Commission (NDRC) released the National Hydrogen Energy Plan, the "Medium and Long-Term Development Strategy for the Hydrogen Energy Industry". The plan is a comprehensive roadmap for the county's hydrogen targets from 2021 to 2035, and its production targets are currently relatively easy to achieve.
While the standards and solutions proposed by China represent progress, they currently fall short of the more stringent benchmarks set by their European counterparts. The vague definition of "low-carbon" and "renewable" hydrogen in China's policy is a concern. To truly catalyse meaningful change, China must adopt clear and rigorous definitions that align with global best practices, such as those in Europe. By establishing clear standards, China can ensure that its hydrogen initiatives make a significant contribution to a sustainable future, not only domestically, but globally
Minh Khoi Le, Head of Hydrogen Research at Resta Energy
Learn more about hydrogen solutions by Resta Energy.
Despite progress, there is a geographical gap between the hydrogen demand centers in eastern China and the abundant solar and wind resources in the north, which are ripe for green hydrogen production. Inner Mongolia and Gansu, for example, have set ambitious targets to produce renewable hydrogen by 2025. Their hydrogen production efforts, together with other provinces, will total more than 1 million mt/year, five times China's national target. However, this has led to a mismatch between supply and demand, prompting China to explore expanding its hydrogen pipeline network.
In a high-profile effort, Sinopec, China's state-owned oil and gas company, has developed a 400-kilometer pipeline connecting Ulanqab in Inner Mongolia with Yanshan in Beijing. The pipeline has an initial capacity of 100,000 mt/year and is planned to be expanded to 500,000 mt/year, marking China's first long-distance hydrogen pipeline. In addition, Hebei Tangshan Haitai New Energy Technology Co. is developing a 737-kilometer-long hydrogen pipeline from Zhangjiakou to Caofeidian Port via Chengde and Tangshan, costing US$845 million. If realized, it would be the longest hydrogen pipeline in the world. Sinopec's subsidiary, PetroChina Pipeline Engineering Corp., aims to expand the network to 6,000 kilometers by 2050.
The northern and northwestern regions of China, including Xinjiang, Gansu and Inner Mongolia, have huge solar and wind potential. In 2023, China's installed solar PV capacity will surge to 217 gigawatts, 2.5 times the installed capacity in 2022. In terms of wind power installations, 76 GW will be added in 2023, double the number in 2022. Most of the new wind power installations are located in Inner Mongolia, with more than 24 GW of new installed capacity, and Xinjiang and Gansu both have more than 5 GW of new installed capacity. Therefore, it is not surprising that most green hydrogen projects are announced in these regions where large amounts of renewable energy are available.
Provinces with strong solar and wind potential have also announced more ambitious hydrogen production targets. Inner Mongolia, for example, aims to produce 480,000 tonnes of renewable hydrogen per year by 2025, while Gansu has set a target of 200,000 tonnes per year. These provinces are heavyweights in the region's transformation, significantly influencing the aforementioned target of 1 million and contributing greatly to China's hydrogen production in the region.
Despite the recent commissioning of several projects, there are still challenges in ensuring that electrolyser facilities in China are operating at full capacity. A major bottleneck is the large amount of renewable energy required to power electrolyzers. For example, producing 1 million mt/year of green hydrogen requires about 20 gigawatts of onshore wind capacity. As a result, hydrogen projects are in direct competition with China's other substantial electrification needs.
Operating an electrolyzer below nameplate capacity can lead to a safety risk. Most alkaline electrolyzers currently used in China operate in the range of between 30% and 100% of nameplate production. Therefore, if the available electricity limits the production of hydrogen to less than 30% of its maximum capacity, then the electrolyzer will be shut down for safety reasons. This prevents gas mixing and potential explosions, which are more likely to occur when the electrolyzer is operating below the nameplate capacity.
Despite these challenges, Resta Energy expects China's share of green hydrogen to continue to grow, especially as China is installing new electrolysis capacity at a world-leading rate every year, similar to the trajectory of China's continued leadership in the solar PV and wind energy sectors. By 2030, China's four largest projects will account for half of China's total green hydrogen capacity.
About Resta Energy:
Resta Energy is a leading global independent research and energy intelligence company dedicated to helping customers navigate the future of energy. By providing high-quality data and thought leadership, our international team empowers businesses, governments, and organizations to make informed decisions.
Our broad portfolio of products and solutions covers all aspects of global energy fundamentals, covering all corners of the oil and gas industry, renewable energy, clean technology, supply chain and power markets. Headquartered in Oslo, Norway, we have a large global network and our data, analytics, consulting and education services provide our clients with a competitive advantage in the market.
To read the latest fuel cell and hydrogen industry news, visit the Fuel Cell Factory