In recent years, with the promotion of relevant policies and the active participation of industries, China's hydrogen energy industry has ushered in rapid development. However, overall, as it is still in the early stages of development and the cost of green hydrogen is relatively high, economics has become one of the key issues restricting the large-scale development of the hydrogen energy industry.

Recently, the "2024 Guiding Opinions on Energy Work" issued by the National Energy Administration pointed out that new energy formats and new models should be accelerated. Formulate relevant policies to accelerate the high-quality development of the hydrogen energy industry, promote hydrogen energy technology innovation and industrial development in an orderly manner, steadily carry out hydrogen energy pilot demonstrations, focus on the development of renewable energy hydrogen production, and expand hydrogen energy application scenarios.

As a clean zero-carbon energy source, hydrogen energy is considered to be a potential decarbonization fuel in the future. In recent years, with the promotion of relevant policies and the active participation of industries, China's hydrogen energy industry has ushered in rapid development. However, overall, as it is still in the early stages of development and the cost of green hydrogen is relatively high, economics has become one of the key issues restricting the large-scale development of the hydrogen energy industry.

Projects continue to grow

Zheshang Securities Research Report pointed out that under the two-wheel drive of the construction of new power systems and the green transformation of traditional industries, the green hydrogen market will increase greatly in the future. "It is estimated that by around 2060, China's total annual hydrogen demand will be approximately 130 million tons, and the proportion of hydrogen production from renewable energy electrolysis from water will exceed 70%, becoming the main body of effective hydrogen supply. The long-term, large-capacity energy storage and peak shaving of the power system with renewable energy as the main body will contribute to the power output of the renewable energy hydrogen production industry, and the steel, chemical, cement, transportation and other industries will release large-scale hydrogen energy consumption demand potential will become the two main driving forces for the future development of the renewable energy hydrogen production industry.”

Thanks to large future market demand expectations, in recent years, the number of green hydrogen demonstration projects in China has continued to grow, and hydrogen production from electrolyzed water has entered a new stage of large-scale demonstration.

In August 2023, China's first 10,000-ton photovoltaic power generation direct production of green hydrogen project-Xinjiang Kuqa Green Hydrogen Demonstration Project was fully completed and put into operation. It is understood that as the supporting photovoltaic power station achieves full-capacity grid connection, the project can produce green hydrogen at full capacity, producing 20,000 tons of green hydrogen every year, which is used to replace natural gas used in refining and processing to produce hydrogen, realizing modern oil products processing and Green hydrogen coupling low-carbon development, and the full completion and operation mark a breakthrough in China's green hydrogen industrialization and scale application. As of December 21 last year, the Kuche Green Hydrogen Demonstration Project in Xinjiang has been running smoothly for 4200 hours, transporting a total of 22.36 million cubic meters of green hydrogen to Tahe Refining and Refining.

Statistics from the Hydrogen Energy Branch of the China-China Manufacturing Development Association show that in 2023, the total number of green hydrogen projects signed, approved and announced in China will reach 74, and the total planned investment of the project will exceed 470 billion yuan. New green hydrogen will be added after all are put into operation. The production capacity will reach 2.8 million tons/year, and it is expected that by the end of 2024, the number of new green hydrogen projects will exceed 100.

Reducing costs is the top priority

At present, China's green hydrogen industry is still in the early stages of development, mainly demonstration projects and are not economical. From the industry's perspective, the high cost of green hydrogen is currently the main problem restricting the large-scale development of the hydrogen energy industry.

Tang Cheng, an associate researcher in the Department of Chemical Engineering at Tsinghua University, previously pointed out in an interview with a reporter from China Energy News that the current cost of hydrogen production by electrolyzing water is still high, 3-5 times that of hydrogen production from fossil energy, and the existing mature electrolytic cell equipment is sensitive to fluctuations. Photovoltaic and wind power are poor, mainly mainly based on commercial power, and not green hydrogen in the true sense.

Wang Jijie, a researcher at the Dalian Institute of Chemical Physics, Chinese Academy of Sciences, pointed out that overall, among the cost composition of green hydrogen, electricity bills account for 70%, and equipment investment and other operating costs account for 30%. In Inner Mongolia, Gansu, Ningxia, Qinghai, and Xinjiang, which have good scenery resources in the west, photovoltaic power generation is already less than 2 cents per kilowatt-hour, and wind power is slightly higher. If calculated based on the hydrogen consumption of 5 kilowatt-hours, the overall cost of making hydrogen on the first side is about 1.4 yuan, while the cost of hydrogen production from coal is about 0.6-0.8 yuan per side. In addition, due to the intermittent nature of renewable energy power generation, the continuity of production cannot be guaranteed. Therefore, some projects now use part of the electricity supply to keep the electrolytic cell running as continuously as possible, which makes the cost higher, and this will also result in the hydrogen produced not being green hydrogen in the true sense.

Fu Xiaolong, vice president of Beijing Tsinghua Industrial Development Research Institute and general manager of Shuimu Mingtuo (Damao) Hydrogen Energy Technology Co., Ltd., recently pointed out in an interview with China Energy News and other media that in the overall industry investment, there is a lack of capital or insufficient investment. The situation is still very obvious. "In the early stage of industry development, when companies pay high investment costs, who will pay for the green premium of green hydrogen? At present, such capital is lacking."

Therefore, in Fu Xiaolong's view, the first thing to do is to solve the cost problem of green hydrogen, reduce the cost as much as possible, and at the same time, we must negotiate green premiums with the global market. Only when these two matters are solved can the business logic of green hydrogen be established.

Continue to promote technology and business model innovation

How to solve the current economic problems that restrict the development of the green hydrogen industry?

Many industry insiders pointed out that, first of all, on the production side, we must continue to promote technological innovation in hydrogen production by electrolysis of water to improve the scale, efficiency and stability of green hydrogen production; in addition, we should pay more complete attention to the overall relationship between production and application, and continue to explore Innovative business models promote the joint efforts of the production side and the application side from the perspective of the entire industry chain.

"In order to adapt to large-scale hydrogen production from renewable energy, large-scale electrolytic cells, reducing hydrogen production power consumption, increasing operating regulation range, and increasing life are technological development trends." Wang Jinyi, director of the Hydrogen Energy Technology Department of the Clean Energy Technology Research Institute of China Huaneng Group, pointed out that basic research and development of core materials plays a key role in the process of achieving low power consumption, high pressure resistance and large-scale PEM electrolyzers.

In addition, from the application side, to reduce the cost of green hydrogen, it is crucial to reduce the cost of intermediate storage and transportation links. In Fu Xiaolong's view, hydrogen, as the element with the lightest molecular weight, is very difficult to transport, while methanol, ammonia, etc. are good hydrogen carriers. In the intermediate link, hydrogen is converted into methanol or ammonia that is convenient for transportation, and then converted into hydrogen in terminal applications is a good solution.

Cheng Jinglei, former chief engineer of SAIC Motor Group and chairman of Yanghydrogen Group, also said that the basic logic of developing hydrogen energy is to find mainstream solutions that can connect traditional energy, renewable wind and solar power and hydrogen energy. This solution must be carbon cycle and renewable. For bulk energy sources, hydrogen-based energy represented by green methanol is the first choice. "On the production side, energy and chemical industry couples green hydrogen and carbon dioxide to prepare green methanol on a large scale, green energy and green processes are used to produce green products, and long-distance transportation and large-scale, high-efficiency and low-cost application of hydrogen in the circulation field are realized; On the application side, hydrogen is efficiently produced through methanol reforming to achieve 'ready-to-use', forming an effective commercial closed loop and promoting the widespread application of hydrogen energy at low cost."