By the end of the year, China will be producing more hydrogen than the rest of the world combined, according to an analysis by Rystad Energy, a global independent research and energy intelligence company.
1. Hydrogen production potential
In early 2022, China’s National Development and Reform Commission released its national hydrogen plan, acting as a roadmap for the county’s hydrogen goals from 2021 to 2035, with its production targets currently being met with relative ease. The plan allocates 2.5 gigawatts (GW) for the production of green hydrogen, which, it estimates, will generate 200,000 tonnes per annum (tpa) by the end of 2025.
Rystad Energy however predicts that the target will already be exceeded this year and, at 220,000 tpa, will be 6,000 tpa more than the rest of the world combined. Nevertheless, the company points out that a substantial portion of the country’s hydrogen supply is derived from grey hydrogen, produced through coal gasification or steam methane reforming, rather than strictly renewable energy.
“While China’s proposed standards and solutions represent progress, they currently fall short of the more stringent benchmarks set by European counterparts. The ambiguity surrounding the definitions of ‘low carbon’ and ‘renewable’ hydrogen within China’s policies is a notable concern”, said Rystad Energy’s Head of Hydrogen Research, Minh Khoi Le. “To truly catalyse meaningful change, it is imperative for China to adopt clear and stringent definitions that align with global best practices, such as those seen in Europe.”
2. Supply and demand disparities across the country
In 2023, mainland China installed a cumulative 1 GW of electrolyser capacity. However, a geographical disparity exists between the hydrogen demand centres in the east and the abundant solar and wind energy resources in the north and northwest of the country, including Xinjiang, Gansu and Inner Mongolia.
The nation’s solar photovoltaic (PV) capacity surged to 217 GW of new installations in 2023, 2.5 times the amount installed in 2022. For wind installations, 76 GW was added in 2023, double that of 2022. Most new wind installations were in Inner Mongolia, with more than 24 GW of new capacity, and Xinjiang and Gansu, each with over 5 GW of new capacity.
Thus, most of the country’s green hydrogen projects are being set up in these regions which offer abundant renewable capacity. Inner Mongolia and Gansu have set ambitious targets for renewable hydrogen production by 2025, aiming for 480,000 tpa and 200,000 tpa respectively. Their efforts, combined with other provinces, would collectively surpass 1 million tpa, a five-fold increase compared to China’s national target.
However, this has resulted in a supply-demand mismatch across the country, prompting China to explore the expansion of its network of hydrogen pipelines. The country aims to have a functioning 6,000 kilometres network by 2050, developed by China Petroleum Pipeline Engineering Corporation, subsidiary of state-owned oil and gas company Sinopec.
Sinopec is already developing a 400-kilometre pipeline connecting Ulanqab, in Inner Mongolia, to Yanshan, in Beijing. With initial capacity of 100,000 tpa and plans to scale up to 500,000 tpa, this will be the country’s first long-distance hydrogen conduit. Another 737-kilometre pipeline from Zhangjiakou to the port of Caofeidian, via Chengde and Tangshan, is also being developed by Tangshan Haitai New Energy Technology in Hebei. If completed, the $845 million project would be the world’s longest hydrogen pipeline.
3. Not enough renewable energy for green hydrogen and electrification
Moreover, challenges remain in ensuring electrolyser facilities can run at full capacity. A major bottleneck is the significant renewable energy capacity required to power the electrolysers. For example, producing 1 million tpa of green hydrogen requires roughly 20 GW of onshore wind capacity. Consequently, hydrogen projects compete directly with other substantial electrification needs throughout the country.
Operating electrolysers below nameplate capacity can, in turn, lead to safety risks. Most alkaline electrolysers currently used in China have an operating range between 30% and 100% of their nameplate yield. As such, if the power available restricts the production of hydrogen to less than 30% of its maximum capacity, the electrolysers will shut down for safety reasons. This prevents gas mixing and a potential explosion, which is more likely when electrolysers operate below nameplate capacity.
Despite these challenges, Rystad Energy believes the share of green hydrogen to continue growing in China, especially since it is installing new electrolyser capacity “at a world-leading pace every year, a similar trajectory seen in the solar PV and wind industry, which China continues to lead”, the company said in a statement. “By establishing unequivocal standards, China can ensure that its hydrogen initiatives contribute significantly towards a sustainable future, not just domestically but also on a global scale”, Minh Khoi Le concluded.
