China is widely recognised as a global leader in clean-energy technologies, controlling over 60 percent of global manufacturing in every step of the solar supply chain and being home to five of the world’s top 10 wind turbine manufacturers. It leads the world in lithium-ion batteries, bio-power, hydropower, solar water heating, and geothermal heat output[1]. Given Chinese leaders’ pledge in September 2020 that the country would reach carbon neutrality by 2060 and the importance hydrogen is set to play in fulfilling that goal, all eyes are on China to develop and scale hydrogen technologies.
China’s 2060 pledge is driven by climate and industrial policies, boding well for hydrogen
Even though carbon neutrality is now clearly regarded as the general goal, requiring a rapid electrification of end-uses and a massive increase in renewables, there is still considerable uncertainty about how to get there. The role of different fuels and technologies are all open questions[2]. In light of China’s efforts to develop its technological capabilities and remain a leading supplier of global clean-tech, hydrogen will be key in China’s path to carbon neutrality. Indeed, hydrogen was listed in the country’s latest five-year plan (14th Five Year Plan, FYP, 2021-2025) under the emerging industries that decision-makers see as a priority. Given that these designations lead to statesupport in the form of capital and human resources, the focus on hydrogen bodes well for its development.
Shifting focus
To be sure, China is no newcomer to hydrogen development. In fact, the country’s hydrogen production was estimated at 22 million tonnes (Mt) by the China Hydrogen Alliance in 2019[3], making it the world’s largest producer. However, unlike many other countries where steam methane reforming (SMR) is the dominant production route, coal remains the most common feedstock for hydrogen in China
Policies aimed at developing hydrogen date back to the 10th Five Year Plan (2001-2005) with a focus on the transport sector, as the growth of the Chinese car market and the related oil demand was deemed a source of strategic vulnerability. In 2016, China released its first Hydrogen Fuel Cell Vehicle (FCV) Technology Roadmap, aiming for mass application of hydrogen in the transport sector by 2030. The Roadmap included interim targets to have 5,000 FCVs in demonstration alongside 100 hydrogen refuelling stations (HRS) by 2020. By the first half of 2020, just under 7,000 FCVs had been sold in China and 72 HRS were in operation. The Roadmap also envisions over 1 million FCVs by 2030 and over 1,000 stations by 2030, by which time 50 per cent of hydrogen production is expected to come from renewable sources.
Nonetheless, these ambitions are already being broadened and accelerated: already in April 2020, in preparation for the 14th FYP, the National Energy Administration highlighted the need to combine new technologies, such as energy storage and hydrogen energy, in order to increase the proportion of renewable energy in regional energy supplies. In that vein, a number of policy documents were released in 2020, emphasising hydrogen-related standards but also capacity-building in basic research.
Challenges on the road to becoming a hydrogen superpower
While hydrogen is gaining momentum in China, increasingly with a view to expanding applications beyond the transport sector, the 14th FYP framework was light on detail. Industrial as well as provincial plans will offer further details while concerted state-led efforts will help the development and deployment of new technologies. Yet, there are a number of challenges that suggest China’s path to hydrogen development will be far from smooth.
First, hydrogen is classified in China as a hazardous material, so its production, transportation, refuelling, and storage are strictly regulated resulting in low transportation efficiencies and high costs.
Second, while hydrogen has been designated as a key technology to develop in the energy vehicle market, the government has promoted electric vehicles (EVs) more aggressively. Compared to 7,000 FCVs sold in China by mid-2020, the cumulative stock of EVs exceeded 4 million units.
Third, China currently lacks the key technologies to enable renewables-based hydrogen production, and it lags behind advanced economies in hydrogen storage and transport technologies as well as in manufacturing capacity for key materials. Even for FCVs, China still relies on imports of key materials. Indeed, in the development of PV panels and wind technologies, China’s clean-energy entrepreneurs relied on partnerships with foreign firms to access new technologies, rather than their own R&D. They then focused on shaving production costs, thereby generating cost-cutting innovations in the manufacturing process. But growing international concern about China’s business practices and the race for technological dominance could constrain the flow of these materials to China and limit Western investments in the country. Even though China’s 14th FYP, in recognition of these trends, stresses technological self-sufficiency and efforts to develop break-through technologies, this could take time.
In light of China’s 2060 pledge and the expected increase in renewables, water electrolysis powered by electricity sourced from renewables is likely to become the major source of China’s hydrogen supply. Similarly, renewable electricity used in green hydrogen will rise, driving renewables growth and helping solve some of China’s curtailment issues.
Regional blueprints will be released over the next few monthswhile a national development strategy could also be issued as part of the 14th FYP development agenda. It is clear that there is growing momentum behind hydrogen applications in China and a gradual shift from grey hydrogen to blue and green hydrogen.While China’s state power can be formidable and will help develop hydrogen technologies and applications, there are also challenges. As such, it is too soon to assume that China has won the hydrogen race.
[1] Barbara Finamore, “Clean tech innovation in China and its impact on the geopolitics of the energy transition”, Oxford Energy Forum 126, “The Geopolitics of Energy: Out with the Old and in with the New?”, https://www.oxfordenergy.org/publications/oxford-energy-forum-the-geopol...
[2] For a discussion on the carbon neutrality pledge see Michal Meidan, “Unpacking China’s 2060 carbon neutrality pledge”, Oxford Energy Comment, December 2020, https://www.oxfordenergy.org/publications/unpacking-chinas-2060-carbon-n...
[3] China Hydrogen Energy and Fuel Cell Industry White Paper 2019 (Chinese) http://www.h2cn.org/Uploads/File/2019/07/25/u5d396adeac15e.pdf
