Green Hydrogen in China: A Vital Prospect with Cost Hurdles

China’s hydrogen energy industry is booming, with the China Hydrogen Energy Alliance projecting its value to reach 1 trillion yuan by 2025. Green hydrogen, produced using carbon-free sources, is a key focus for the nation’s hydrogen endeavors. However, while the sector is growing rapidly, cost remains a challenge.

With over 3,060 hydrogen-related enterprises in the country, the industry is expanding rapidly, with more than 130 new companies entering from January to May 2023. Prominent players like Guohong Hydrogen Energy, Jie Hydrogen Technology, Guofu Hydrogen Energy, and Zhongding Hengsheng are eyeing IPOs.

Green hydrogen aligns with the objective of carbon-free energy. While market demand drives hydrogen development, it’s also critical for national growth. Development aligns with China’s energy security and sustainability goals.

Experts stress that hydrogen’s potential is evident in scenarios like petroleum shortages. Green hydrogen could convert to green ammonia, methane, and methanol, replacing fuels for enhanced safety.

Additionally, nurturing the green hydrogen industry could transform abundant wind and solar resources into energy carriers, fueling industrial evolution and energy transition. For instance, regions like Inner Mongolia possess ample wind and solar resources that can be harnessed for green hydrogen, driving local economies.

Despite its promise, the high cost of green hydrogen remains a concern. Projections suggest China will focus on using industrial byproduct hydrogen and renewable energy electrolysis to reduce average hydrogen production costs to around 25 yuan/kg by 2025. This is still higher than gray and blue hydrogen. Experts mentioned that non-green hydrogen costs as low as 9 yuan/kg in Shanxi’s Meijin Hydrogen Station.

Low-cost supply is pivotal for large-scale hydrogen applications. Lack of top-level design and relatively lagging subsidies hinder China’s green hydrogen industry’s cost-effectiveness.

Electricity prices play a pivotal role in cost determination. About 42-43% of electrolysis-based green hydrogen costs stem from electricity. Lower electricity prices are crucial for green hydrogen’s low-cost path.

Engaging in carbon trading can further reduce green hydrogen costs. China Hydrogen Energy Alliance’s Chairman, Liu Guoyue, emphasized green hydrogen’s potential in carbon reduction, especially for challenging sectors like transportation, chemicals, and steel.

Overall, hydrogen energy, especially green hydrogen, holds immense potential. Forecasts suggest that by 2025 or 2026, hydrogen fuel cell costs could rival lithium-ion battery costs. The sector’s cost trajectory remains promising, with estimates indicating hydrogen production costs could drop to around 20 yuan/kg by 2030 and 10 yuan/kg by 2050, propelled by renewable energy growth.