China’s Green Hydrogen Projects: Exponential Growth Begins

Keeping track of China’s green hydrogen projects is becoming hard. 

We saw explosive growth of new green hydrogen projects in the first quarter of 2021. 

For investors, technology suppliers, and developers hoping to get a foothold in the Chinese green hydrogen bloom, this is the time to pay serious attention. 

China Power-to-Gas: 50+ Projects and $20B

According to Energy Iceberg’s intelligence database, China already has +50 green hydrogen production projects by the end of May 2021. 

The total investment size of these project, as we estimate, is over ¥110 billion.

Only five projects have so far entered into the operational stage, most of which are in Zhangjiakou city of Hebei—a critical wind power production hub near Beijing. 

More than a quarter of the 50+ power-to-gas projects are new plans announced in the past three months. 

The majority of the 50+ projects are with the onshore wind (mounted) and PV (mounted and distributed) generations. Nevertheless, projects based on offshore wind, biomass, hydropower and waste treatment to produce green hydrogen gas have also surfaced. 

The list of +50 only includes renewable power-to-gas projects, excluding industry by-product gas recovery facilities.

China Green Hydrogen Applications: More than FCEVs 

China’s green hydrogen demand-side market, which applies green hydrogen gas, is developing at a slower pace. 

With 50+ gas production projects announced and much more on the way, whether all of the green gas production capacity could find their market fit remains a question. 

The five operating power-to-gas projects are set to supply gas to the nearby public fuel cell transportation (FCEV) demonstrations. However, not all the new PtG projects have access to the FCEV refuelling market. 

Heavy industry process, therefore, offers alternative market options for green hydrogen’s application. We notice that major Chinese state-owned industry players are getting more keen on utilizing green hydrogen in —from steelmaking, chemical production to other transportation demonstrations (shipping, harbour and mining etc.). 

We expect first to witness the development of some regional green hydrogen markets in the following years. The development will centre around the FCEV technology demonstration hubs (Beijing, Shanghai, Guangdong, Hebei, Henan, Shandong, Zhejiang etc.) 

China Green Hydrogen Players: New Partners Emerging

On Mar., LONGi, the world’s largest Monocrystalline silicon wafers maker, announced to set up a hydrogen technology joint venture with a Shanghai-based private equity Rosefinch Investment. 

The news is a phenomenal event that marks the growing investment interest in the green hydrogen market. It also heralds the array of new investors (developers) rushing to this sizzlingly hot market. 

Up till the end of last year, state-owned power generation companies are currently leading the power-to-gas development. 

These are also the largest renewable power developers in China. As the Chinese renewable power market sets to double its size (to terawatt size) in five years, the renewable developers see power-to-gas as a potential solution for the looming renewable curtailment issue. 

New players are stepping into the “blue ocean” market fast, our hydrogen deal-watch database shows. 

The new green hydrogen developers include:

• Private solar manufacturer: LONGi’s investment has stirred up the market. Its competitor Sungrow has been setting foot in power-to-gas for some time, with four PtG investment concluded between 2019-2020. 
• Private wind power OEMs: Ming Yang—the Guangdong based turbine maker with significant success in China’s offshore wind bloom—reveals intention to develop hydrogen and energy storage businesses. Ming Yang’s competitor in wind power—especially Dongfang Electric—have been way ahead in developing electrolysis equipment.  
• National oil companies: CNPC and Sinopec are both advancing deals regarding renewable power-to-gas projects. 

Investment Trend on Green Hydrogen: Carry on

Indeed the nascent industry faces many challenges, among which the absence of a national policy framework for green hydrogen remains an uncertain factor and limits the competitiveness of green hydrogen. 

And the “hype” to invest in green hydrogen projects still face the uncertainty of lacking a clear business model.  

Nevertheless, we expect the green hydrogen investment trend to continue and speed up in the coming 1-2 years. This is because green hydrogen development is in line with several energy policy factors in China. 

• Renewable grid-parity and curtailment: as mentioned, renewable developers face the “double-whammies” of declining electricity prices and looming power curtailment.
• Industry Capacity Capping policy: Beijing’s stricter measure to cap capacity (such as in iron&steel and coal-to-chemical) would spur the adoption of green applications. 
• Energy storage policy: the recent emphasis on fostering a 20GW size energy storage market provides another policy momentum for green hydrogen projects. The set-up of storage pricing in the electricity market is a positive note to the burgeoning PtG scene. 
• 30/60 Target: the 2030 carbon emission peak and 2060 carbon neutrality require green or blue hydrogen–instead of the existing grey gas sources.   

In short, China’s green hydrogen market is expected to see capacity increase exponentially. The time window left for new investment, suppliers, and developers to secure a foothold is short.