Chinese Power Manufacturers: The Hydrogen Transition

The three power generation manufacturing giants in China (Dongfang Electric, Shanghai Electric, and Harbin Electric) are moving towards hydrogen. 

The trio is known for their dominant position in the traditional power market, as leaders in coal, hydro, nuclear, to wind power equipment manufacturing. But they were relatively “new” in the hydrogen scene. 

Nevertheless, since central and local governments in China pledged to foster the Chinese hydrogen market, two of the three have made a speedy strategy transition. 

The participation of these conventional energy players could shake up the game.

Dongfang, Shanghai & Harbin Electric the “Big Three” Power Manufacturers

The three major Chinese electricity equipment makers are “old stagers” in China’s power sector. 

All three are state-owned enterprises (SOEs). The Sichuan-based Dongfang Electric and Heilongjiang-based Harbin Electric are central government-owned (CSOEs), whereas the Shanghai provincial government owns Shanghai Electric. 

The “Big Three” have played a vital role in China’s power industry development. The Chengdu-headquartered Dongfang Electric, for instance, is critical to China’s hydropower construction. 

They are also the only players with business footprints in all conventional power sub-sectors from hydro, coal-fired, gas, nuclear, and wind.

The trio is the only pl have a long-standing cooperation relation with China’s major power utilities. It is often the power utilities who approach these electricity equipment suppliers for new equipment R&Ds. For instance, Dongfang Electric’s 10MW offshore wind turbine—the first-of-this-kind in China—was initiated by China Three Gorges. A similar pattern is also found in their involvement in developing the 3rd Gen nuclear RCPs. 

Despite the solid market positioning, the two CSOEs are considered with heavier “historical” and “social burden.” In terms of financial yields, they are outperformed by some of the other listed electric manufacturers—OEMs leading in one specific energy business.

Conventional Power Makers’ Transitions to Clean Energy

Amid China’s rapid changes in terms of power policy and market transition, the trio is naturally moving to cleaner energy, with slightly different focuses. 

Renewable (and nuclear) has been the standard choice of the three. However, the results of their attempts have been different.  

DEC—a Leader in Hydro and R&Ds 

  • The Chengdu-based firm has strong expertise in hydropower and gas equipment and is a key supplier of nuclear island’s steam generator. 
  • The company, notably, is with a strong technology background in developing turbines. It has been investing over ¥1 bn in R&D for ten consecutive years since 2011—a record that stands out among the three. 
  • Despite a latecomer to China’s wind power scene, DEC in 2019/2020 made a historic breakthrough in the offshore wind market by developing a 10-MW turbine that is first of its kind in the Asia Pacific. This breakthrough would ensure its competitiveness in the blue ocean market where currently has just a handful of OEM players.’

SEC—Leading in Nuclear, Offshore Wind and Gas

The firm has become a leader in supplying critical nuclear, gas and offshore wind equipment, thanks to its active international cooperation strategy.   

In nuclear, it has teamed with KSB of Germany in developing Gen III RCPs. Its partnership with Ansaldo Energia of Italy has helped SEC’s positioning in the gas turbine market. 

In offshore wind, the group has been the No.1 offshore wind turbine supplier in China, thanks to its technology cooperation with Siemens Gamesa. That position then brought the firm some 10GW offshore wind project development right in the south of China. 

Meanwhile, notably, SEC stands out from the other two rivalries, with a strong power engineering EPC business next to its equipment manufacturing and its cooperations with vital international players.

HEC—Slow Transition from Thermal Power

Compared to its peers, HEC has been slower in its transition from the coal-fired power sector. 

Nevertheless, HEC is one of the two developers of a Gen III reactor RCPs with IT transferred from Westinghouse. 

  • Despite tiptoeing into the wind market as early as in the 1990s, HEC left the wind market for some time. Recently, by acquiring XEMC, the firm shows some interest in heading back to the wind sector where competition has become red-ocean.
  • Executives of HEC in 2020 expressed determination to speed up the firm’s energy transition to the renewable and new energy sector. However, its next steps remain to be seen. 

The Hydrogen Moves of the Three Chinese Power Manufacturers

Amidst China’s “hydrogen boom,” the trio began to look into the new market’s business potential. 

DEC took the lead in hydrogen fuel cells since 2010 and has established its technology knowhow of fuel cell system.

DEC: One Step Ahead in Hydrogen

  • In 2018, DEC’s proprietary FCB was enlisted on the Ministry of Industry and Information Technology’s (MIIT’s) catalogue of new energy vehicles.
  • In 2019, DEC’s automatic hydrogen fuel cell production facility became operational in Chengdu, capable of producing 1,000 hydrogen fuel cell engines annually.
  • In 2020, DEC issued new shares to investors to introduce new capital. The funding raised would be spent on fuel cell stake technology R&D. This is a critical move of DEC in the hydrogen fuel cell sector.
  • Currently, DEC has provided engine systems and technical services to 100+ FCBs in Chengdu. These buses have put in more than 4 million KM in clean, emission-free service to the public, with a maximum mileage of nearly 120,000 kilometres. The hydrogen consumption and other key indicators are leading domestically. 

Against the backdrop of China’s 2020 hydrogen subsidy policy (Read more on our report of the policy: 2020 China Fuel Cell Subsidy Design) and the 14th Five-Year Plan, DEC would:

  • Support Sichuan’s five-year hydrogen energy development plan 2020-2025.
  • Further research and develop hydrogen fuel cell vehicles, e.g., cooperate with the China Automotive Technology and Research Center on setting industry standards, testing and certification, hydrogen energy research, etc.
  • Cooperate with local municipalities on hydrogen energy industry development. E.g., Cooperate with Nanjing Municipal Government (of Jiangsu Province) for fostering local hydrogen industry.

SEC: Combining RE and H2

SEC focuses on the fuel cell system-stack-membrane electrode industrial chain since the establishment of its energy storage and fuel cell business unit in 2018. It has achieved promising progress. 

  • The company announced it has successfully developed fuel cell engine systems, stacks and membrane electrode technologies and products with completely independent intellectual property rights. 
  • SEC China forged closer links with National Offshore Oil Corp. (CNOOC) on offshore wind-based green hydrogen technology.

SEC’s recent movements reflect the company’s ambition to cultivate a new energy industry ecology that integrates “generation-grid-load-storage” (源网荷储氢一体化) with hydrogen energy as the main medium.

  • In Dec. 2020, SEC secured two “generation-grid-load-storage-hydrogen” integration demo projects. One is in Ningdong Energy and Chemical Industry Base in Ningxia Autonomous Region, and the other is with Ordos City of Inner Mongolia. 
  • The Ningdong demo project would integrate hydrogen production-and-storage, green chemical/metallurgical industry chain, and hydrogen fuel cell heavy truck demonstration. 
  • Similarly, the Ordos demo project would create a pilot demonstration of the entire industry chain, covering hydrogen production, storage, transportation, and utilization. 

HEC: Not Fully Committed Just Yet

HEC is looking for a new way out for energy transition. HEC’s chairman averred in 2019 that the company would not resort to hydrogen for the energy transition. Instead, it will turn to biomass solutions. 

However, HEC’s recent movements indicate the company is getting active in H2 industry in north-eastern China. 

  • In Jun. 2020, HEC signed a cooperation agreement with the Heilongjiang Provincial Government to promote new energy industries including wind, solar, and hydrogen energy. 
  • Soon after reaching a cooperation agreement with the Heilongjiang Provincial Government, HEC started reaching out for hydrogen fuel cell experts. For instance, representatives of HEC visited the Dalian Institute of Chemical Physics Chinese Academy of Sciences (Institute) and discussed cooperation modes in the new energy sector. 
  • In Nov. this year, HEC reached cooperation intention with Baotailong New Materials, and Qitaihe Municipal Government of Heilongjiang Province to develop new energy sectors such as hydrogen, wind, and solar energy, as well as battery storage.