INSIGHTS | China looks beyond EVs

A little over a decade ago, China’s leaders laid out plans to become the world’s biggest market for electric vehicles (EVs). The country was late in producing gas-driven cars, putting it behind the US, Japan, and Germany. In 2009, China introduced subsidies for EVs in the hope that these vehicles could take the lead in the next generation of cars. Now, observers ask if hydrogen is next.

China’s EV push worked—the country is now the world’s largest market for EVs and is home to some of the world’s largest manufacturers of EVs and EV batteries.

Now, the government and some of China’s biggest energy companies are jumping into hydrogen energy. More than 10 state-owned energy companies including Sinopec and State Grid have plans to increase the use of hydrogen energy in the country.

While China has a well-developed EV industry, the country is looking for new ways to cut emissions. The government doesn’t want to “put all its eggs in one basket with battery EVs,” Tu Le, managing director of Beijing-based consultancy Sino Auto Insights, told TechNode. 

In September, Chinese President Xi Jinjing revealed plans for China to reach peak emissions by 2030 and hit carbon neutrality by 2060. Hydrogen fuel, which can be used in applications from industrial processes to transportation, could form a linchpin in reaching this goal. The technology could allow China to move away from fossil fuels as the cost of producing clean hydrogen drops. 

“Hydrogen is now expected to play a much more important role to drastically decrease [China]’s greenhouse gas emissions over time,” Tu Jianjun, adjunct professor at the School of Environment at Beijing Normal University, wrote in a paper late last year. 

Bottom line: China’s hydrogen energy sector could see massive growth in the next 30 years. The country’s commercial vehicle sector is likely to see the biggest benefit from the technology. 

• The country already produces 20 million tons of hydrogen annually, around a third of the world’s total, according to a report by the Beijing-based think tank Green Belt and Road Initiative Center. 
• Little of that goes towards energy use, and, despite the promise of the zero-emission technology, it’s going to be a long road to mass adoption. Currently, the majority of China’s hydrogen comes from fossil fuels, which contributes to the country’s carbon emissions. 

What is hydrogen power? Hydrogen fuels cells are a dense, efficient, and clean form of energy storage. Use power to isolate the gas, and then you can deploy it to power a car in a reaction that’s cleaner than fossil fuels and requires less heavy equipment than battery electrics. It even has applications in energy-intensive industries like the steel sector. One of the most popular prospects at the moment is fuel cell electric vehicles (FCEV).

• These vehicles use hydrogen as fuel. Unlike battery-powered electric cars, they don’t rely on electricity from the grid. Instead, these cars combine hydrogen and oxygen to produce electricity. 
• Energy released from the gas is clean. So clean, in fact, that while petrol-driven cars release a myriad of dangerous greenhouse gases, the byproduct of hydrogen power is water. 
• Hydrogen is also well-suited to high-temperature industrial processes, and the technology could significantly reduce the sector’s carbon footprint, particularly if the hydrogen is produced using renewable energy. 

The element is rarely found in its pure form and needs to be extracted from water, coal, or natural gas. But producing it in an environmentally friendly way is currently expensive, preventing wider use until the issue is dealt with. 

China eyes hydrogen: After being delayed last year, a national plan for hydrogen is expected at some point in 2021. Already, several whitepapers and planning documents have laid out goals to decrease emissions and increase hydrogen energy adoption. Until recently, China’s interest in developing its hydrogen economy was not driven by an ambition to cut emissions. 

• The country should increase the number of fuel cell electric vehicles (FCEV) on its roads from 5,000 in 2020 to 1 million in 2030, the China Automotive Technology and Research Center (CATARC), a research institute overseen by the State Council, said in 2017. 
• The country should increase its hydrogen refueling infrastructure from 100 stations in 2020 to 1,000 in 2030, the CATARC said.
• The technology should make up 10% of China’s total energy mix by 2050, up from 2.7% in 2019, China Hydrogen Alliance, which is supervised by the National Energy Administration (NEA) and the National Development and Reform Commision (NDRC), said in its 2019 whitepaper. 
• At the same time, revenue from China’s hydrogen economy should reach $1.7 trillion by 2050, up from $42.5 billion in 2019, the group said. 
• The 13th five-year plan for energy issued by the NDRC and the NEA in 2016 promotes hydrogen production pilots and R&D into fuel cells. 

Localized developments: Despite the lack of a national plan, Beijing has encouraged local governments to develop and fund their own hydrogen industries. But these plans are often far more optimistic in their targets than industry expectations, Yuki Yu, founder of Energy Iceberg, wrote in a report. 

• Yu added up figures from just seven of the around 50 regional governments that released hydrogen plans by late 2019. In total, they planned on a total of 15,000 FCEVs by 2020, much higher than CATARC’s 5,000. 
• Recently, the southern province of Guangdong announced (in Chinese) several hydrogen energy and fuel cell projects worth a combined RMB 60 billion. 

“Anytime the Chinese government puts the thumb on the scale, there’s going to be 200 or 300 companies globally that come with their hand out.” 

Tu Le, managing director of Sino Auto Insights

Better than batteries? But China has bet big on competing technology. The country spent billions building its electric vehicle industry. Government subsidies led to the rise of some of the biggest EV companies in the world, and made China the world’s number one market for these types of vehicles. 

• Batteries present significant problems when they reach the end of their lifespan. Recycling facilities will need to see higher rollout to deal with this issue.
• Compared with batteries that are currently used in EVs, hydrogen fuel cells are energy dense. 
• Depending on the grading of a charging pile, EVs can take a long time to refuel.
• Fuel cell vehicles don’t share this problem. They refuel much like their gas-driven counterparts, a process that typically takes a few minutes. 

A brief timeline: China’s drive to use hydrogen for power has been years in the making. The country’s ambitions were initially set out as part of its Made in China 2025 plan. There has been a lot of action in the industry over the past few years, and things appear to be picking up pace. 

• May 2015: China’s Premier Li Keqiang outlines the county’s Made in China 2025 plan, which includes mentions of fuel cell vehicles. 
• June 2017: China’s transport and science ministries releases plans to promote research and development into fuel cell technologies and hydrogen infrastructure.
• June 2019: Wan Gang, a former science and technology minister—the same man who two decades ago convinced Beijing to pursue its EV industry—says the country needs to “look into establishing a hydrogen society.”
• June 2019: During the same month, the China Hydrogen Alliance releases a landmark white paper on the country’s hydrogen industry. The document is widely regarded as a key document that explains the government’s goals in developing its hydrogen power and fuel cell industries.
• April 2020: China releases a new draft Energy Law, classifying the gas as an energy source rather than a hazardous chemical. This classification previously limited its applications in energy.
• September 2020: SAIC, China’s largest automaker, announces plans to release 10 fuel cell vehicles by 2025, with production capacity hitting 10,000 vehicles in the same year. 
• March 2021: At this years’ Two Sessions, Ma Yongshen, president of China’s largest oil company Sinopec, calls for the country to focus on producing environmentally friendly hydrogen. Ma’s views were echoed by Li Chan, an academician at the Chinese Academy of Sciences. 
• March 2021: Following Ma’s speech, Sinopec says in an earnings call on March 29 that it would step up investment in the technology by building 1,000 hydrogen refueling stations that also sell conventional fuels by 2025, without specifying how much it would invest. 
• April 2021: Nearly 20 clusters of Chinese cities submit applications for a central government scheme to finance building hydrogen infrastructure and demonstration areas in the hopes of making fuel cells commercially viable. 
• April 2021: The Beijing government releases draft plans to deploy 10,000 fuel cell vehicles on its roads and build 74 refuelling stations by 2025.

What’s the potential? In China, buses and trucks will likely come first. The policy environment currently favors using fuel cells in heavier, commercial vehicles rather than passenger cars, Energy Iceberg’s Yu said.

• Experts TechNode spoke to didn’t doubt the potential of the technology, but expressed concerns over mass adoption. 
• “Right now, EVs are at least ten years ahead of fuel cell vehicles. There is a lot of existing infrastructure, so right now it will be really hard for fuel cells to compete,” Yu said. 
• Hydrogen is better suited than battery power for vehicles that have high utilization rates, like buses and trucks. “It doesn’t make sense to have a fleet of buses that are just parked because they are being charged,” Tu Le, managing director of Beijing-based consultancy Sino Auto Insights, told TechNode. 

Dirty secrets: Hydrogen is only as clean as the process used to produce it. The element is rarely found in its pure form, and typically needs to be extracted from fossil fuels or water. Depending on how it is produced, it can be completely clean or release harmful gases. 

• The majority of hydrogen in China is manufactured using natural gas or coal, known as “grey hydrogen.”
• Grey hydrogen is primarily produced in coal or oil-based plants in refineries., representing a major hurdle that faces the industry.

Cleanup in aisle H: The industry needs a cleanup to achieve its green potential.

• The cleanest, known as “green hydrogen” comes from separating water into hydrogen and oxygen using electricity generated from renewable sources. This form of production is seen as vital to dramatically reducing carbon emissions but is expensive given how much renewable energy is needed. 
• Meanwhile, “blue hydrogen” is produced in the same way as grey hydrogen, but around 50% of the carbon produced is captured and stored underground. 
• According to the Hydrogen Council, the price of green hydrogen is expected to halve in the next ten years. 

“More than 80% of hydrogen produced in China is grey. But we see a growing number of green hydrogen projects being launched. In 2018, there were probably just one or two projects, but last year, at least 30 were announced.” 

Yuki Yu, founder of Energy Iceberg

What next? China has a history of rapidly developing domestic industries after choosing them key development priorities. The country’s EV and solar industries are a testament of this. Hydrogen energy is likely to be next. Development—and funding—will likely accelerate once a national plan is rolled out. 

• Beijing has already launched a subsidy system, in which it encourages cities to form alliances to develop hydrogen supply chains. 
• The subsidies are similar to the approach China took when developing its EV industry, and the developments that result will likely spillover into the global hydrogen economy. 

READ MORE: Little mention of China’s EV industry in Five-Year Plan bodes well: experts

Big opportunities: Hydrogen has big potential, but it will take big investments to bring the technology to widespread use. Oliver Bishop, general manager of hydrogen at petroleum giant Shell, told Green Tech Media that China is expected to play an important role in the global hydrogen economy, with large scale deployments meaning cheaper costs around the world. 

China’s leadership in the hydrogen economy hinges on whether it can clean up its hydrogen production processes—and convince the world that electric vehicles are not the only way. 

“There needs to be private enterprise appetite to diversify out of battery electrics, which are already doing research into batteries and infrastructure,” Tu said.