Infrastructure development for “green” hydrogen is proceeding rapidly in China as the country aims to exploit its extensive generation capacity in renewable energy to get ahead of Western countries in production and transport.
Authorities in the Inner Mongolian city of Ulanqab—known for its expansive grasslands—approved this January a RMB 20.5 billion (USD 2.9 billion) green hydrogen investment project from oil major China Petroleum and Chemical, or Sinopec.
Electricity generated onsite using solar and wind power will be used to electrolyze water and produce an annual 100,000 tons of green hydrogen. Plans are to supply companies in Beijing, with an aim of being fully operational in June 2027.
This is not Sinopec’s first investment in green hydrogen. In Ordos, Inner Mongolia, it has been proceeding since 2023 with plans to build a plant that will have an annual output capacity of 30,000 tons and include storage and transportation functions.
That June, Sinopec began operations at a plant with an annual production capacity of 20,000 tons in Xinjiang.
Green hydrogen is positioned as a next-generation alternative energy source for decarbonization. Among the various types of hydrogen being produced for energy purposes, it is attracting the most attention by virtue of how it is generated.
Until now, hydrogen has typically been produced by burning fossil fuels, resulting in the emission of carbon dioxide. Green hydrogen, produced using electricity derived from such renewable sources as solar power and wind, does not have this drawback.
To achieve net zero CO2 emissions by 2050, the ratio of green hydrogen among all environmentally friendly forms of hydrogen energy must rise to 77.8%, according to the International Energy Agency.
Chinese companies are also making a push in the electrolysis equipment essential for producing green hydrogen. Companies including China State Shipbuilding Corporation subsidiary Peric Hydrogen Technologies, and Shandong Saikesaisi Hydrogen Energy have accumulated technological capabilities and begun exports to over 30 countries and regions.
Shenzhen Kylin Technology, which has know-how in alkaline electrolysis equipment that can be used for extended periods, is drawing attention from overseas as well, having hosted researchers from a German company for tours and exchanging views.
The IEA has estimated that China had 1.2 gigawatts in installed capacity at the end of 2023—already half of the global total. Growth has been rapid, with the share rising from less than 10% in 2020 and 30% in 2022.
Green hydrogen-related industries are booming in China as a promising way to make effective use of electricity from renewable sources.
Planned Chinese production of green hydrogen appears to be concentrated in inland regions, based on targets announced by local governments. Inner Mongolia is seen becoming the top producer, with a planned annual output of 500,000 tons.
Inland regions have also drawn significant investments related to solar power, given their sunny climates and abundance of land.
But big, energy-hungry Chinese cities, such as Shanghai and Guangzhou, are mainly coastal. Transporting electricity across long distances is a major challenge, and an estimated 10% of power generated in certain regions is never used.
Meanwhile, hydrogen can be transported via pipeline, just like natural gas. The Hydrogen Council and McKinsey expect China to be the largest single market for clean hydrogen by 2050, transporting the majority of the fuel for domestic use via pipeline.
Pipelines are cheaper than shipping hydrogen by sea. China sees greater domestic availability of cheap hydrogen boosting its industrial competitiveness.
Pipeline construction is underway as well. PetroChina and partners agreed in late 2022 to start building a hydrogen pipeline between Wuhai and Hohhot in Inner Mongolia. Sinopec in April 2023 began planning a 400-kilometer pipeline connecting Inner Mongolia and Beijing that will eventually be able to transport 600,000 tons of hydrogen a year.
The central government positions hydrogen as a strategic emerging industry and plans to increase production of green hydrogen to between 100,000–200,000 tons per year by 2025.
Local governments are answering the call. At least 24 provinces, municipalities and autonomous regions have announced hydrogen energy development plans. Adding up the plans’ targets and estimates, the production capacity for green hydrogen as of 2025 would amount to around 2 million tonnes a year.
Green hydrogen production plans are also underway in Europe, which plans to establish a production system for 10 million tons per year within the region by 2030.
But headwinds are blowing against the renewable energy industry, a prerequisite for green hydrogen, including the cancellation of multiple construction plans for large-scale offshore wind power plants.
US President Joe Biden’s administration is encouraging hydrogen investment by providing a tax credit under the Inflation Reduction Act of 2022. The US is also working to attract companies from Europe, aiming to compete with China in cost-competitiveness and production volume.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.