Power-to-X in China: 2024 and Beyond

Introduction

As the world's largest energy consumer and one of the largest carbon emitters, China has recognized the urgent need to transition from fossil fuels to sustainable energy sources. In recent years, the concept of Power-to-X (PtX) has emerged as a vital component of China's strategy to decarbonize its energy sector and achieve carbon neutrality by 2060. Power-to-X refers to a group of technologies that convert electricity, particularly from renewable sources like wind and solar, into other forms of energy or chemicals, such as hydrogen, synthetic fuels, or ammonia, for use in various sectors like transportation, industry, and heating.

This article provides a deep dive into China’s development of Power-to-X, examining the critical drivers behind this transition, the current state of PtX technologies, and the country’s progress in scaling up these systems. We will also explore the challenges and opportunities that China faces as it seeks to become a global leader in PtX, and offer projections for the development of the sector by 2040.

1. Why Power-to-X is Critical for China

China’s energy demand continues to grow as its economy expands and its population increases. In 2024, China’s primary energy consumption remains heavily reliant on coal, which accounts for nearly 60% of the country’s energy mix. This dependency on coal has made China the largest emitter of carbon dioxide (CO2), with annual emissions of over 10 billion metric tons. Given these challenges, China has committed to achieving carbon neutrality by 2060, which will require a radical transformation of its energy system.

Power-to-X technologies are critical to this transformation because they offer a way to store and utilize surplus renewable energy, which can be converted into fuels, chemicals, or other forms of energy that are more flexible and easier to transport and store. This flexibility is especially important in a country like China, which has an abundance of renewable energy resources—particularly solar and wind—but faces challenges with intermittency and energy storage.

The key reasons why PtX is crucial for China include:

• Decarbonization of Hard-to-Abate Sectors: PtX can help decarbonize sectors that are difficult to electrify, such as heavy industry (steel, cement, and chemicals) and long-distance transportation (shipping, aviation, and freight).
• Energy Storage: PtX offers a way to store excess electricity from intermittent renewable energy sources like wind and solar. This helps balance the grid and ensures that renewable energy can be used when demand is high.
• Energy Security: PtX technologies enable China to reduce its reliance on imported fossil fuels by producing synthetic fuels and hydrogen domestically using renewable electricity.

2. Current Landscape of Power-to-X in China (2024)

As of 2024, China has made significant progress in the development and deployment of Power-to-X technologies, particularly in the production and use of green hydrogen, synthetic fuels, and ammonia. Several pilot projects are already in operation, and large-scale PtX projects are being planned or are under construction in key provinces.

2.1 Green Hydrogen Production

Hydrogen is a cornerstone of China’s PtX strategy. It is produced through the process of electrolysis, where renewable electricity is used to split water into hydrogen and oxygen. This green hydrogen can then be used as a fuel, either directly or converted into other chemicals like ammonia or methanol.

• Electrolyzer Capacity: By 2024, China has installed an electrolyzer capacity of 300 MW, making it one of the global leaders in green hydrogen production. The government has set a target to reach 1000 MW of electrolyzer capacity by 2030.
• Hydrogen Production: In 2024, China produces about 1 million tons of hydrogen annually from renewable sources, a small but rapidly growing share of the country’s total hydrogen production (which currently stands at 25 million tons per year, mostly from coal and natural gas).
• Key Projects: Several large-scale green hydrogen projects have been launched in regions rich in renewable energy, such as Inner Mongolia, Xinjiang, and Hebei. The Baotou Green Hydrogen Project in Inner Mongolia, for instance, aims to produce 150,000 tons of green hydrogen annually using wind power by 2026.

2.2 Synthetic Fuels and Chemicals

Synthetic fuels, also known as e-fuels, are produced by combining green hydrogen with captured CO2 to create fuels like synthetic natural gas (SNG), synthetic gasoline, or synthetic diesel. These fuels are important for decarbonizing sectors where direct electrification is difficult, such as aviation and shipping.

• Pilot Projects: Several pilot projects for the production of synthetic fuels are underway. For example, Sinopec is leading efforts to develop synthetic jet fuel using green hydrogen and CO2 from industrial processes. These fuels can be used in aviation to reduce carbon emissions from long-haul flights.
• Synthetic Ammonia: China is also focusing on producing synthetic ammonia for use as a fertilizer in agriculture and as a fuel for industrial applications. Ammonia is easier to store and transport than hydrogen and can be used directly in fuel cells or internal combustion engines.

2.3 Carbon Capture and Utilization (CCU)

To complement Power-to-X technologies, China is investing heavily in carbon capture and utilization (CCU) technologies. By capturing CO2 from industrial processes, China can combine it with green hydrogen to produce a variety of synthetic fuels and chemicals. This process not only reduces emissions but also helps create valuable products that can be used across the economy.

• CCU Capacity: As of 2024, China has deployed 6 million tons of carbon capture capacity across several sectors, with plans to increase this to 30 million tons by 2030. The captured CO2 is used in chemical production, enhanced oil recovery, and for synthetic fuel projects.
• Key Projects: The Yanchang Petroleum Group in Shaanxi Province has been a pioneer in combining carbon capture with Power-to-X technologies. Its project captures 300,000 tons of CO2 annually and uses it to produce synthetic methanol.

3. Planning, Financing, and Execution of Power-to-X Projects

The development of Power-to-X projects in China follows a well-structured framework that involves detailed planning, regulatory approval, financing from both public and private sectors, and coordination between national and local governments.

3.1 Planning and Regulatory Framework

China’s government has developed a clear regulatory framework for Power-to-X projects, which ensures alignment with the country’s broader energy transition goals. The National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) are the key agencies responsible for regulating the PtX sector.

• National Hydrogen Strategy: Launched in 2020, China’s National Hydrogen Strategy outlines specific targets for hydrogen production, infrastructure development, and industrial applications. It emphasizes green hydrogen production from renewable electricity and aims to establish a comprehensive hydrogen supply chain by 2030.
• Environmental Regulations: PtX projects must undergo environmental impact assessments (EIAs) and receive approvals from local environmental protection agencies. Projects are required to meet strict emissions reduction targets, especially if they involve carbon capture and utilization.

3.2 Financing

The financing of Power-to-X projects in China involves a mix of government funding, state-owned enterprises, private investors, and international organizations. Several financing mechanisms are used:

• Government Funding: China’s government has allocated significant funding for PtX development as part of its 14th Five-Year Plan, which runs from 2021 to 2025. Subsidies are available for research and development, pilot projects, and the construction of large-scale green hydrogen and synthetic fuel plants.
• Private Investment: China has seen increasing interest from private companies, particularly in the energy and chemical sectors. Leading state-owned enterprises like Sinopec and China National Petroleum Corporation (CNPC) are investing heavily in PtX technologies, while private companies like Longi Green Energy are entering the green hydrogen market.
• International Collaboration: International organizations such as the Asian Development Bank (ADB) and the International Renewable Energy Agency (IRENA) are working with China to provide financing and technical expertise for PtX projects. These partnerships aim to promote the adoption of PtX technologies in other countries as well.

3.3 Execution Timeline

The development timeline for PtX projects in China is typically 3-5 years from planning to commissioning, depending on the scale and complexity of the project. Key phases include:

• Planning and Feasibility Studies: 1-2 years to assess technical and economic feasibility.
• Construction: 2-4 years, depending on the size of the electrolyzer capacity and infrastructure required for storage, transportation, and distribution.
• Commissioning: 6-12 months to fully test and integrate the PtX plant into the energy grid.

4. China’s Global Standing and Technological Leadership in Power-to-X

China is positioning itself as a global leader in Power-to-X, particularly in the areas of green hydrogen production, carbon capture, and the development of synthetic fuels. While the country is still in the early stages of deploying PtX technologies at scale, its rapid progress and investments in research and development put it on track to become a major player in the global PtX market.

4.1 Green Hydrogen Leadership

China’s investments in green hydrogen place it among the top global producers. By 2030, China aims to produce 5 million tons of green hydrogen annually, which will require a massive expansion of its electrolyzer capacity. China’s Baotou Hydrogen Project is one of the largest green hydrogen projects in the world and is set to become operational by 2026.

4.2 Synthetic Fuel Development

While China still lags behind Europe in the development of synthetic fuels, the country is quickly catching up. Sinopec and China National Offshore Oil Corporation (CNOOC) are leading efforts to produce synthetic fuels for aviation and shipping, with the goal of reducing reliance on imported fossil fuels and decarbonizing heavy transport sectors.

4.3 Carbon Capture and Utilization (CCU)

China’s CCU capacity is expected to grow rapidly, with the country targeting 50 million tons of carbon capture by 2035. China’s leadership in CCU will enable it to play a key role in global efforts to reduce industrial emissions, particularly in the steel and cement sectors.

5. Challenges and Opportunities

Despite its progress, China faces several challenges in scaling up Power-to-X technologies:

• High Costs: The production of green hydrogen and synthetic fuels is still relatively expensive, and large-scale deployment will require further cost reductions. Electrolyzer costs must fall significantly for green hydrogen to become cost-competitive with hydrogen produced from fossil fuels.
• Infrastructure Development: China will need to invest heavily in hydrogen infrastructure, including pipelines, storage facilities, and refueling stations, to enable the widespread use of hydrogen across different sectors.
• Renewable Energy Supply: While China has abundant renewable energy resources, there is a need to ensure that enough renewable electricity is available to meet the growing demand for PtX projects without compromising the country’s broader energy transition goals.

On the other hand, the opportunities are immense:

• Export Potential: China could become a major exporter of green hydrogen and synthetic fuels, particularly to countries in Asia and Europe that are looking to decarbonize their economies.
• Technological Innovation: China’s leadership in renewable energy technologies, combined with its rapidly growing PtX sector, provides an opportunity for the country to innovate and drive down costs, making PtX more accessible globally.

6. Future Projections for Power-to-X in China (2040)

By 2040, China’s Power-to-X sector is expected to expand dramatically, driven by continued investment in renewable energy, advancements in electrolysis technology, and the construction of large-scale PtX plants. Key projections include:

• Green Hydrogen Production: China will be producing over 10 million tons of green hydrogen annually by 2040, with electrolyzer capacity reaching 30 GW.
• Synthetic Fuel Use: Synthetic fuels will play a key role in decarbonizing China’s aviation, shipping, and heavy industry sectors. By 2040, China is expected to produce 20 million tons of synthetic fuels annually, reducing its reliance on imported oil.
• Hydrogen Infrastructure: China will have a well-developed hydrogen infrastructure network by 2040, with thousands of hydrogen refueling stations and pipelines connecting hydrogen production hubs with industrial and urban centers.
• Global Leadership: China will be a global leader in Power-to-X, exporting hydrogen, synthetic fuels, and PtX technologies to other countries, particularly through its Belt and Road Initiative (BRI).

7. Conclusion: Power-to-X as a Cornerstone of China’s Energy Transition

Power-to-X represents a critical pillar of China’s broader strategy to decarbonize its energy system and achieve carbon neutrality by 2060. By converting renewable electricity into green hydrogen, synthetic fuels, and other forms of energy, China is addressing key challenges related to energy storage, industrial emissions, and energy security.

As the country continues to scale up its PtX projects and reduce costs, China is poised to become a global leader in this emerging field. By 2040, Power-to-X technologies will play a central role in China’s energy system, enabling the country to decarbonize hard-to-abate sectors, reduce its reliance on fossil fuels, and contribute to global efforts to combat climate change.

Kjeld Friis Munkholm

www.munkholmconsulting.com

? 2024Kjeld Friis Munkholm. All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means without the prior written permission of the author