#TouchingHydrogenFuture - #China

#TouchingHydrogenFuture – tour across the globe in Jules’ Verne style

Short series of stories on global Hydrogen future, written by a group of Hydrogen passionados and energy realists, making concepts accessible to wider audience, allowing both entertainment and education including readers from all continents for whom affordable and clean energy is key.

Imagining the future is delivering it.

How hydrogen will change our lives. Next stop: China, 2030

Author: Joachim von Scheele Editors: Erik Rakhou and Rosa Puentes Fernández

From Biggest in Grey to Biggest in Green

It’s January 2030, I am about to land in Beijing. Skies are clear. I remember my Christmas prediction of 2021 that for China by 2030, the green hydrogen would have reached about 5 million tonnes with a corresponding electrolyzers capacity of about 80 GW. It’s particularly supporting industry and heavy duty transport. And, it (hydrogen economy playing a role in China) looks to be happening according to my hydrogen community friends who invited me over for a professional seminar. My thoughts wander back to winter of 2021/2022. I vividly see my computer screen of my laptop 9 years ago of my ‘Hydrogen going to be big in China’, as my mind dozes off as airplane reduces speed. The mind races through its pages, here we go:

“My 2021 speech– what role will Hydrogen play in transition?

China is the world’s largest emitter of CO2 accounting for approximately 30% of the global CO2 emissions. Since year 2000 more than 60% of the increase in global CO2 emissions have taken place in China despite a 40% decrease in CO2 intensity in the Chinese economy during that period. More than 80% of the CO2 emissions in China are attributed to two key sectors, power generation and industry; the corresponding figure for the EU is 55%. In September 2020 President Xi announced the 30-60 climate goal, which means a commitment to peak China’s CO2 emissions no later than in 2030 and to become carbon neutral by 2060. This is of course an enormous challenge to fulfill, which also has been pointed out by President Xi. Will this even be possible to achieve? And what role will hydrogen play in this gigantic transition?”

My mind is briefly back in 2030 – yes, policy matters. And off to 9 years ago laptop screen again:

“The policy framework

?The 14th Five-Year-Plan (14FYP), for the period 2021-2025, was launched in March 2021 clarifying the fundamental changes required in the Chinese energy system, which will rely on four key pillars:

-??????Improve energy-efficiency both related to production and use

-??????Electrify industry and transportation sectors, in conjunction with decarbonization of electricity supply

-??????A green energy supply by increased use of renewable sources and natural gas, and a significantly reduced use of coal

-??????Strengthen research and innovation related to energy production and use

In April 2021 President Xi said that China will strictly limit the increase in coal consumption over the 14FYP and decrease it during the 15FYP. This implies a strive to have the peak in coal consumption already in 2025.

To increase sustainability and reduce carbon footprint the following general hierarchical approach based on efficiency, is principally applicable everywhere:

1.???Increase the life cycle of the products – a year longer in use saves a year of emissions from production

2.???Increase the recycling rate – usually less impact compared to using virgin inputs

3.???Electrify wherever it is viable to electrify

4.???Increase the energy-efficiency in processes that are not electrified

5.???Replace a high-carbon containing fuel with a low-carbon containing fuel, and ultimately with hydrogen where that makes sense.

Accordingly, it is important to note that use of hydrogen is not the first action to take. We can clearly see much of China’s laid out framework follows along this general approach.

There are several factors supporting a successful Chinese transition to carbon-neutrality, for example:

·??????The Chinese population is not growing much, but will be contracting during the coming decades, probably already before 2030.

·??????Large investments in infrastructure made over recent years will not have to continue at same pace, which will reduce the need for cement, steel, etc.

·??????The focus on the domestic market rather than on export, which began already 15 years ago.

·??????The enormous increase?of production of steel and other metals over the past 40 years, which to 80-90% has been based on virgin raw materials, can now to a continuously increasing extent be based on recycled materials – this will have a huge impact on?reducing CO2 emissions.

·??????Ongoing reduction of emissions from transportation?

- Expansion of public transportation; the subway systems in Beijing and Shanghai are already the two largest in the world

- Leading in expansion of electric vehicle fleet

- Automotive assets utilization - China is already world #1in taxi rides, with most of them ordered electronically and basically all electronically paid.?

·??????Being world-leading in Artificial Intelligence and Big Data, which supports creation of more efficient and optimized processes for production and uses.

·??????China is habituated to change; the Chinese people have huge experience in adopting to change, particularly over the past 3-4 decades.”

Again back in 2030, thoughts race to adaptability, ability to change – that always impressed me with China. That also happened in last decade with energy efficiency, dealing with volatile natural gas markets and electrification. Those 3 developments were the ecosystem success needed for hydrogen to be big in China. I jump in my mind back to my notes 9 years ago:

?“Making decarbonization happen will need energy efficiency, dealing with volatile natural gas markets and electrification

It is of interest to compare China to the US and to the EU. Two such parameters could be energy-use per capita, and energy-use compared to GDP (“energy intensity”). If we look at the per capita figures (2020) the US is at 266 GJ/head, and China at 104 and EU at 116. Accordingly, each US citizen is on average using about 2.5 times more energy than the average Chinese. But let us now also look at it from a GDP perspective (again 2020). The US figure is about 4,200 GJ/USD while the corresponding Chinese figure is 9,900 and EUs at 3,000. To be on the safe side, let us apply Purchasing Power Parity on the Chinese figure - we then get about 6,000 GJ/USD. Accordingly, in general terms we can then say that currently the US economy is at least about 50% more energy-efficient than Chinese, and the EU is at least twice as energy-efficient as China’s. In other words: clearly there is room for improvements of the Chinese energy-efficiency, even more than in many other industrialized countries.

Let us just make a quick back-of-the-envelope check of what could be possible. Assuming the Chinese economy will grow with a conservative CAGR of 2.5% until 2060, its GDP will then be 2.5 times higher than what it is today. Reasonably efficiency improvements in China until 2060 could make it reach an energy-use compared to GDP (energy intensity) same as EU has today (3,000 GJ/USD). That would mean that a richer China in 2060 would use 25% less energy than today. This is challenging, but doable!

In China there are more than 120,000 industrial furnaces in operation. The energy use in those furnaces accounts for more than 25% of the total energy use in China, and more than 60% of energy use in its industry. One of the proven ways to increase the energy-efficiency here, is to modify the combustion system by using oxygen instead of air as the primary oxidizer, i.e., convert to so-called oxyfuel combustion. This would potentially result in a decrease of the fuel consumption and carbon footprint from those operations by 30% or more, and eventually with hydrogen as fuel eliminate it completely.

Figure 1. Flameless Oxyfuel can reduce fuel consumption massively in many furnaces and other processes using combustion, and it is ready to use hydrogen as fuel.

The Hebei province will screen out a total of 1,000 existing factories for replacement with less-polluting alternatives under 14FYP, and there are similar plans for each of China’s 34 administrative areas. Under 13FYP, concluded in 2020, Hebei reduced its installed cement production capacity by 12 Mt/y, which already has had a large positive impact as the cement industry is among of the top-3 industrial emitters of CO2.For comparison, this reduction in Hebei equals shutting down all of Canada’s cement production.

Another example is China’s steel industry, today accounting for around 15% of the country’s carbon emissions. There is now an ongoing expansion of China’s electric arc furnace (EAF) steelmaking capacity, allowing for using 100% recycled scrap as raw material, which will have a large positive impact of the carbon footprint. China plans to boost EAF steel to account for 15%-20% of the total crude steel output by 2025, which is a doubling compared to last year. Eventually, more than 50% of China’s total crude steel capacity could come from EAFs. In 2021, China approved the construction of 43 new EAFs, with a total crude steel capacity of 30 Mt/y. To put this in perspective, a 30 Mt/y output equals that of the 10th largest steel producing country in the world.

Today less than 20% of China’s steel production is based on scrap. The 2020 figure of 260 Mt of steel scrap used is aimed to increase to 320 Mt by 2025. Assuming a similar addition of scrap use going forward and that the Chinese steel production will stay at around 1 billion tonnes annually, around 70% will be based on scrap by 2060. And assuming that all the balance would be supplied as Direct Reduced Iron (DRI) produced using hydrogen as reductant, those roughly 350 Mt of DRI would need 150 GW of electrolyzers to produce the required 25 Mt of hydrogen. Adding 15 Mt to replace fossil fuel gases in combustion applications, we could then make China’s steel industry “green” using 40 Mt/y of hydrogen. This would require a power supply at 240 GW.

It seems we can assume a considerable part of China’s decarbonization might take place without basically change fuels, but mainly by increased energy-efficiency, less use of coal-based processes, electrification, etc. Then, still before going into hydrogen, there are two areas to touch upon: increased use of natural gas, and electrification. China has increased both its production and import of natural gas tremendously over the last years, and that trend seems to continue - now largely boosted by the decarbonization agenda. The domestic natural gas production more than doubled from 2010 to 2020, reaching 192.5 billion cubic meters. The 2020 import reached 138.4 billion cubic meters, so altogether China used 331 billion cubic meters of natural gas in 2020. China’s LNG import increased further to a new record level in 2021.

Electrification will play a central role in China’s pathway towards carbon neutrality. Most forecasts indicate China’s electricity consumption in 2050 could be doubled compared with the 2019 level, and even tripled by 2060, largely driven by transport, industrial sectors and applications of hydrogen produced from electricity.

Figure 2. A tripling of China’s electricity generation estimated by 2060 (unit: 1000 TWh). Author’s source.

An increased supply of non-fossil electricity is important for both electrification and for production for production of green hydrogen. The 14FYP and onwards, use of new and green energy will increase to become the main energy sources. By 2030 the non- fossil power installed capacity is expected to reach 2,300 GW, accounting for over 60% of the total ???installed capacity. It will further increase to 6,500 GW, accounting for at least 80% (sometimes even 95% is mentioned) of the total by 2060. To reach the goal of 1,200 GW of wind and solar capacity by 2030, as stated by President Xi at the Climate Ambition Summit in December 2020, it is estimated that as much as 5%-20% in storage capacity needs to be developed at the local level, depending on local renewable resources. The current prioritization can be seen from how China's finance ministry has set the 2022 renewable power subsidies: the allocated $607 million was distributed with 40% to wind turbines, 59% to solar power, and 1% to biomass power generators.

Figure 3. Forecast of non-fossil power installed capacity 2020-2060 (unit 100 GW). Author’s source.

Since years, China is at the center of global supply and demand for renewable energy, accounting for about 40% of capacity growth from 2015 to 2020. Naturally, electrification through renewable power will be the technology that dominates the ‘low-cost decarbonization’ spectrum today, and it is believed it has the potential to support decarbonization of more than 45% of China’s CO2 emissions and, additionally, support the production of green hydrogen. Similar forecasts for clean hydrogen estimate that to potentially drive 20% of the decarbonization, playing a. a critical role in several industrial processes (iron & steel, petrochemicals, etc.), and long-haul heavy transportation.”

Back in 2030, the pilot announces that she wants to take another tour through the airport approach, as we are a bit early landing – this allows me to see accidentally some of the hydrogen economy in action – we high over a highway, where I see some of the locally produced hydrogen-fuelled buses and trucks neatly travelling the road alongside electric personal cars. My mind wanders to my thoughts on Hydrogen development in China back in those eventful early 2020s:

“Hydrogen in China – by 2060, it may account for 130 million tonnes, accounting for about 20% of the energy consumption.

China is the largest hydrogen producing country in the world, with an annual production of roughly?30 million tonnes. In China, cheap supply of grey hydrogen is abundant from coal gasification, catalytic steam reforming of natural gas and as by-products of chemical processes, such as partial oxidation of heavy oil. Production of blue hydrogen is still in an early developing stage, and production of green hydrogen has been limited. Green hydrogen production based on electrolysis contributed only 1%?of the total hydrogen supply in 2020. However, this figure is expected to increase to 15% by 2030.?Hydrogen production as an independent component (non-syngas or in a mixture of gases) that meet industrial quality standards, what is normally referred to as merchant production, reached about 12.5 million tonnes.

Figure 4. Production of hydrogen in China by source in 2020. Author’s source.

China is keen to develop its natural gas infrastructure. The current pipeline network for hydrogen is limited. It is unlikely we will see a large parallel expansion of a pipeline network for hydrogen, but rather a blending of hydrogen into the natural gas in the increasing pipeline infrastructure.

The number of hydrogen FCEVs, mostly larger vehicles (busses and trucks) in China has grown rapidly since 2019, reaching over 7,000 by end of 2020. The number of FCEV is expected to reach 1 million by 2035. When it comes to hydrogen refuelling stations, China today has about 100, however, Sinopec alone aims to put up an additional 1000 during 14FYP. China’s current vehicle fleet is about 300 million. Assuming it will increase to 500 million in year 2060 and 1% would be FCEV, that would mean 5 million FCEV. China today has 300 million electric scooters; it is unlikely fuel cell technology will compete much in that space.

China’s 30-60 climate goal, together with China’s ambition to accelerate its energy transition by increasing the total installed capacity of solar and wind to 1,200 GW by 2030 are the new policy drivers for China’s green and high-quality hydrogen development. Specific targets for hydrogen development have been set up as an important component in China’s short-term and long-term energy- and climate transformation.

To realise the high ambition of green hydrogen development, a large amount of renewable electricity of high quality at a competitive price will be a necessary condition, but also a key challenge. For instance, more than 70% of the cost of extracting hydrogen from water is electricity. It takes about 60 kWh of electricity to produce 1 kg of hydrogen. Assuming over 5 million tonnes of green hydrogen in 2030, means more than?260 TWh?renewable electricity needs to be delivered. The critical factor is the electricity price, i.e., the scale-up of supply to meet all demands, not only for hydrogen,

Currently, average solar and wind on-grid prices are at?$0.05-0.10/kWh in China. Estimates indicate renewable-to-hydrogen needs a renewable electricity price at $0.015/kWh?to become competitive. The current production cost of green hydrogen in China is at $3 per kg compared with just over $1 per kg for hydrogen from coal.

Up until 2020 the Chinese government had already invested more than $315 million in hydrogen energy and fuel cell R&D. In the 14FYP, increased financial funding will clearly target hydrogen production and research and innovation. China Ministry of Finance is planning to appropriate $125 million for hydrogen R&D in four technical areas: green hydrogen production, safety storage system, energy efficiency upgrades, and “hydrogen into ten thousand homes” demonstration projects. In those four areas, 19 research and innovation programs have already been launched in 2021.

According to China Hydrogen Alliance, in 2030 China's annual demand for hydrogen will reach 37 million tonnes, accounting for about 5% of the final energy consumption. By 2030, the green hydrogen would have reached about 5 million tonnes with a corresponding electrolyzers capacity of about 80 GW. Under the carbon neutral scenario in 2060, China's annual demand for hydrogen would then have to be about 130 million tonnes, accounting for about 20% of the energy consumption. At least 100 million tonnes of that will be green hydrogen, and most of the balance will be blue hydrogen. Industrial use of hydrogen will still be the largest accounting for 60%, while use of hydrogen in transportation and building sectors account for 30%.”

The pilot now firmly ask to fasten the seatbelts, and start being ready to get off the plane. I am thinking of what I will say at the seminar, if they ask me what I think on hydrogen role in China in last decade and going forward, as I will walk into the room full of students who are very critical and smart – I am practicing my response:

“Hydrogen a vector in joint global village, not the sole or purely national solution.

Neither in China nor in most other countries of the world we have hydrogen as a sole solution today or in the coming decades.

Together with other ongoing sustainability trends – increased energy-efficiency and electrification which play large, and probably every year larger, roles. As elsewhere in the world, the key to a viable supply green hydrogen is a continuous viable supply of green power (or at least non-fossil power).

It appeared possible for China to make the enormous transition towards carbon neutrality, and hydrogen played and will play an essential role in that. And that is despite China which started in early 2020s from a position with comparatively low energy-efficiency, 30% of the world’s CO2 emissions, and – thought being the largest hydrogen producing country – a rather weak position in green hydrogen.

In first 20+ years of the century the world’s wind power capacity has increased from 6 GW to 750 GW. A large part of this expansion had taken place in China, for example in 2021 having a capacity exceeding 300 GW. Looking towards 2040s ahead on green hydrogen, it is likely a similar development can be expected.

Remember students, how the journey with large-scale projects has started – Sinopec announced in early 2020s a 20 kt/y electrolyzer based on 300 MW solar power to be commissioned in Xinjiang in 2023. Remember the forecasts saying that more than half of the world’s electrolyzer installations in 2020s onwards would be taking place in China. Well you know how this played out.

Reducing the carbon footprint continues to be a task for our joint global village, where China and all other countries contribute to our shared future. It seems China does, and will do its part, with an important and huge of use of hydrogen across multiple sectors, and China will continue to transform from being the world’s biggest producer of grey hydrogen to become the biggest producer of green hydrogen. Would you agree?”

Yes, I liked my speech to the students in the seminar – it was looking to be a promising day in Beijing.

[journey to be continued…]

Acknowledgement

The author is most thankful to Dr. Nannan Lundin and her colleagues at the Embassy of Sweden in Beijing, and to Dr. Flora Kan and her colleagues at the EU-China Energy Cooperation Platform for their great support with input data.

References

For further references please contact Joachim von Scheele.

Disclaimer:

The opinions expressed are purely those of the authors and in no case can they be considered as an official position of the organizations.

The information presented here is based on available public information from announced projects. In any case can be considered a guarantee of what may or may not happen in the future. The author(s) reserve(s) the right to include additional fictional projects or features for the solely purpose of this story.

This is just the beginning of a potential book that we are planning to write. The book would consist of several chapters, each of them highlighting how life would be in different countries if the current announced H2 projects/H2 valleys/IPCEIs had developed. The purpose of the book is mainly educational.

As this is a proof-of-concept, we appreciate your honest and constructive feedback.

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