Hydrogen energy industry chain and future development trends in China
We have previously listed the top 10 hydrogen energy companies, and this post from starting from the characteristics and main types of hydrogen energy, the hydrogen energy industry chain, development strategies of various countries, China’s hydrogen energy industrial policies, and the investment and financing of hydrogen energy industry are reviewed in detail, and the future development trend of hydrogen energy is forecasted.
In the hydrogen energy industry chain, industry and transportation are the main application areas, while construction, power generation and other fields are still in the exploratory stage. By 2060, the industrial sector and transportation sector will account for 60 percent and 31 percent of hydrogen consumption, while the power generation sector and construction sector will account for 5 percent and 4 percent, respectively.
The Medium – and Long-term Plan for the Development of Hydrogen Energy Industry (2021-2035) points out that “a hydrogen energy industry system will be formed by 2035, and a diversified hydrogen energy application ecology will be built covering transportation, energy storage, industry and other fields”. Hydrogen energy will provide an important path to decarbonization in all industries. At present, the cost of hydrogen energy is high, and its application scope is narrow.
Hydrogen energy is mainly used in the industrial field and the field of transportation, and is still in the exploration stage in the fields of construction, power generation and heating. According to the China Hydrogen Energy Alliance, the industrial sector and transportation sector will account for 60% and 31% of hydrogen consumption respectively by 2060, while the electricity sector and construction sector will account for 5% and 4% respectively.
Transportation is a relatively mature field of hydrogen energy application. In terms of patent applications, there were 15,639 patent applications for hydrogen technology applications in the transportation sector in 2021, accounting for 71% of the downstream applications of hydrogen technology. The applications of hydrogen energy in the field of transportation include automobile, aviation and maritime transportation, among which hydrogen fuel cell vehicle is the main application scenario in the field of transportation.
Development status of fuel cell vehicles: The fuel cell vehicle industry is in its infancy. The number of fuel cell vehicle enterprises is small, technology, cost and scale are the main entry threshold, fuel cell vehicle production and marketing scale is small. In 2020, due to the impact of the epidemic and other factors, the production and sales of fuel cell vehicles declined significantly, and then recovered steadily.
In 2021, fuel cell vehicle production and sales increased by 35% and 49%, respectively, year-on-year; Since the beginning of this year, the production and sales have further increased, with the first half of the year’s production of 1,804 units, already exceeding the whole of last year. Compared with pure electric vehicles and traditional fuel vehicles, fuel cell vehicles have the advantages of low greenhouse gas emissions, short refueling time and high range, which is more suitable for medium and long distance or heavy haul transportation.
The current fuel cell vehicle industry policy also gives priority to support the development of commercial vehicles. At present, domestic hydrogen fuel cell vehicles are mainly commercial vehicles such as buses and heavy trucks, while passenger cars are mainly used for leasing, accounting for less than 0.1%.
Fuel cell vehicles are currently expensive to purchase and are not yet fully commercialized. Cost is the main factor limiting the marketability of fuel cells. The development of fuel cell vehicles still relies on government subsidies and policy support. A large number of hydrogen buses will be promoted in 2020. Although there are differences in model specifications, system suppliers and power size, the average price of most buses ordered is 2-3 million RMB/ bus, which is relatively high.
In addition, fuel cell vehicles have high requirements for low temperature performance, high power system cost, coupled with the scarcity of infrastructure and other limitations, so far, they have not been widely promoted and need to be further improved in the future.
Development prospect of fuel cell vehicle：Driven by the realization of the “dual carbon” goal, zero-carbon fuel cell vehicles are expected to maintain high growth. The Medium – and long-term Plan for the Development of the Hydrogen Energy Industry (2021-2035) states that there will be about 50,000 hydrogen fuel cell vehicles by 2025. According to this calculation, the average annual growth rate of holdingwill exceed 50% in 2022-2025.
The cost of fuel cell vehicles has a large room to fall in the future. Fuel cell vehicles mainly include fuel cell system, on-board hydrogen storage system, vehicle control system and so on. Of these, fuel cell systems are central, and costs are expected to fall as technology advances and scale up. According to the report, with the development of large-scale production and technology, the cost of fuel cell passenger vehicles will be equal to that of other passenger vehicles such as pure electric vehicles and fuel vehicles in 2030.
The cost of fuel cell system will be reduced from USD 30,200 per vehicle in 2015 to USD 4,300 per vehicle in 2030. Unit cost is expected to fall 86% from $38 per KWH in 2015 to $54 per KWH in 2030, which is the main driving force behind the cost reduction of fuel cell vehicles.
Fuel cell vehicles are suitable for heavy and long-distance transportation, and are more competitive in the market with high mileage requirements and large load capacity. The future development direction is heavy trucks, long-distance transportation passenger cars, etc. According to the analysis of the International Hydrogen Energy Association, fuel cell vehicles have a cost advantage in the transportation market with a range of more than 650 kilometers.
Since passenger cars and city buses typically have a shorter range, pure electric vehicles have an advantage. The future of fuel cell vehicles is very promising. Compared with pure electric models, fuel cell vehicles overcome the problems of long energy replenishment time and poor adaptability to low-temperature environment, improve operation efficiency, and complement the application scenarios of pure electric models. China Hydrogen Energy Alliance Research Institute predicts that China’s fuel cell vehicle production is expected to reach 620,000 units per year by 2030.
Clean energy has become an important part of the future energy system in many countries. As a clean energy, hydrogen energy has attracted extensive attention in the railway field. The application of hydrogen energy in the field of railway transportation is mainly combined with fuel cells to form a power system to replace the traditional internal combustion engine. Hydrogen-powered trains are currently being developed and tested, with countries such as Germany, the US, Japan and China leading the way.
Germany will begin operating the world’s first environmentally friendly rail line consisting of hydrogen-powered passenger trains in 2022, with a range of 1,000 kilometers and a top speed of 140 kilometers per hour. In 2021, China launched the first hydrogen fuel cell hybrid locomotive, which can run continuously for 24.5 hours with full hydrogen load and can carry a maximum tractable load of more than 5,000 tons on a straight track.
China’s first heavy-haul railway hydrogenation scientific research demonstration station will be built in 2022, which will supply hydrogen energy for railway locomotives. The advantages of hydrogen-powered trains are that they do not require alterations to existing railway tracks, are pumped to fill the trains with hydrogen, and have low noise and zero carbon emissions.
But there are challenges to developing hydrogen-powered trains at this stage. On the one hand, the cost of hydrogen fuel cell stack is higher than that of traditional internal combustion engine, and the cost of hydrogen power system (including hydrogen storage and heat dissipation system, etc.) will further increase. The cost of vehicles equipped with hydrogen energy system is higher.
On the other hand, due to immature technology, low demand and other factors, the construction of hydrogen energy infrastructure such as hydrogen refueling stations is still not perfect. As the world’s major countries pay attention to the development of clean energy represented by hydrogen energy, hydrogen powered train as an effective way to reduce carbon, the future development of broad space. Among European countries, France has pledged to replace its national rail network powered by fossil fuels (diesel) with one powered by clean energy, including hydrogen, by 2035, Germany by 2038, and the United Kingdom by 2040.
The aviation industry is also facing new challenges brought about by the transformation of the energy system, as the evolution of energy towards low carbon and no carbon is accelerating.
Hydrogen energy offers the possibility of low-carbon aviation, reducing the industry’s dependence on crude oil and reducing greenhouse and harmful gas emissions. Compared with fossil energy, fuel cells can reduce carbon emissions by 75%-90%, direct combustion of hydrogen in gas turbine engines can reduce carbon emissions by 50%-75%, and synthetic fuels can reduce carbon emissions by 30%-60%.
Hydrogen-powered aircraft may be a carbon reduction solution for short – and medium-distance flights, but for long – distance flights, jet fuel is still needed. Hydrogen is expected to provide about 5 percent of the aviation sector’s energy needs by 2060. Hydrogen energy provides a possible carbon reduction scheme for the aviation industry. The United States, the United Kingdom, the European Union and other developed countries and regions have issued top-level strategic plans related to the development of hydrogen aviation.
As can be seen from the plans issued by developed countries, the development of hydrogen aviation is a long process. Between now and 2030, we will focus on developing basic technologies and conducting aviation tests. By 2050, it will complete the construction of long-range passenger aircraft verification aircraft and large-scale hydrogen refueling infrastructure, and realize large-scale application in the aviation field.
With the rapid development of shipping industry, environmental problems caused by diesel-powered ships are becoming more and more obvious. In 2020, China’s shipping industry accounted for 12.6 percent of emissions from the transportation sector. Hydrogen energy as a clean energy is expected to play a positive role in carbon reduction in the shipping sector. According to the report, carbon emission reduction of the shipping industry mainly depends on the development and commercialization of new low-carbon technologies and fuels such as hydrogen and ammonia.
In the commitment target scenario, the fuel cell-based hydrogen application model in 2060 will meet about 10% of the energy demand in the water transportation sector. Hydrogen and hydrogen-based fuel is one of the carbon reduction options in the shipping sector. The electrification of inland river and coastal shipping can be achieved through hydrogen fuel cell technology, and the decarbonization of ocean shipping can be achieved through biofuels or new fuels such as zero-hydrocarbon ammonia synthesis.
Some Chinese enterprises and institutions have initiated the development of hydrogen-powered ships based on domestic hydrogen energy and fuel cell technology advances. At present, hydrogen powered ships are usually used in lakes, inland rivers, offshore and other scenes, as the main power of small ships or auxiliary power of large ships.
The development of large hydrogen powered ships such as offshore engineering ships, offshore RO-RO ships and super yachts is the future development trend. In general, hydrogen-powered ships are in the early stage of exploration, and high-power fuel cell technology is not yet mature. However, with the emergence of hydrogen storage advantages, the market penetration of fuel cell ships will gradually increase.
It is expected that by 2030, China will build a system for designing, manufacturing, commissioning, testing, functional verification and performance evaluation of hydrogen-powered ships, establish supporting hydrogen “production, storage and transportation” infrastructure, expand the scale of demonstration application of hydrogen-powered ships in inland rivers and lakes, and improve the infrastructure related to waterway transportation.
To achieve the goal of carbon neutrality in China’s waterway transportation equipment sector by 2060, carry out application demonstrations of hydrogen-powered ships on international routes, and enhance the international competitiveness of China’s hydrogen-powered ships industry.
Industry is a difficult application sector for decarbonization. Fossil energy is not only an industrial fuel, but also an important industrial raw material. Industrial fuels can be partially decarbonized through electrification, but the space for direct electrification of industrial feedstocks is limited. Driven by hydrogen metallurgy, synthetic fuels and industrial fuels, the demand for hydrogen in the industrial sector will reach 77.94 million tons by 2060, nearly twice that of the transportation sector.
Iron and steel industry
Carbon dioxide emissions from steel smelting are large. In 2020, the total carbon emissions from China’s steel industry were about 1.8 billion tons, accounting for about 15% of China’s total carbon emissions. Under the “double carbon” goal, the steel industry faces huge pressure of carbon emission reduction. According to the carbon peak-carbon neutral roadmap published by various large steel enterprises, combined with the carbon reduction target of China Iron and Steel Industry Association, assuming that by 2030, China’s steel industry will reduce carbon by 30%, during this period, the steel industry needs to reduce emissions by 540 million tons.
China accounts for more than half of the world’s steel production, and achieving carbon reduction in the steel industry is of great significance to China’s “double carbon” goal. Hydrogen in the iron and steel industry can be used in hydrogen metallurgy, fuel and other aspects, hydrogen metallurgy is the largest scale. Hydrogen metallurgy uses hydrogen instead of carbon reduction in the metallurgical process, so as to achieve carbon reduction at the source, and the traditional blast furnace iron smelting is based on coal smelting, carbon emissions account for about 70% of the total emissions.
Hydrogen metallurgy is a revolutionary technology for iron and steel industry to achieve the “double carbon” goal. In 2021, the 14th Five-Year Industrial Green Development Plan was released, stressing the need to vigorously promote the construction of hydrogen energy infrastructure and promote the development of non-blast furnace low-carbon iron making technology in the iron and steel industry. At present, hydrogen in hydrogen metallurgy technology mainly comes from coal, and the overall carbon reduction capacity is limited.
Hydrogen metallurgy technology is divided into blast furnace hydrogen metallurgy and non – blast furnace hydrogen metallurgy two categories. Blast furnace hydrogen metallurgy refers to the realization of “partial hydrogen metallurgy” by injecting hydrogen or hydrogen-rich gas into the blast furnace instead of partial carbon reduction reaction. Non-blast furnace hydrogen metallurgy technology is dominated by gas-based shaft furnace method. China’s shaft furnace hydrogen metallurgy technology is in its initial stage, and is limited by hydrogen production, storage and transportation, high-quality concentrate and other conditions.
There is still a certain distance from large-scale application and deep carbon reduction in the whole life cycle. On a global scale, the industrialization technology of hydrogen metallurgy is not yet mature, and the leading countries of hydrogen metallurgy technology such as Germany and Japan are also in the stage of research and development and testing. According to the statistics of the World Energy Agency, the service life of the traditional blast furnace is 30-40 years, and the average age of the global ironmaking blast furnace is only about 13 years.
In the future, for a long time, the world will still take the traditional blast furnace ironmaking process as the mainstream, and the low-carbon blast furnace metallurgy technology will be an important research and development direction in the transition period. The development of hydrogen metallurgy can be achieved in steps: by 2025, the feasibility of large-scale industrial hydrogen smelting can be verified by pilot plant;
By 2030, the industrial production of hydrogen from coke oven gas, chemical and other by-products will be realized. By 2050, high purity hydrogen energy smelting of steel will be carried out, in which the hydrogen energy is mainly hydropower, wind power and nuclear power water electrolysis.
Hydrogen is an important raw material in ammonia synthesis, methanol synthesis, petroleum refining and coal chemical industry, and a small part of by-produced gas is used as industrial fuel for combustion support. Data from the China Hydrogen Energy Alliance show that in 2020, hydrogen used in ammonia synthesis, methanol, smelting and chemical industry accounted for 32%, 27% and 25% respectively. At present, industrial hydrogen production mainly relies on fossil energy, and there is great potential in the future through low-carbon clean hydrogen replacement.
Ammonia is a compound of nitrogen and hydrogen, widely used in nitrogen fertilizer, refrigerant and chemical raw materials. The demand for synthetic ammonia mainly comes from agricultural fertilizers and industry, of which agricultural fertilizers account for about 70%. The International Energy Agency predicts that by 2050, more than 30% of hydrogen will be used to make ammonia and fuel.
At present, the hydrogen needed for ammonia production (also known as grey hydrogen from fossil fuels) is mainly obtained through steam methane reforming (SMR) or coal gasification, and each tonne of ammonia produced emits about 2.5 tonnes of carbon dioxide. Green hydrogen synthesis of ammonia can reduce carbon dioxide emissions. The main equipment for green hydrogen ammonia synthesis includes renewable energy power equipment, water electrolysis hydrogen production equipment, air separation device and ammonia synthesis device, and the above related technical equipment has a high degree of localization.
Among them, basic water electrolysis and proton exchange membrane water electrolysis technology can achieve large-scale water electrolysis hydrogen production, and China’s basic electrolytic cell technology is in the leading level of the industry. In addition, China’s foreign proton exchange membrane water electrolysis technology is in the initial stage, and the cost is high, the future mainly depends on the development process of fuel cell technology.
Large scale, low cost, continuous and stable supply of hydrogen is the premise of green hydrogen application in chemical industry. Although the application of green hydrogen in chemical industry faces economic challenges in the short term, as the price of renewable energy generation continues to fall, By 2030, green hydrogen parity is expected to be realized in some parts of China. Green hydrogen will enter the industrial field and gradually become a conventional raw material for chemical production.
Pure hydrogen and a mixture of hydrogen and natural gas can be used to power gas turbines and thus decarbonize the power generation sector. Hydrogen power can be generated in two ways. One is to use hydrogen energy in a gas turbine, through the process of inspiration, compression, combustion, exhaust, drive the motor to produce current output, that is, “hydrogen generator”.
The hydrogen power generator can be integrated into the power transmission line of the grid and cooperate with the hydrogen production device to produce hydrogen by electrolysis of water during the power consumption low, and then generate electricity through hydrogen energy during the power consumption peak, so as to realize the rational application of electric energy and reduce the waste of resources. The other uses the reverse reaction of electrolysis of water, in which hydrogen reacts electrochemically with oxygen (or air) to produce water and release electricity, known as “fuel cell technology”.
Fuel cells can be used in fixed or mobile power stations, standby peak power stations, standby power supply, combined heat and power supply system and other power generation equipment. These two kinds of hydrogen power generation have the problem of high cost. Currently, fuel cell power generation costs about 2.50-3.00 RMB/ degree, while other power generation costs are basically less than 1 RMB/ degree.
For example, the current thermal power generation cost is about 0.25-0.40 RMB/ degree, wind power generation cost is about 0.25-0.45 RMB/ degree, solar power generation cost is about 0.30-0.40 RMB/ degree, and nuclear power generation cost is about 0.35-0.45 RMB/ degree. Comparing the cost of electricity generation, it can be found that the cost of electricity generation of fuel cells is higher than that of other types of power generation mode.
As the core equipment such as proton exchange membrane and electrolytic cell mainly rely on imports, the cost is relatively high, and platinum, the superimposed raw material, is expensive, leading to the high cost of hydrogen power generation. With the emphasis on clean energy, the proportion of electricity generated by renewable sources such as wind and solar energy has gradually increased. In 2020, the total installed capacity of wind power and solar power in China reached 530 million kW, accounting for 11% of the total social electricity consumption.
By 2030, the total installed capacity of wind power and solar power will reach over 1.2 billion kW. According to the research, wind and solar power will account for nearly 70% of electricity generation under the 2050 zero-carbon emissions target scenario. Renewable energy generation is playing an increasingly important role in the power system. However, the intermittensity and randomness of wind power and solar power generation affect the continuity and stability of grid-connected power supply, so energy storage, as a relatively independent subject, will play an important role.
At present, there are mainly pumped storage, lithium electronic battery, lead battery and compressed air energy storage, among which pumped storage accounts for more than 86%. Compared with other energy storage methods, hydrogen energy storage has the advantages of long discharge time, high cost performance for large-scale hydrogen storage, flexible storage and transportation, and no damage to the ecological environment.
In addition, hydrogen energy storage has a variety of application scenarios. On the power supply side, hydrogen energy storage can reduce power abandonment and smooth fluctuations. In the power grid measurement, hydrogen energy storage can be used to load the peak capacity of power grid operation and relieve transmission line obstruction. At present, the application of hydrogen energy storage still faces many challenges due to technical and economic constraints.
On the one hand, hydrogen energy storage systems are relatively inefficient. There are two energy conversions in the “electric-hydrogen-electric” process of hydrogen energy storage, and the overall efficiency is about 40%, which is lower than the energy conversion efficiency of about 70% for pumped energy storage and lithium battery energy storage.
On the other hand, hydrogen energy storage systems are relatively expensive. The current cost of pumped storage and compressed air energy storage is about 7,000 RMB/ kW, electrochemical energy storage is about 2,000 RMB/ kW, and hydrogen energy storage system costs about 13,000 RMB/ kW, which is much higher than other energy storage methods. Hydrogen energy storage is still in its infancy, with about 1.5 MW installed in 2021 and less than 0.1% hydrogen energy storage penetration.
Hydrogen energy storage will play a significant role in promoting carbon peaking and carbon neutralization in the energy sector. The Guidance on Accelerating the Development of New energy Storage issued by the Chinese government in 2021 proposes that new energy storage should be transformed from commercialization to large-scale development by 2025. By 2030, the market development of new energy storage will be realized. As a new type of energy storage, hydrogen energy storage has broad development space in the future.
The energy demand of the building sector is mainly used for energy consumption of heating (space heating), heating (domestic hot water) and so on. Hydrogen heating is currently not superior to competing technologies such as natural gas heating (the most common heating fuel) in terms of efficiency, cost, safety and infrastructure availability.
Since the use of pure hydrogen requires new hydrogen boilers or extensive retrofitting of existing pipes, the cost of using pure hydrogen in buildings is relatively high. In Europe, for example, hydrogen energy use started earlier than elsewhere, but the cost of hydrogen heating is still more than twice that of natural gas. Even by 2050, when heat pumps become the most economical option, hydrogen heating could still cost 50 per cent more than natural gas heating.
Hydrogen can be transported by pure hydrogen or mixed with natural gas, which requires more pipeline. Hydrogen can also pose a safety risk to steel natural gas lines, which will need to be replaced with polyethylene lines. Such investments may make economic sense for larger commercial buildings or district heating networks, but may be too costly for smaller residential units.
As a result, the early use of hydrogen in buildings will be mainly in hybrid forms. Hydrogen can be mixed with natural gas at a ratio of up to 20 percent by volume without retrofitting existing equipment or pipelines. Mixing hydrogen into gas lines can reduce costs and balance seasonal energy demand compared to using pure hydrogen.
As the cost of hydrogen falls, regions with natural gas infrastructure and access to low-cost hydrogen, such as North America, Europe and China, are expected to gradually use hydrogen for heating and heating buildings. DNV, a Norwegian shipping society, predicts that the use of pure hydrogen in buildings could overtake that of mixed hydrogen in the late 2030s; By 2050, hydrogen will account for about 3-4% of total building heating and heating energy demand.