Green hydrogen prices are gradually becoming more affordable 
Currently, under the established operational conditions – at an electricity cost of 0.2 RMB/kWh, a power consumption of 4.7 kWh/Nm³, and hydrogen production equipment & power supply costs of 9 million RMB – the cost of green hydrogen is approximately 14.9 RMB/kg. While this price is ~30% higher than coal-based hydrogen (difference of 4.9 RMB/kg), rapid tech advancements and cost reductions are expected to drive down green hydrogen costs further, to be on par with, or lower than coal-based hydrogen.

Globally, SPF Hydrogen Energy anticipates that the launch of new 1 MW AEM electrolyzer systems by end 2024, could help reduce green hydrogen production costs below 10 yuan/kg. Meanwhile, the collaboration between Ceres Power and Shell is developing new SOEC (Solid Oxide Electrolysis Cell) hydrogen production technology, pledging to reduce production costs to $1.5 USD/kg by 2025, with alternative nuclear-powered SOEC technology potentially lowering green hydrogen costs further to below €3.5/kg.

Regional subsidies helping to reduce prices further
In China, regional green hydrogen subsidy policies have shown early success. Places like Erdos in Inner Mongolia and Karamay in Xinjiang have significantly reduced green hydrogen production costs with the help of government subsidies. Erdos, for instance, introduced a regional subsidy policy in August 2023, offering subsidies of 4 RMB, 3 RMB & 2 RMB per kg of hydrogen for years 2023 to 2025 respectively, helping lower green hydrogen costs into the 8-12 RMB/kg range, greatly narrowing the cost gap with coal-based hydrogen.

Expansion of domestic green hydrogen projects
As of end of 2023, China had 387 renewable hydrogen projects planned: 80 under construction, 58 in operation, plus 20 newly commissioned projects. They contribute to a total renewable hydrogen capacity of approximately 56,000 tons/year. The target green hydrogen capacity is 6.43 million tons/year, with 78,000 tons/year already in operation. According to public data from the China Hydrogen Energy Industry Association, China has planned over 60 new green hydrogen projects from Jan-Nov 2023, with total investments exceeding 410 billion RMB.

Inner Mongolia, benefiting from abundant natural resources and policy support, accounted for 57.8% of China’s new green hydrogen projects, with over 230 billion yuan in planned investments from Jan-Nov 2023, leading the charge.

Wide application potential across chemical and transportation sectors
In 2023, 40% of commissioned green hydrogen projects were applied in petroleum refining, 25% in methanol synthesis, and 21% in transportation. Green hydrogen-based ammonia synthesis and methanol production remain the primary consumption pathways for green hydrogen projects.

The industrial sector has a substantial demand for hydrogen, and green hydrogen offers significant potential for decarbonization by replacing grey hydrogen. As the world’s largest producer of synthetic ammonia and a leading producer of methanol, China sees broad prospects for green hydrogen’s application in chemicals like green ammonia and methanol, which facilitates the low-carbon transformation of the overall energy mix. In transportation, hydrogen fuel cell vehicles (FCVs) are emerging as a crucial scenario in the hydrogen energy chain, gradually entering the stage of large-scale commercial operations. While the initial cost of FCVs remains high, technological advancements and government policies are expected to drive costs down over time. FCVs boast advantages like long driving range and excellent low-temperature performance, complementing battery-based electric vehicles.

The implementation of carbon taxes in the European Union has been pressuring demand for green fuels like green methanol and green aviation fuel in maritime and aviation sectors.

China’s green ammonia and green methanol projects exhibited a robust growth trend in 2023, with 27 new green hydrogen-based ammonia projects and 20 new green methanol projects (Jan-Nov), attracting investments of 188.58 billion RMB and 175.42 billion RMB, respectively. These projects are projected to add approximately 4.85 million tons/year of green ammonia and 8.65 million tons/year of green methanol capacity upon completion.

Accelerated infrastructure construction and equipment development
To support the rapid development of the green hydrogen industry, China is accelerating infrastructure construction, including hydrogen refueling stations & ports, ammonia tanker projects, and equipment development. China leads the world in hydrogen refueling stations, with 407 stations in operation and 62 new stations built by the end of 2023, with integrated energy stations accounting for 58% of the total.

Regarding ports – according to announced construction plans – about 50 hydrogen and hydrogen-derivative ports will be commissioned globally by 2030, with over 50% equipped for ammonia handling. In logistics development, Jiangnan Shipyard has partnered a Singaporean shipping company for four 93,000 cubic meter ultra-large ammonia tankers in May 2023, and CIMC Enric confirmed the delivery of a 5,500 cubic meter ammonia transport tank in November 2023.

The road ahead
With increasing policy support, constant improvement in standards, accelerated infrastructure development, and rapid advancements in technology and equipment, China’s hydrogen energy industry is expected to maintain its quick-paced momentum in 2024. The application fields and investment scale of green hydrogen and its derivatives will continue to grow, potentially achieving the goal of producing 100,000 to 200,000 tons/year of renewable hydrogen ahead of schedule. Green hydrogen, as a vital component of the future energy system, is expected to contribute significantly to China’s sustainable development and the global energy transition.