Zhang Fan and Zhang Songchen, CNCIC Consulting
Huge Gap in China Hydrogen Development, Opportunities Emerging
Hydrogen is one of the sustainable energy resources that attracts wide attention. According to statistics from BP Statistical Review of World Energy, fossil energy accounted for over 85% of China’s primary energy structure in 2020, while hydrogen only occupied 8%. As the world’s largest crude and natural gas import country, China’s high reliance on crude and other energy imports continues to affect the national energy security and pose challenges to its long-term development. Figure 1 shows China’s mid-and-long-term hydrogen energy demand forecast.
Figure 1 China’s Mid-and-Long-Term Hydrogen Energy Demand Forecast (2020-2050) Unit: 10 kt
In 2021, China listed hydrogen energy in its future industry layout as shown in the 14th Five-Year Plan for National Economy and Social Development and Outline for Vision 2035, which means that China will start to vigorously develop the hydrogen energy industry. According to statistics from China Hydrogen Alliance, China’s hydrogen demand exceeded 20 000 kt in 2020 and is likely to increase by seven times to 160 million tons by 2050.
Explore New Hydrogen Demand, Share of Transportation Industry to Grow Rapidly
Apart from the chemical industry, steel and cement are expected to become new growth points for hydrogen energy.
Figure 2 displays China’s hydrogen energy demand structure. Domestic hydrogen demand is concentrated in the industrial sector, with chemical industry being the largest contributor, mainly using hydrogen in ammonia synthesis and refining. This together with other chemical industry segments accounts for over 94% of hydrogen demand. The chemical industry will remain the major consumer of hydrogen.
Figure 2 China’s Hydrogen Demand Structure
According to relevant statistics, the steel industry is the manufacturing industry with the highest carbon emissions in China, accounting for about 15% of its total carbon emissions. The high carbon emissions of the steel industry are inseparable from the use of coal as energy and coke as reducing agent. Hydrogen has the potential to provide a large amount of high-temperature heat for the steel industry, while also acting as a reducing agent. Driven by the "carbon neutrality" initiative, hydrogen energy metallurgy is likely to become an important path for the steel industry to achieve decarbonization in the future. In addition, with the enhancement of hydrogen supply capacity to achieve "parity", hydrogen can also be used as a clean industrial fuel to replace coal as a fuel for cement kilns, etc. and will form a large-scale demand in other industrial fields.
Hydrogen Drives Full Electrification of Transportation
Hydrogen energy is expected to achieve breakthroughs in the field of fuel cells, thereby driving the rapid growth of demand in transportation.
Hydrogen fuel cell vehicles make up for the shortcomings of pure electric vehicles due to their high energy density and short energy replenishment time. Vehicles such as heavy trucks, mining trucks, excavators, and long-distance buses have heavy loads, long mileage, high fuel consumption, and need to quickly replenish fuel, so the application of hydrogen fuel cell vehicles has advantages. At present, the promotion of hydrogen fuel cell vehicles in China is still in the early stage, and the hydrogen demand of fuel cells accounts for the lowest in total hydrogen demand, only 0.1%.
In addition, hydrogen energy also has application potential in other transportation fields, such as aviation. In order to achieve decarbonization in the aviation field, several kinds of hydrogen-fuelled aircraft are being developed and tested around the world to replace aviation fuel as another energy option for short- and medium-haul aviation flights. For example, in shipping, with the breakthrough of hydrogen fuel storage technology in the future, hydrogen fuel cell technology can be supplemented by power batteries to realize the decarbonization transformation of inland and coastal shipping.
Opportunities and Challenges Coexist, 100 Billion Hydrogen Energy Materials Market Can Be Expected
According to the forecast of the International Hydrogen Energy Commission, the potential market size of the global hydrogen energy-related industry chain will reach US$2.5 trillion by 2050. The potential market for hydrogen fuel cell materials in China will also reach US$100 billion in the future, and products that will usher in explosive growth include carbon fibers, proton exchange membranes, electrocatalysts and other segments.
1. Carbon fiber
Promoting the improvement of hydrogen storage and transportation technology and the reduction of storage and transportation costs are the linchpin for the maturity of the hydrogen energy industry, and the improvement of on-board hydrogen storage technology will be a key breakthrough in the development of hydrogen fuel cell vehicles in the future. Among them, carbon fiber wound composite hydrogen storage cylinders have high growth potentials.
Around half of the carbon fiber used in China's hydrogen storage bottles is supplied by foreign manufacturers, among which Japanese and Korean companies contributed to over 70% of imported carbon fiber used hydrogen storage bottles. Domestic enterprises such as Shanghai Petrochemical, Zhongfu Shenying and other enterprises have realized the industrial production of carbon fiber.
A number of provinces in China announced that they would vigorously promote the development of hydrogen energy industry during the “14th Five-Year Plan” period and more than 10 cities are incorporating hydrogen fuel vehicles into their future plans. China may become the world’s largest on-vehicle hydrogen storage bottle market, driven by demand from multi-fields. In the face of the upcoming booming demand for on-vehicle hydrogen storage bottles, carbon fiber has become the "biggest bottleneck" in the current hydrogen energy equipment manufacturing industry.
2. Proton exchange membrane
Proton exchange membrane is the key material of membrane electrode in hydrogen fuel cell, which directly affects the performance of fuel cell. Proton exchange membranes can also be used in electrolyzers to electrolyze water to produce hydrogen. As the main raw material of proton exchange membrane, perfluorosulfonic acid resin is difficult to produce technically. China mainly relies on imported proton exchange membranes and major manufacturers include the US’ DuPont, Japan’s Asahi Glass Company (AGC) and Asahi Kasei. Some domestic companies have successfully realized the localization of proton exchange membrane, such as Dongyue Group Co, SPIC, etc.
According to the Technology Roadmap for Energy Saving and New Energy Vehicle Industry compiled under the guidance of China’s Ministry of Industry and Information Technology (MIIT), China will build more than 1 000 hydrogen refueling stations in 2030, and the proportion of hydrogen production from renewable energy will reach more than 50%. The structure of China's hydrogen sources will undergo drastic changes by then. The Roadmap proposed that the development goals of fuel cell vehicles in 2020, 2025 and 2030 are 10 000, 100 000 and 1 million vehicles. It is expected that in 2030, the demand for proton exchange membranes will reach around 26.4 million square meters, and the market space can reach RMB13.2 billion. At the same time, it will have excellent compatibility with renewable energy power generation.
3. Electrocatalyst
Catalyst is one of the core materials of fuel cell, accounting for over 40% of the cost of fuel cell stack. In September 2020, China’s five departments, including the Ministry of Finance and MIIT jointly issued the Notice on the Demonstration and Application of Fuel Cell Vehicles, which clearly pointed out that it is necessary to focus on supporting the research and development of key materials and components such as catalysts.
Platinum group metals are noble metals. They are widely used in hydrogen fuel cells and other fields due to their high melting point, high strength, stable electrothermal properties, and good catalytic activity. However, the world's platinum group metal resources are highly concentrated, with more than 80% located in South Africa. For the current research of hydrogen fuel cell catalyst, foreign technology is still in a comprehensive leading position. Research and development to replace precious metal catalysts and improve the activity of electrocatalysts have become the key to the rapid development of China’s fuel cell industry. In addition, how to achieve mass production of catalysts and reduce the cost of catalyst preparation is also crucial for enterprises to think and make breakthroughs.
As one of the most important mobile renewable energy sources in the future under the carbon neutrality and carbon peaking targets, the growth of hydrogen energy and related supporting industry chains is very certain and predictable. As such, chemical companies shall seize the opportunity and prepare to ride the hydrogen wave.
