Chinese solar giants bid to dominate hydrogen power


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(Bloomberg) – Chinese companies have spent 10 years aggressively maneuvering to become the dominant players in solar power. Now they are looking to lead the way in the development of the next big innovation in clean energy: hydrogen.

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Major solar power makers, including Longi Green Energy Technology Co., are ramping up production of electrolysers, the equipment needed to make green hydrogen, the cleanest form of fuel. They are accelerating investments on the bet that a market will explode as industries and consumers turn to low carbon fuels.

To gain the advantage in the global hydrogen race, Chinese companies are following the same scenario used to dominate solar power: reducing prices and production costs, dramatically increasing facilities, and accelerating the development of new ones. technologies.

“In the solar supply chain, Longi has played the role of leading the technological advancement of the industry,” said Wang Yingge, deputy general manager of Longi’s hydrogen technology and energy unit. . “In hydrogen equipment, Longi will continue to focus and invest heavily in research and development. “

Longi plans to build 1.5 gigawatts of electrolyzer production capacity by the end of next year, up from the current 500 megawatts. The world’s largest owner of renewable assets, State Power Investment Corp., aims to build 10 gigawatts of electrolyzer manufacturing capacity by 2027.

China will account for more than 60% of global electrolyser installations worldwide in 2022, with the market having quintupled this year, according to BloombergNEF. The China Hydrogen Alliance said earlier this year that fuel could account for 20% of the country’s energy mix by 2060, a deadline set by President Xi Jinping for China to become a carbon neutral country.

Yet despite the positive outlook, the solar giants face significant challenges in developing the hydrogen market. The industry still has a long way to go to bring prices down, and it lacks the key government incentives that helped start a fire in the solar and wind sectors.

Green hydrogen is far from being competitive with other fuels. Hydrogen produced by renewables currently costs at least $ 3.22 per kilogram in China, nearly double the price of coal, according to BloombergNEF. And the dirtier gray hydrogen produced by fossil fuels makes up the bulk of the Chinese hydrogen market. It represented more than 63% in 2020, compared to just 1.5% for green hydrogen, according to a white paper published by the China Hydrogen Alliance.

“The biggest challenge ahead is the cost,” said Libby Zhong, co-head of Ernst & Young’s energy and resources business in China. Without policies like the ones that have spurred the development of solar and wind power, it will be very difficult for green hydrogen to receive sufficient support at this early stage, she said.

China has yet to put in place a national hydrogen plan, and the only statewide subsidy program is limited to supporting fuel cells, which will directly boost hydrogen consumption but will not necessarily promote a clean production process or support the development of electrolysers.

Wang de Longi said he hopes the government will introduce subsidy programs that set benchmarks for hydrogen produced by renewables, and expects the rising cost of carbon emissions in China to stimulate the consumption of green hydrogen. The company predicts that the price of electrolysers will drop by more than 30% over the next three to five years.

Another big difference between the development of solar panels and hydrogen electrolyzers is the market in which they are sold. While solar customers can plug panels into existing grids and immediately start selling electricity, enabling rapid adoption, the uses of hydrogen are more limited and rambling.

Chinese state giants are trying to close this gap. Sinopec, the world’s largest oil company, has started building the world’s largest green hydrogen project, with the capacity to deliver 20,000 tonnes of clean fuel each year from mid-2023.

More than a third of state-owned enterprises are making plans for the production, storage, distribution and use of hydrogen, according to China’s Commission for the Supervision and Administration of State-Owned Assets. Much of the enthusiasm is driven by the pressure to cut emissions to meet climate goals and the rising cost of carbon, said Mao Zongqiang, professor at the Institute of Nuclear Technologies and New Energy at Tsinghua University. in Beijing.

While state-owned companies are making bigger bets on hydrogen, private companies such as Longi and Sungrow Power Supply Co. are currently focusing on the development of electrolysers.

Longi has not built capacity in downstream applications such as fuel cells or hydrogen production because it “has not seen a clear direction” as to where the greatest potential will lie, Li Zhenguo, chairman of Longi, said in a recent interview.

Still, the solar giants expect to stay at the forefront of the industry as companies from oil refiners to steelmakers turn to hydrogen.

“Solar energy primarily addresses the problem of carbon reduction in the electricity field, but as the industrial sector steps up its emission reductions, we see hydrogen as a necessary clean secondary energy,” said Wang of Longi.

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