Industry Insights | The development of China's hydrogen energy industry is in the ascendant, and there is great potential for markets in all segments of the future industrial chain

From the perspective of the hydrogen energy industry chain, the upstream of the hydrogen energy industry includes hydrogen production, which is mainly achieved through three methods: 1) electrolysis of water; 2) industrial by-product hydrogen; 3) fossil fuels. Among these three production methods, fossil fuels are the most common method of hydrogen production in China. The midstream of the hydrogen energy industry value chain involves the transportation and storage of hydrogen, mainly in three forms, with gaseous transportation and storage being the mainstream method and the technology being mature. The downstream applications mainly include hydrogen refueling stations and batteries, ultimately leading to hydrogen-powered vehicles.

According to different production technologies, hydrogen production routes can be divided into three categories: grey hydrogen (hydrogen produced from fossil fuels), blue hydrogen (hydrogen produced as an industrial by-product), and green hydrogen (hydrogen produced from electrolysis of water, etc.). Currently, most of the hydrogen produced globally is grey hydrogen, which is hydrogen generated using fossil fuels such as coal, natural gas, and petroleum. Green hydrogen production accounts for only about 4% of global hydrogen production. Electrolysis of water for hydrogen production is expected to become the main method, because 1) the materials required are easily accessible; 2) the production process is reliable; 3) the finished product has a high purity.

The preparation of industrial by-product hydrogen can be further divided into the following production methods: 1) Coke oven gas (COG) by-products; 2) Chlor-alkali by-products; 3) PDH by-products; 4) Ethane by-products, etc. Currently, coke oven gas (COG) is one of the most likely sources for large-scale hydrogen production, as China is the world's largest producer of coke. Looking at different production methods of industrial by-product hydrogen, coke oven gas remains the lowest at 6-12 yuan per kilogram, while other methods cost more than 10 yuan per kilogram.

Hydrogen stations are an important part of the infrastructure network for hydrogen energy development.A hydrogen station consists of a compression system, a storage system, and a refueling system; each system is indispensable for the station's functionality. The workflow of a hydrogen station is as follows: hydrogen gas is compressed into different pressure vessels within the station. When a hydrogen vehicle arrives at the station for refueling, the system first adds hydrogen from the vessel with the lowest pressure. When the pressure difference between the low-pressure vessel and the high-pressure vessel reaches a certain level, the high-pressure vessel begins to function.

Hydrogen fuel cells convert chemical energy into electrical energy through non-combustion electrochemical reactions and are the core devices that provide power to hydrogen fuel cell vehicles, having a significant impact on the reliability of their performance.The power generation principle of a hydrogen fuel cell system is that the engine integration system provides hydrogen and oxygen to the anode and cathode through the reverse reaction of water electrolysis, respectively. Hydrogen diffuses out from the anode and reacts with the electrolyte, releasing electrons to the cathode, thereby directly converting the chemical energy of hydrogen and oxygen into electrical energy.

Hydrogen fuel cell vehicles (HFCVs) refer to vehicles that use hydrogen fuel cell systems as the sole power source or a hybrid power source consisting of hydrogen fuel cell systems and rechargeable energy storage systems.In the automotive sector, hydrogen is used to replace traditional internal combustion engines by forming powertrains that combine with fuel cells.

Hydrogen fuel cell vehicles only require hydrogen refueling during use, ensuring a pollution-free driving process that meets environmental protection standards. In terms of national energy strategy, hydrogen fuel cell vehicles reduce the environmental impact of hybrid and traditional vehicles, while also solving the range anxiety and long charging times associated with pure electric vehicles.

At present, hydrogen fuel cell vehicles are likely to become the main direction for clean energy development in the commercial vehicle sector.With the support of national fiscal stimulus, mainstream commercial vehicle manufacturers have been intensifying their research and development efforts to seize the hydrogen fuel cell vehicle market. In the past few years, the overall ownership of hydrogen fuel cell vehicles in China has been relatively stable, with about 10,000 hydrogen fuel cell vehicles on the road in 2021.

Currently, the vast majority of hydrogen fuel cell vehicles in China are used for commercial purposes. Commercial hydrogen energy vehicles such as trucks and buses are mainly applied in specific scenarios like parks and ports. Starting from 2022, with the gradual increase in sales of hydrogen fuel cell vehicles, it is expected that the number of hydrogen fuel cell vehicles in use will exceed 100,000 by 2025 and reach about 200,000 by 2026. As the market embraces hydrogen energy, hydrogen fuel cell vehicles will have a wider range of automotive application scenarios.

At the international level, the continuous increase in carbon emissions has caused adverse effects such as global climate anomalies and rising sea levels. Currently, carbon emission governance has become an important international issue, with countries around the world gradually accepting the concepts of 'carbon peak' and 'carbon neutrality'.

In the last century, with the rapid development of industrialization worldwide, carbon dioxide emissions from major economies around the globe significantly increased. Affected by factors such as rising carbon dioxide concentrations, global climate anomalies and sea-level rise have become increasingly prominent, and their unchecked development will bring irreparable losses to the production and life of people around the world. Carbon emission governance has gradually gone beyond the scope of environmental protection and has become one of the important international political and economic issues. After long and difficult negotiations, the global carbon emission governance issue made phased progress in the form of the Paris Agreement at the Paris Climate Change Conference in December 2015.

Driven by the goals of 'carbon peak' and 'carbon neutrality', reducing carbon emissions from transportation and deploying new energy modes of transport have become important tasks for future development in various countries. With government support, the upstream and downstream sectors of China's hydrogen energy industry chain will develop rapidly.

To achieve the Paris Agreement's temperature control target of 2°C, the world must work together to reach 'carbon neutrality'. The transition period from 'carbon peak' to 'carbon neutrality' in European countries generally lasts for 50-60 years, while China has only 30 years to complete this task. Therefore, China is far ahead of major European countries in terms of the intensity and pressure of its energy economic transformation and reduction of carbon dioxide and other greenhouse gas emissions.

Over the past decade, transportation (shipping, land transport, air transport) has contributed about 15% to global greenhouse gas emissions. Among these, land transport is the main driver of greenhouse gas emissions from transportation, accounting for about 10%, and it continues to show an upward trend. The automotive industry is one of the largest sources of global greenhouse gas emissions. Therefore, against the backdrop of global governments' efforts to achieve carbon neutrality, addressing automotive emissions is an important entry point for energy conservation and emission reduction.

Currently, fossil energy accounts for nearly 80% of the energy system. Under the vision of a global zero-carbon economy, hydrogen and its derivatives are expected to account for more than 10% of the global energy structure in the future, making them one of the fastest-growing and most promising clean energy sources. It is estimated that by 2050, hydrogen and its derivatives will become an important part of the global energy structure, accounting for more than 10%.

From the perspective of global energy structure, fossil fuels currently account for nearly 80%, making them the main source of carbon emissions at the current stage. To achieve the vision of a zero-carbon economy globally by 2050, there will be significant changes in the global terminal energy consumption structure. Among these, direct electricity and hydrogen and their derivatives will be the two most important components of the future global energy structure. It is estimated that hydrogen will account for more than 10% of the global energy structure by 2050, showing great development potential.

Compared to traditional fossil fuels, hydrogen has advantages such as high energy density, unlimited resources, cleanliness, and safety. In the future, clean energy represented by hydrogen will gradually replace traditional fossil fuels, showing great development potential.

In recent years, the Chinese government has been actively promoting the development of hydrogen energy and has introduced a number of favorable policies to support the industry. These policies include financial subsidies, tax incentives, R&D support, etc., aiming to encourage enterprises to increase investment in the hydrogen energy field, improve technological innovation and industrial development levels. In addition, the Chinese government has also increased support for hydrogen energy-related enterprises. For example, it has introduced a number of tax preferential policies, provided resources such as financing and land support, and strengthened the formulation and implementation of hydrogen energy standards and laws and regulations.

The introduction of various policies will provide a broader development space for China's hydrogen energy industry and make positive contributions to promoting global sustainable development.