China issues guidelines for low-carbon hydrogen use in industrial sectors

The Chinese government issued a plan late Dec. 31 to accelerate the deployment of low-carbon hydrogen in industrial sectors, focusing on stimulating demand and reducing costs.

The plan was released by the Ministry of Industry and Information Technology (MIIT) to ensure that the targets under the country's national hydrogen industry development plan (2021-2035) can be met on time.

China is on track to meet its targets of producing 100,000-200,000 mt/year of renewables-based hydrogen by 2025, driven by state-owned energy companies represented by Sinopec. However, low demand and high costs remain key constraints for this nascent industry in securing sufficient off-takers and achieving meaningful growth.

The national plan, launched in March 2022, calls for the orderly deployment of renewable-based hydrogen across various industries by 2030 and the development of a comprehensive hydrogen ecosystem by 2035. Additionally, the MIIT's latest plan sets detailed targets to be met by 2027.

By 2027, the steel, ammonia synthesis, methanol synthesis and refining sectors should achieve large-scale deployment of low-carbon hydrogen, the MIIT said, without setting any quantitative target.

The MIIT also advocates more demonstration projects in the transportation and power sectors, aiming to create a series of innovative low-carbon hydrogen use cases in shipping, aviation, rail transit, power generation and energy storage by 2027.

The MIIT aims to cultivate a group of "dragon head" companies, industrial clusters and integrated solution providers by 2027, enabling them to develop a relatively comprehensive hydrogen value chain and establish the country's initial hydrogen ecosystem.

Technologies, use cases

In the highlighted sectors, the MIIT recommended some technologies and use cases to be prioritized for investments and deployment.

The ministry endorses hydrogen metallurgy for both the steel and non-ferrous metal sectors.

Hydrogen metallurgy uses hydrogen as the reducing agent to produce steel and other metals, substituting carbon-intensive fossil fuels and lowering emissions from metal production. The MIIT said steel producers could start by deploying industrial byproduct hydrogen, gradually switching to using renewable-based hydrogen.

The MIIT has also urged the refining sector to transition to low-carbon hydrogen in processes such as hydrocracking and hydrorefining instead of using hydrogen produced from fossil fuels.

In transportation, the MIIT calls for the deployment of hydrogen fuel cell electric vehicles (FCEVs) across various use cases, including steel supply chains, mining bases, industrial clusters, ports and terminals, to establish FCEV logistics networks that are comprehensive, reliable and capable of handling large throughput volumes.

The ministry suggests that companies vigorously scale up green methanol production -- methanol produced by combining low-carbon hydrogen with carbon collected from biomass or captured using CCUS (carbon capture, utilization and storage) technologies. It has encouraged airlines to invest in green methanol to produce sustainable aviation fuels.

The MIIT proposes that companies proactively promote the development of low-carbon ammonia synthesis projects, emphasizing the critical role that shipping companies will play in the investment and deployment of synthetic ammonia. The ministry also asked agricultural companies to promote the use of low-carbon ammonia as fertilizers.

Lowering system costs

The ministry's latest plan also addresses the current challenge of high costs associated with renewable-based, low-carbon hydrogen. According to analysts, electricity alone accounts for about 70% of the total renewable-based hydrogen production costs in China.

Even in northwest China, which has the country's cheapest solar and wind electricity supplies, renewable-based hydrogen costs about Yuan 1.4/cu m (19 cents/cu m), significantly higher than coal-based hydrogen costs of Yuan 0.6-0.8/cu m, data from state media China Energy News showed.

The MIIT encourages companies to build factories and industrial parks in regions with abundant renewable power supplies. By doing so, companies can directly consume renewable electricity as it is generated, rather than relying on grids, which can reduce system costs and enhance efficiency.