China scaling up electrolyzer manufacturing base for domestic, export markets

China is rapidly building up its manufacturing capacity for hydrogen electrolyzers, which is expected to reach 1.5-2.5 GW in 2022, to cater to increasing orders from both domestic and overseas customers, company executives said at a recent industry conference.

Several private sector companies are formulating plans to leverage China's manufacturing expertise to lower the cost of equipment used in the hydrogen supply chain and produce electrolyzers, which crack the water molecule, at less than half of the cost of overseas manufacturers, the executives said.

Bringing down supply chain costs will help commercialize large-scale green hydrogen production and Chinese manufacturers are keen on replicating their dominance in global solar panel production in the race for hydrogen.

"Our prices differentiate significantly from competitors overseas, while our products do not have significant weaknesses in terms of quality and features," said Ma Jun, General Manager of Cockerill Jingli Hydrogen (CJH) at the Bloomberg New Energy Finance Shanghai Summit Dec 1.

CJH, a joint venture between Suzhou Jingli Hydrogen Production Equipment Co. Ltd. and Belgium-based John Cockerill Group, has become one of China's leading suppliers of green hydrogen electrolyzers based on alkaline technology, and others are joining the fray.

"The prices that we offer in the European market are likely to reach one-third of local suppliers' prices," Ma said, adding that, within 2-3 years, as productivity and scale of production improves, prices can drop by another 30%. He said CJH already has channels to receive orders from Europe, the US and Australia.

Competitive price

Electrolyzers are used to produce green hydrogen by passing electricity through a water molecule, and a buildup in global manufacturing capacity from current levels of around 3 GW is needed for countries to ramp up hydrogen production projects.

Alkaline electrolyzers are currently the leading technology for green hydrogen, followed by polymer electrolyte membrane or PEMs, with most of the capacity located in Europe, while China is gradually catching up.

"Alkaline technology has matured in China after decades of development, especially in terms of safety, reliability and cost. Within 2-3 years, we aim to complete product planning and expand to overseas market, increase orders and exports," Wang Yingge, Deputy General Manager of Longi Hydrogen Energy Technology, said at the summit.

Xian-based Longi Group, one of China's largest solar photovoltaic makers, recently entered the hydrogen equipment market and plans to have an eventual electrolyzer making capacity of 5-10 GW.

"It is likely the ASEAN region will become our pilot overseas market because of the relatively lower barrier of market entry. We expect to receive orders from next year," Wang said.

"For small-scale PEM [polymer electrolyte membrane] devices, our price is about half of our competitors' offering. In terms of large-scale PEM devices beyond 1 MW, we are also competitive and influence our overseas competitors' pricing decisions," Ding Xiaotao, Deputy General Manager of Shandong Saikesaisi Hydrogen Energy Co. Ltd., said at the event.

Saikesaisi specializes in electrolyzers based on the relatively new PEM technology, which has better integration with renewables but also requires more expensive catalysts.

In China, traditional alkaline electrolyzers still dominate the hydrogen market and PEM electrolyzers currently occupy less than 10% of the market share, Ding said, adding that 50% of the company's supplies were exported.

Compared with products like solar PV modules, hydrogen suppliers face more stringent standards in different countries, Wang said.

State-owned companies

While China's state-owned enterprises have taken the lead on hydrogen producing projects, electrolyzer manufacturing growth is likely to come from private companies, with executives saying that state-owned companies face difficulties in keeping pace in a highly competitive market.

However, the state firms have an important role in the rest of the hydrogen supply chain, and will depend on local firms to supply equipment, some of which had to be imported in the past.

"Sinopec has an extensive network of refilling stations, which can facilitate their deployment of hydrogen. SPIC has its own wind farms, which can support hydrogen production," Ding said.

"SPIC and Sinopec are not our competitors. We collaborate with them in their projects, providing them with core components of electrolyzers," Ding said. "At least in the next 3-5 years, collaboration will be the main theme of the green hydrogen market. If the 'cake' becomes bigger and bigger, everyone's getting more, regardless of the share," he added.

China's oil major Sinopec, which owns around 30% of China's refining capacity, has announced plans to invest $4.6 billion in the hydrogen sector through 2025, aiming to boost renewable-based hydrogen production capacity to 500,000 mt/year by 2025.

Sinopec has started construction of its 20,000 mt/year solar-based hydrogen project in Kuqa, Xinjiang, and is expected to start production in June 2023.

State Power Investment Corp or SPIC, one of China's "Big 5" state-owned generation utilities, is also expanding hydrogen investments, focusing on hydrogen's ability to cope with renewables' intermittency issue.