China’s hydrogen and CCUS opportunity Hydrogen and CCUS are set to play important, complementary roles in meeting the carbon neutrality goals of China. China has pledged to peak CO2 emissions before 2030 and achieve carbon neutrality before 2060, requiring a profound transformation of its energy system. Low-emission hydrogen and carbon capture, utilisation and storage (CCUS) technologies have both been identified as key priorities in China’s carbon neutrality guidelines. China leads the world in hydrogen production, but this production is currently emissions-intensive. In 2020, hydrogen production in China reached around 33 Mt, or 30% of the world total. China’s leading position results from its large share of the global chemical market and its considerable oil refining capacity, which are the primary sources of hydrogen demand today. China is the only country in the world that produces hydrogen from coal at significant scale: about two-thirds of China’s hydrogen production is fuelled by coal, with around 360 Mt of CO2 emissions generated in 2020.
Hydrogen in China today China has been the world’s largest producer and consumer of hydrogen since 2010, owing to growing demand from its industry sector and the availability of low-cost resources. Since 2010, according to data sources in China, national hydrogen consumption has increased an impressive 30% to reach around 33 Mt in 2020, accounting for around 30% of the global total (CHA, 2020a). This includes hydrogen used for onsite co-generation of heat and power in industrial processes, such as coal-coking in steelmaking and chlor-alkali electrolysis in chlorine and caustic soda production. Dedicated hydrogen production and by-product hydrogen production from catalytic naphtha reforming (which is generally the basis of IEA estimates) amount to around 26 Mt3 (IEA, 2021a).
Coal is the fuel used for most of China’s hydrogen production, with nearly two-thirds (21 Mt) made through coal gasification, accounting for 5% of China’s total coal consumption. Natural gas reforming is the other main means of dedicated hydrogen production (5 Mt), and only a very small fraction of today’s hydrogen comes from water electrolysis. The remainder (7 Mt) is formed as a by-product of several processes: coal-coking in steelmaking; chlor-alkali electrolysis in chlorine and caustic soda production; dehydrogenation; cracking of light oil fractions; and catalytic naphtha reforming (CHA, 2020a).
Meanwhile, the threshold adopted for “clean” hydrogen is 4.9 kg CO2/kg H2, which corresponds to a 65% reduction relative to “low-carbon” hydrogen and an over 80% reduction relative to coal-based hydrogen. The 65% reduction was mandated by the Energy Supply and Consumption Revolution Strategy 2016-2030. When this threshold is met, hydrogen produced through electrolysis using renewable electricity or biomass is labelled as “renewable hydrogen.
While no international standard for low-emission hydrogen production currently exists, definitions of “low-carbon” and “clean” hydrogen are likely to become more restrictive in the future. Low-emission hydrogen in IEA scenarios includes hydrogen produced via electrolysis where the electricity is generated from a lowemission source (renewables or nuclear), biomass or fossil fuels with CCUS. Production from fossil fuels with CCUS is included only if upstream emissions are sufficiently low, if a high rate of capture is applied to all CO2 streams associated with the production route, and if all CO2 is permanently stored to prevent its release into the atmosphere.
Outlook for hydrogen production and demand in China In both scenarios, the contribution of hydrogen and hydrogen-based fuels to China’s energy transition increases progressively to 2060, with especially strong uptake after 2030. Total hydrogen demand increases 11-20% by 2030 and then three- to fourfold by 2060. In the APS, hydrogen demand reaches just over 90 Mt by 2060, and make up around 6% of China’s final energy consumption. 5 In CHA projections, hydrogen plays an even greater role in China’s energy sector, with demand reaching 130 Mt in 2060.
Hydrogen in industry and fuel transformation As industry and fuel transformation consume nearly all China’s current hydrogen production, meeting this demand with cleaner hydrogen – by applying CCUS to hydrogen produced from fossil fuels, switching to electrolytic hydrogen or producing hydrogen from bio-feedstock – would help decarbonise this sector. There is also significant potential to expand hydrogen use to new applications, including as a feedstock for industrial processes (e.g. DRI in steelmaking), as a fuel for industrial heating, and as an input in the production of long-distance transport fuels such as synthetic kerosene.
Hydrogen in transportation In both the IEA and CHA analyses, transport is the sector that boosts hydrogen demand the most through 2060. Although China has a long history of supporting FCEV development, it was not until 2016 that FCEV uptake began to gain traction, with the greatest increase in 2019. By the end of 2020, China had deployed over 7 700 FCEVs (particularly buses and trucks, according to CHA data), making the country the world’s largest FCEV market (CHA, 2020a). Given the large size of China’s vehicle market and the sheer volumes of fuel involved, hydrogen uptake in transport could quickly make this sector the single largest source of hydrogen demand in the future. However, actual hydrogen deployment will depend on many factors, including overall vehicle sales trends; FCEV prices and how they compare with the cost of electric vehicles; refuelling infrastructure buildout; hydrogen production costs; and supporting policies. To date, electric vehicles have had a head start and China is currently the largest market for light-duty electric vehicle sales in the world.
China has made considerable progress in developing and demonstrating biomass conversion technologies, particularly biomass-based power and ethanol plants. In 2019, the City of Jixian (Heilongjiang province) and the Jin Tong Ling Technology Group Co., Ltd. signed a contract to develop a biomass-to-hydrogen gasification plant. The facility will produce 200 million Nm3 H2/yr from 750 kt of raw materials such as forestry and agricultural waste and manure (Shuangyashan People’s Government Network, 2019). Given the highly concentrated stream of CO2 generated during this process, projects such as these are ideal opportunities to apply CCUS technology, but China’s RD&D activities on CCUS have so far focused primarily on conventional power and coal-to-chemical plants. While BECCS development and demonstration has been lagging, it is expected to gain traction in upcoming years because of its importance in achieving carbon neutrality by 2060.
The Ordos Basin, where the Ningdong industrial cluster is located, offers prime opportunities for source-sink matching of suitable sites for CO2-EWR storage and EOR utilisation, and for coal-to-chemicals production. A CCUS cluster in this area is therefore highly recommended, and the potential sharing of CCUS and hydrogen infrastructure could reduce CO2 transport and storage costs.
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