A 10 Trillion Yuan Hydrogen Energy Market Everyone Wants a Piece of｜A TiPost Focus

BEIJING, June 19 (TiPost) -- "Not investing in hydrogen energy now is like not investing in lithium batteries 5 years ago," said economist Ren Zeping in 2022. His comments were spread like wild fire.

At that time, hydrogen energy made its debut as an energy source, and the policy began to promote the generation and use of hydrogen energy. Investment institutions were looking for targets with cash, and major listed companies were also participating through investment in start-up companies or extending their main business.

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One year later, at the "2023 World Hydrogen Technology Conference," Chinese Academy of Sciences academician Ouyang Minggao predicted that hydrogen energy is an industrial cluster with a potential scale of "100 trillion."

However, similar to the development of the lithium battery industry, as it advances towards the goal of 100 trillion, the future of hydrogen energy needs both upstream expansion to drive downstream demand and downstream demand growth to promote upstream cost improvement.

Before this, the cost of green hydrogen in the upstream was too high, and the downstream demand was not strong, resulting in many technologies being trapped in universities or research institutions, and the entire industry cycle was in a "deadlock."

But this year, under the continuous promotion of policies, we clearly see that both ends of the industry are moving towards each other:

Upstream green hydrogen projects are constantly expanding, and some industry insiders believe that it is expected to break the expensive green hydrogen dilemma.

On April 5, China Power Construction Corporation signed a contract with the Manzhouli government of Inner Mongolia for a wind-powered hydrogen integrated demonstration project, planning to produce 60,000 tons of hydrogen per year. The next day, Jingke Electric Power signed a contract with the government of Balin Left Banner, Chifeng City, Inner Mongolia for a wind-powered hydrogen integrated demonstration project.

Downstream terminal companies are also actively seeking use cases to become pioneers in the industry.

On February 16, Yutong Heavy Industries delivered 40 hydrogen fuel heavy trucks to Henan Ziling Construction Engineering Co., Ltd. Multiple companies, including Mindong Future, Tailing Group, Yang Hydrogen Group, Jie Hydrogen Technology, and Vina Hydrogen Energy, announced their entry into the hydrogen-powered two-wheeled vehicle field. On March 17th, the first domestically classified 500 kW hydrogen fuel cell powered working boat "Sanxia Hydrogen Boat 1" with China Classification Society (CCS) was launched.

Multiple regions compete in the hydrogen energy sector, with single subsidies exceeding tens of millions

In March of last year, the "Mid- and Long-Term Development Plan for the Hydrogen Energy Industry (2021-2035)" was introduced, and the country clarified the energy attributes of hydrogen energy from a top-level design perspective.

Local governments have also included the development of the hydrogen energy industry in their "14th Five-Year Plan" development plans. Some local governments have even provided substantial support for the development of the hydrogen energy industry with subsidies exceeding tens of millions of yuan. The scale of the industry in some regions exceeds one hundred billion yuan.

In 2023, many regions are still increasing their investment in the hydrogen energy industry. According to the data released by the Ministry of Science and Technology"s Department of High and New Technology in March of this year, since the release of the "Mid- and Long-Term Development Plan for the Hydrogen Energy Industry (2021-2035)" last year, local governments have issued over 70 relevant supporting policies.

For example, in January of this year, Gansu, Qinghai, and Jiangxi provinces respectively released local mid- to long-term plans for the development of the hydrogen energy industry. Qinghai Province expects to have a green hydrogen production capacity of around 40,000 tons by 2025, with no less than 150 fuel cell vehicles in operation, no less than 100 hydrogen-powered heavy-duty trucks in mining areas, and the construction of 3 to 4 hydrogen refueling demonstration stations.

Wang Dongyu, the Director of the Hydrogen Energy Technology Development Department of Mindong Energy Technology Co., Ltd., believes that under the continuous catalysis of policies, the development potential of the industry is enormous, and it will accelerate the rapid promotion of hydrogen energy projects in various regions, thereby increasing local fiscal revenue. At the same time, different policies have also played a corresponding stimulating role in the development of the hydrogen energy industry, which is more conducive to the acceleration of the construction of hydrogen energy infrastructure such as hydrogen refueling stations, promoting the formation of a linked chain of the entire industry.

Compared with the development of power batteries, the reason why they can quickly penetrate the passenger car market is closely related to the construction of charging facilities. Therefore, the construction of basic infrastructure such as hydrogen refueling stations has always been considered as a key prerequisite for the scale development of the entire hydrogen energy application.

However, as of April 7, 2023, China had only built 301 hydrogen refueling stations.

Wang Dongyu stated that the cost of building a hydrogen refueling station in China is approximately 10-15 million yuan. The core components are still mostly imported, and coupled with land use issues, the construction cost is still very high. In addition, the subsequent operating and maintenance costs will be particularly high for hydrogen fuel cell vehicles until they reach a large scale. Secondly, because there is currently no "scalable" application to balance the cost, it is difficult for hydrogen refueling stations to be profitable. The high cost of hydrogen prices and the lack of hydrogen sources all affect whether refueling stations can be profitable.

Thirdly, the domestic system for planning, approval, and regulatory supervision of hydrogen refueling stations is not sound, which to some extent also affects the speed of the construction and popularization of hydrogen refueling stations.

However, he also predicted that with the government"s support for the construction of comprehensive energy stations for oil, gas, hydrogen, and electricity through various policies, and the strong entry of central enterprises such as Sinopec, there will be more than 1,000 hydrogen refueling stations by 2030.

Green hydrogen costs are falling

In addition to the convenience of energy supply, "the popularization of a new technology inevitably requires sufficiently low costs. Financial subsidies are one way, but ultimately it relies on large-scale mass production to reduce supply chain costs," said a hydrogen industry practitioner to TiPost App.

There are two paths to cost reduction: one is the economic production of green hydrogen, and the other is the manufacturing price of the whole vehicle. "The real challenge we face now is still in the hydrogen production process, which needs to be further improved and optimized in terms of scale and overall cost," said the aforementioned industry insider.

According to the different sources of production and carbon emissions, hydrogen is divided into gray hydrogen, blue hydrogen, and green hydrogen. Among them, green hydrogen is hydrogen produced by electrolyzing water using renewable energy sources such as solar and wind power, and almost no carbon emissions are produced during the process.

Since the beginning of this year, many hot funds have invested in green hydrogen projects due to the dual logic of the proportion of hydrogen energy in the energy mix and the proportion of green hydrogen in hydrogen energy increasing. According to statistics from the Energy Chain Research Institute, there are currently more than 100 wind and solar electrolysis hydrogen production projects in China that are already built, under construction, or in planning.

However, overall, most of China"s current hydrogen is produced from coal, with a small portion being produced from natural gas, and the proportion of green hydrogen is relatively low. The biggest challenge behind this is the high cost of producing green hydrogen.

Why is the cost of green hydrogen high? It is mainly affected by factors such as electricity price, electricity consumption, and hydrogen production equipment, among which electricity cost usually accounts for more than 70% of the total cost of electrolytic hydrogen production.

According to Dongwu Securities" forecast, if calculated based on the current electricity consumption of 5 kWh/cubic meter and electricity price of 0.3 yuan/kWh, the total cost of alkaline water electrolysis hydrogen production is 25 yuan/kg, while the cost of coal-based hydrogen production is 9.6 yuan/kg and natural gas-based hydrogen production is 15 yuan/kg. Therefore, the cost of green hydrogen is almost three times that of coal-based hydrogen production.

High electricity prices will lead to high costs for green hydrogen, making it difficult to compete with grey hydrogen.

Peng Chaocai, Vice President of Sunergy, once said that when the electricity price drops to 0.13 yuan/kWh, the cost can be reduced to 11.63 yuan, which can achieve parity with coal-based hydrogen production, which currently has the lowest cost.

As for when this phenomenon will occur, his view is that there will be a "death crossing" of the cost of grey hydrogen and green hydrogen industries around 2025-2030.

In addition to electricity prices, another important reason for the high cost of green hydrogen is the electrolysis cell equipment.

Currently, the mainstream technology for electrolytic hydrogen production is alkaline water electrolysis (AWE) and proton exchange membrane water electrolysis (PEM). Alkaline water electrolysis technology is the most mature process, mainly including five parts: electrolysis cell, electrical equipment, solid-liquid separator, purification equipment, and auxiliary equipment. Among them, the electrolysis cell accounts for 50% of the total cost and is the most core equipment.

The outbreak of green hydrogen projects has driven the competition for alkaline water electrolysis hydrogen production equipment to gradually become "white-hot". According to incomplete statistics, there are more than 40 domestic alkaline electrolysis cell production companies with public announcements, and new players are constantly entering the market.

The first type is old companies such as 718 Institute, Tianjin Continental, Suzhou Jingli, etc., with deep technical accumulation and high market share.

The second type is photovoltaic leading companies such as Longi Green Energy, Sunergy, etc. For example, in April of this year, Jinko Power signed a contract with the government of Balinzuoqi, Chifeng City, Inner Mongolia for a wind-solar integrated hydrogen production demonstration project, and Xinjiang Goldwind established a 10 billion yuan hydrogen energy industry investment fund to "bet" on natural gas-based hydrogen production.

In addition, fuel cell companies are also actively deploying upstream. On June 6th, Beijing Yihua Tong Hydrogen Energy Technology Co., Ltd. was officially established. At the founding ceremony, the hydrogen energy technology company released independently developed PEM water electrolysis hydrogen production systems and PEM electrolysis cells.

Wang Yingge, Vice President of Xi"an Longji Hydrogen Energy Technology Co., Ltd., said that in the next 3-5 years, there will be at least a 30% reduction in the cost of electrolytic hydrogen production equipment.

In terms of the manufacturing cost of the whole vehicle, a report by CITIC Securities shows that the current manufacturing cost of a hydrogen-powered heavy truck or bus is about 1.2-1.3 million yuan, with the battery system accounting for the highest proportion of about 60%.

To be more specific, Chen Hong, Vice President of Xiongtao Corporation, has stated that the stack cost accounts for 60% of the entire engine cost, which can now be controlled at a cost of about 1,000 yuan/kilowatt.

So when can the stack cost be on par with that of electric and fuel vehicles? Ouyang Xun, Founder and Chairman of Hydrogen Purification Energy, once publicly predicted that by 2030, the stack cost could be reduced to 150 yuan/kilowatt, which would be on par with that of electric and fuel vehicles.

Commercial vehicles will be the first to be put into use, and hydrogen-powered heavy trucks can be operated on a large scale in the next 5 years

The huge market blueprint for hydrogen energy is gradually unfolding, but it still needs time to wait.

Since Daimler developed the fuel cell car Necar 1 in 1994, many car companies have invested in the development of hydrogen fuel cell vehicles. Large car companies such as Ford, Honda, Toyota, and Hyundai have all launched their own hydrogen fuel cell passenger car products.

In late 2014, Toyota launched the hydrogen energy car-Mirai, which was also the world"s first mass-produced hydrogen fuel cell car. In just one month, the number of orders reached about 1,500. At that time, the Japanese government also provided a highly attractive subsidy policy, with a single vehicle subsidy of up to 100,000 yuan.

Subsequently, Mirai entered the US market, and in 2017 alone, nearly 2,000 Mirai were sold in the US. However, the good times did not last long, and in 2019, Mirai sales plummeted due to safety, cost, and other reasons.

Another company eager to try, Honda, announced in June 2021 that it would stop production of the hydrogen energy car CLARITY. Although Hyundai"s hydrogen energy car model Nexo accounts for nearly 60% of the global market share, its cumulative sales are only 30,000 units.

Encountering setbacks in passenger cars does not mean that hydrogen energy is useless.

After terminating the development of hydrogen fuel cell passenger cars with Honda, Daimler shifted its focus to hydrogen-powered heavy trucks. According to media reports, researchers at Oregon State University in the US are working with Daimler Trucks North America to develop a hydrogen fuel cell-powered heavy truck for regional and long-distance transportation.

Even the normally progressive Japanese government is now placing more emphasis on fuel cell commercial vehicles in its recently updated Basic Hydrogen Strategy. Although the latest strategy lacks specific quantitative targets for commercial vehicles, the Japanese government plans to develop a roadmap for the production and deployment of fuel cell trucks, and is considering support plans for logistics suppliers investing in a transition to fuel cell vehicles.

In China, according to data released by the China Association of Automobile Manufacturers, the cumulative production and sales of hydrogen fuel cell vehicles from January to December 2022 were 3,626 and 3,367 respectively, representing a year-on-year increase of 105.4% and 112.8%, respectively.

Looking at the types of vehicles, the hydrogen fuel cell vehicles currently produced and sold are mostly commercial vehicles. According to the data, the proportion of dedicated vehicles, heavy trucks, buses, logistics vehicles, and passenger cars among fuel cell vehicles in 2022 were 39%, 28%, 25%, 7%, and 1%, respectively.

Since the beginning of this year, there have been continuous delivery announcements for hydrogen fuel cell commercial vehicles. For example, since February of this year, hydrogen-powered heavy trucks equipped with the UNISUN Energy hydrogen power system have been successively delivered to companies such as Hegang Group, Xintian Steel Group, Tianjin West Group, and Changshu Bus; Weichitong delivered the world"s first hydrogen-powered heavy truck exported to Australia; Foton Ouhui delivered 80 hydrogen-powered buses to Shuimutongda; Yutong Heavy Truck once again delivered 40 Yutong hydrogen fuel heavy trucks to Henan Ziling Construction Engineering Co., Ltd.

Why is the focus of fuel cell vehicles on commercial vehicles?Wang Dongyu, Director of Hydrogen Technology Development Department of the Technology Center of UNISUN Energy, explained, "Currently, the operating habits of commercial vehicles are "point-to-point," which is conducive to the construction of hydrogen refueling stations. Moreover, the demand for hydrogen is very large, which can help promote the construction of hydrogen refueling facilities and the popularization of hydrogen refueling network."

However, at present, many domestic commercial vehicle companies are pursuing a technology route of pure electric and hydrogen power. Some industry insiders have stated that commercialization of pure electric heavy trucks below 500 kilometers has basically been achieved, leaving only the market for hydrogen fuel cell vehicles with ranges of 800-1000 kilometers or above.

However, Wang Dongyu expressed that based on the current situation of officially delivered electric heavy-duty trucks and hydrogen fuel heavy-duty trucks, such as the Hundred Hydrogen Fuel Heavy-duty Truck Project of UniEnergy Group in Xiong"an New Area, the Logistics Transportation of Hebei Iron and Steel Group, the Logistics Transportation of Xintian Steel, and the Logistics Transportation of Jinxi Steel, the transportation scenarios are almost the same as those of electric heavy-duty trucks. They mainly focus on fixed transportation lines and closed scenarios.

At the same time, he also stated that in terms of range, compared with pure electric heavy-duty trucks, in the market of 800-1000 kilometers or more, hydrogen fuel heavy-duty trucks have faster energy supplement, are not affected by seasonal environment, and are more suitable for long-distance, heavy-duty transportation. The performance advantages will be more obvious, and the market space will be larger. It is expected that hydrogen fuel heavy-duty trucks will achieve large-scale operation in the next five years.

Commercialization of Two-Wheeled Vehicles and Industrial Forklifts Accelerates

In addition to commercial vehicles, the news of hydrogen fuel two-wheeled vehicles has also been frequent since 2023 in the transportation field.

For example, Weina Hydrogen has put hydrogen-powered assisted bicycles and hydrogen-powered electric vehicles at the Weina-Changqing Hydrogenation Demonstration Station in Xixian New Area of Shaanxi Province, officially starting the exploration of hydrogen-powered "two-wheeled" scenarios; Tailing Electric Bicycle, Yang Hydrogen Group, and Jie Hydrogen Technology have signed a strategic cooperation agreement, and the three parties will jointly develop hydrogen-powered two-wheeled electric vehicles; Panye Hydrogen will launch 1,000 hydrogen-powered two-wheeled vehicles this year; Yonganxing has released a variety of new hydrogen-powered bicycles.

"The reason why development of two-wheeled vehicles is relatively fast now is that the solid-state hydrogen storage method is more mature. There are mainly two hydrogen storage methods for two-wheeled vehicles: one is to use high-pressure bottles, but this method requires pressurization, the process is cumbersome, and the investment cost is high. The other is to use ordinary industrial hydrogen storage bottles, which require only 100 atmospheres, and the refueling equipment only costs four to five hundred yuan," explained Ge Xuxu, general manager of Shanghai Yingzhi Dynamic Technology Co., Ltd., to TiPost App.

In terms of industrial forklifts, after years of development, the statistics of the Industrial Vehicle Branch of the China Construction Machinery Industry Association show that by 2020, the penetration rate of lithium-ion battery forklifts in electric forklifts has exceeded 50%.

In Ge Xuxu"s view, the promotion of hydrogen fuel forklifts is timely, "Only when electrification reaches a certain level, customers can feel the problems of charging battery products and will be more willing to try more advanced hydrogen fuel cell products."

As an industrial production tool, forklifts have high working frequency and need to work continuously for up to twenty hours a day. Therefore, forklifts with batteries must withstand frequent large current shocks, vibrations, and the influence of high and low temperatures. However, lithium batteries have problems such as slow charging and discharging, decreased power performance, and safety issues.

Compared with internal combustion forklifts and pure electric forklifts, hydrogen fuel cell forklifts are more suitable for operation sites with long continuous operation time and large workload, and can adapt to working environments from -30℃ to 50℃.

In addition, unlike the challenge of limited energy supply for hydrogen-powered road vehicles due to the scarcity of hydrogen refueling stations, industrial vehicles such as forklifts are site operation vehicles that can solve the refueling problem by building their own hydrogen refueling facilities through relatively simple applications and compliance with relevant regulations.

However, due to the issue of price, many companies consider the initial investment to be too large. Regarding this, Ge Xuxu explained that from a one-time cost perspective, hydrogen fuel cell forklifts are still 2-3 times more expensive than lithium battery forklifts, and building a simple refueling station also requires hundreds of thousands of yuan in expenses. However, whether to choose which power method should not simply compare the prices of battery modules, but should calculate the comprehensive cost or total cost of ownership (TCO) usage cost.

"The total cost of ownership calculation is divided into the purchase and operation stages. The calculation results show that the TCO of fuel cell and electric forklifts are 478,000/509,000 yuan respectively, and fuel cell forklifts currently have cost advantages."

At the same time, he also admitted that hydrogen fuel cell forklifts in China are just beginning to take off, and the industry is still in the early stage of educating the market. "From the perspective of market share, it is only equivalent to the situation in the United States before 2010."

In the short term, subsidies are another option to reduce costs when it is not possible to achieve mass production.

However, current subsidy policies mainly focus on commercial vehicles, with only a few cities issuing subsidy policies for hydrogen fuel cell forklifts.

In the process of dealing with customers for many years, Ge Xuxu clearly felt that the focus of end application is on whether the product is easy to use, and does not care about what technology is used. In the industry, manufacturers talk about cooperation, not asking for power, technical parameters, but for how many cases, how many hours of support, and whether problems have been found. "Money needs to flow into applications to generate real business value."

Otherwise, "no matter how many laboratories or high-precision testing equipment there are, it is difficult to discover the fundamental commercialization problems without going to the application layer. With more application scenarios, the industry will naturally develop."

According to the US Department of Energy"s Hydrogen Energy Plan, a new industry generally goes through four stages: technology research, transitioning to the market, infrastructure improvement, and achieving industrialization. The application of hydrogen energy has accumulated a lot of research by scientists and is gradually moving towards the market.

Before this, every player in the hydrogen energy industry chain needs to solve the "pressure" from the early stage of industrial development. In addition, all participants can only "wait".

(This article first appeared on TiPost App, Author | Han Jingxian, Editor | Zhang Min)

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