Sinopec Eyes Global Crown in Green Hydrogen

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China’s largest oil products and petrochemicals supplier Sinopec is set to dominate the country’s hydrogen scene in 2023. Multiple projects from upstream production to equipment manufacturing are scheduled to be completed — or start construction — this year. Since unveiling its hydrogen strategy last September for achieving “autonomy and self-control” along the entire production chain, the company has been delivering small but definite progress toward its goals. If all goes according to plan, Sinopec says its flagship Kuqa project in Xinjiang would be operational by end-June to become the world’s largest solar-powered electrolyzer project for producing green hydrogen. Not content with relying on foreign electrolyzer technology and supplies, Sinopec is eyeing equipment localization: its 50:50 joint venture with New York-listed power technology provider Cummins to manufacture PEM (proton exchange membrane) electrolyzers in Guangdong province is also slated to start production in 2023.

Kuqa Green Hydrogen

The Sinopec Kuqa green hydrogen project that broke ground in late 2021 is now 80% completed and on track to begin operations by end-June, the official China Daily reports. Sinopec has already invested over 2.2 billion yuan ($320 million) to date into the project, which is estimated to cost a total of 3 billion yuan. Billed as the world’s largest of its kind currently under construction, Kuqa would be able to produce 20,000 tons per year of green hydrogen with an electrolyzer capacity of around 250 MW.

Kuqa, when completed, would dwarf a similar project of 150 MW already in operation in China’s remote Ningxia region. The Ningxia project by coal-based chemicals manufacturer Baofeng currently holds the title of being the world’s largest green hydrogen electrolysis project, outsizing by over seven times previous record holder Air Liquide’s 20 MW project in Canada.

Grander Ambitions

Sinopec has bigger plans for boosting its green hydrogen production prowess through a multi-billion dollar investment in Inner Mongolia. The company recently secured approvals to begin construction on two new projects in Inner Mongolia’s Ulanqab and Ordos regions. The Ulanqab project, in particular, has a planned capacity of some 100,000 tons per year — five times that at Kuqa.

With an investment cost tagged at 20.5 billion yuan ($2.9 billion), the Ulanqab project would be integrated with a giant wind farm of 1.7 gigawatts (GW) and a solar farm of 804 megawatts (MW) for supplying the renewable electricity required for manufacturing green hydrogen by electrolysis. Construction is scheduled to start in December 2023, with completion targeting June 2027.

The green hydrogen to be produced from Ulanqab would be transported via a long-distance pipeline to Sinopec’s Beijing Yanshan petrochemical complex, which already houses a hydrogen purification facility that supplied the clean fuel for the Beijing Winter Olympics.

Transport Demand Not Yet Unlocked

But while headways are being made in producing green hydrogen, China has had less success in boosting demand through downstream applications — a challenge also seen in the US and Europe. Demand for hydrogen so far comes mainly from traditional uses such as in refining and chemicals processes. The green hydrogen to be produced at Kuqa, for example, is earmarked for Sinopec’s nearby Tahe refinery, where it would substitute for the gray hydrogen (extracted from natural gas) currently being used there. Green hydrogen proponents say the fuel could be used in many other hard-to-decarbonize industries, such as steel.

Transportation is another potential demand target, but China’s phenomenal success in popularizing battery-driven electric vehicles (BEVs) has so far not been replicated in fuel cell electric vehicles (FCEVs) powered by hydrogen, even in the heavy duty segment. Sales of FCEVs in China, including heavy vehicles, more than doubled — albeit from a low base — to 3,000 units in 2022, according to latest data from the China Association of Automobile Manufacturers. But this represents only a drop in the ocean compared with the 6.9 million units of BEVs and plug-in hybrid vehicles sold in China last year. At this rate, China appears a long way from meeting its target of growing the national FCEV fleet to a total of 50,000 units by the end of 2025.

China’s strategy for FCEVs focuses on the commercial segment for public buses, trucks and tractors which mainly run on diesel. The longer driving ranges and short refueling time of FCEVs make them highly suited for such heavy-duty usage — as opposed to light-duty gasoline-driven passenger cars, whereby BEVs are deemed as better alternatives. But the FCEV industry, for now, is still highly dependent on government financial incentives and support under a dedicated policy that targets fuel cell-related technology breakthroughs and commercialization, which benefits mostly medium- to heavy-duty FCEVs.

Many companies in the FCEV chain are struggling to stay afloat. China’s leading FC systems manufacturer SinoHytec, for example, has been in the red since 2020. “We expect to continue to record net losses until at least 2025,” said SinoHytec in its Dec. 29 prospectus for Hong Kong IPO listing. This is because the FCEV industry in China is still at an early stage, presenting “difficulties and unexpected risks in the process of exploring the large-scale commercialization of our products,” the company explained.

Hydrogen, Electric Vehicles, Emerging Technologies, Corporate Strategy
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