China is set for rapid growth in green hydrogen production, with demand for electrolysers rising from a little over 2GW in 2023 to 40GW in 2028, according to a note from Chinese investment bank China International Capital Corporation (CICC).
And with foreign electrolysers costing about three to four times more than their Chinese counterparts, there is also plenty of export potential, the financial institution adds.
The note explains that the initial demand for electrolysers in China is coming from about 8GW of demonstration projects, with 350MW and 776MW shipped in 2021 and 2022, respectively.
“We expect the domestic demand for electrolysers to be 2GW+ in 2023, with a market space of 3.8 billion yuan [$553m]. In 2028, the domestic demand for electrolysers will exceed 40GW, and the new market space is expected to exceed 50 billion yuan,” it says, adding that it expects four million tonnes of green hydrogen to be produced in China during 2028.
CICC also expects overseas demand for electrolysers to exceed 110GW in 2028.
“In the production of alkaline electrolysers, there is little technical difference between home [ie, made in China] and abroad. In terms of cost, the average price of alkaline electrolysers in China in 2022 will have been about US$343/kW, while the price of alkaline electrolysers in Western countries will have been as high as US$1,200/kW.
“We believe that with the further improvement of the technology of Chinese electrolytic cells, Chinese enterprises can expect to enter the European and American markets through joint ventures and other means, and broaden the long-term market space.”
The bank puts the current cost of green hydrogen in China at 20.53 yuan ($2.99) per kg, compared to 10.02 and 17.32 yuan for H2 made from coal gasification and natural gas, respectively.
But it adds that it expects the cost of renewable H2 to fall rapidly.
“We believe that the large-scale production of electrolysis hydrogen production equipment, the advancement of electrolysis technology, and the reduction of new energy electricity prices will... reduce the cost of hydrogen production.
“According to the National Development and Reform Commission's China's 2050 Photovoltaic Development Outlook, by 2035 and 2050, the cost of photovoltaic [solar] power generation will drop by 50% and 70% compared with the current forecast, reaching 0.2 yuan/kWh and 0.13 yuan/kWh.”
The note then explains that with the expected cost improvements in electrolysers, power prices of 0.25 yuan/kWh and 0.1 yuan/kWh would enable green hydrogen to reach cost parity with grey hydrogen made from fossil gas and coal, respectively.
Increases in carbon pricing would enable green H2 to achieve cost parity even earlier, it adds.
CICC explains that while demonstration projects are currently the driving force for electrolyser purchases, as the price of renewable H2 declines, “the replacement of grey hydrogen by green hydrogen will gradually accelerate”.
“At the same time, when the cost of green hydrogen decreases, [demand] is expected to further expand to rail, ships, industrial/building heating, peak shaving and other emerging application fields.”
China currently produces more hydrogen than any other country, with about 33 million tonnes made each year, largely from coal, which emits 20 tonnes of CO2 for every tonne of H2 produced.
