China has made it clear that some of its plans for the coming years hinge upon drawing down on fossil fuels and investing in alternative energy. One key aspect of this reshuffle is the development of hydrogen energy and applications. In fact, we have seen some specifics already laid out in governmental energy strategy documents, which include various benchmarks indicating China’s approach to the matter.
For example, the governmental legal framework puts an emphasis on hydrogen for two major reasons: environmental protection and China’s future energy independence. To speed up and push hydrogen forward, the policies define timelines and numbers that the country must meet in the not-too-distant future. For instance, by 2030, China intends to spike the percentage of general usage of green energy by 20% and cut down greenhouse gas emissions by 60%. Hydrogen is likely to play a role here.
As a practical matter, there are many ways that foreign companies can get involved with hydrogen projects in China, including research and development of patentable innovations via either international business cooperation or investment in scientific and scholarly projects. Eventually, there will also be a need for a dedicated new supply infrastructure.
Gray versus Green Hydrogen
One of the primary concerns here is simply where to find hydrogen. It’s no secret that we can easily produce hydrogen using a number of different, shall we say, less than green methods. The vast majority of so-called gray hydrogen is unfortunately still made from fossil fuels. Only a small percentage could be considered renewable or sustainable, but therein lies the opportunity for starting a real transition and capitalizing on it, especially in China.
Electrolysis driven by hydro-power or offshore wind creates green hydrogen, but less known is that green hydrogen also results from the decomposition of biomass. As China is rich in biomass resources, found for example in municipal solid waste, one strategy for investors will be to look into innovative solutions for breaking down biomass and producing green hydrogen.
Hydrogen is not an entirely new energy source in China, but in recent years there has been a clear spike in associated investments from a sustainability angle. Again, the hydrogen industry clearly wants to move away from gray hydrogen derived from fossil fuels, and we often see the blue variety of hydrogen in certain industrial processes. Blue hydrogen is not carbon-free but there are specific carbon capture technologies used to make it less “gray” and therefore a reasonable alternative.
It will be a challenge to find cost reducing solutions, as green hydrogen remains relatively inefficient and expensive. Hence, the future of green hydrogen is related to how efficient its production and usage can become. Further development of blue hydrogen as a transition solution is an option as well.
Despite the challenges, China’s energy market for green hydrogen has interesting growth prospects, and DaWo’s lawyers can help you clarify the above and identify potential opportunities.