China’s hydrogen and CCUS opportunity, report

In order to help China achieve its carbon neutrality objectives, hydrogen and CCUS are expected to play significant, complementary roles.

China has committed to attain carbon neutrality by 2060 and reach a peak in CO2 emissions before 2030, which will necessitate a significant overhaul of its energy infrastructure. The carbon neutrality standards for China have selected low-emission hydrogen and carbon capture, utilization, and storage (CCUS) technologies as two of their top goals.

Although China produces more hydrogen than any other country, its generation now produces a lot of emissions. China produced about 33 Mt of hydrogen in 2020, representing 30% of the global amount. The main sources of today’s hydrogen demand, the global chemical industry, and China’s considerable capacity for oil refining are the reasons for China’s leadership. One-third of China’s hydrogen production is powered by coal, which will emit roughly 360 Mt of CO2 in 2020. China is the only nation in the world to produce hydrogen from coal on a considerable scale.

A crucial tactic to cut emissions and increase the nation’s supply of low-emission hydrogen is to outfit existing hydrogen production facilities with CCUS. A bold transition to low-emission production is required for hydrogen to help China reach its carbon neutrality objective. The most promising low-emission production methods use electrolysis to produce hydrogen from renewable electricity or outfit fossil fuel-based industrial methods with CCUS. It may be essential to equip China’s current coal-based hydrogen reactors with CCUS in order to minimize emissions because many of them were recently constructed, have high emissions levels, and may continue to operate for decades.

In areas with an abundance of coal resources and prospects for CO2 storage, CCUS may also be a feasible, cost-effective supply alternative for new hydrogen capacity. Given China’s vast coal gasification fleet and the country’s limited natural gas resources, coal-to-hydrogen production with CCUS is anticipated to continue as a significant fossil fuel-based hydrogen generation pathway. Nevertheless, electrolysis is expected to become more common starting in the 2030s. In reality, electrolytic hydrogen based on renewable power might account for as much as 80% of China’s hydrogen supply by 2060 due to predicted cost reductions in electrolyzers and renewable energy sources.

China’s potential for CCUS and hydrogen
In China, using hydrogen could help with a variety of energy and emissions issues. To significantly reduce emissions, low-emission hydrogen could be used in a variety of industries, such as long-distance transportation, chemicals, and iron and steel. Creating hydrogen as an energy source can also enhance air quality, lessen dependency on imported fuels, and spur technological advancement. To increase the proportion of hydrogen in China’s ultimate energy consumption to 20% in 2060, the China Hydrogen Alliance (CHA) has launched a project.

A key component of China’s plan to become carbon neutral by 2060 is hydrogen. For China to achieve its climate targets by 2060, the IEA Announced Pledges Scenario (APS) predicts that hydrogen demand could more than triple. About one-third of this rise is connected to the use of hydrogen as a fuel and as a feedstock in industrial operations, and about two-thirds are connected to the use of hydrogen and hydrogen-based fuel in transportation.

Under the APS, the demand for hydrogen rises to 31 Mt in 2030, in part due to the traditional uses of hydrogen in the production of methanol, oil refining, and coal-to-chemicals, though novel uses (such as a fuel or feedstock in non-chemical industries, as well as in the transport and building sectors), also make slow progress. In the 2030s, the market for hydrogen expands rapidly, reaching just over 90 Mt by 2060, mostly due to the market growth of fuel cell heavy-duty trucks, hydrogen-based fuels for shipping and aviation, as well as the increased demand for fuel and feedstock for industrial processes.

Targeted assistance might increase China’s use of hydrogen. According to the CHA study, tailored policy and encouragement for hydrogen could lead to even greater market uptake. According to the CHA study, which provides a thorough bottom-up evaluation of hydrogen’s technical and commercial potential outside of a framework for energy system modeling, demand for hydrogen will increase to 130 Mt by 2060 from 37 Mt by 2030, with a particularly strong increase in hydrogen and hydrogen-based fuels for use in industry and transportation.

The economy’s use of hydrogen is expanding
In areas of China with an abundance of coal, access to CO2 storage, and a dearth of renewable energy sources, producing low-emission hydrogen from coal with CCUS will be a low-cost option. The cost of producing hydrogen in China varies by location depending on a number of variables, with capital expenditures and the price and accessibility of renewable energy playing a major role. For instance, the average cost of manufacturing electrolytic hydrogen using renewable electricity is currently USD 3.1-9.7/kg H2, depending on the source and availability of the electricity. In contrast, the cost of making hydrogen from coal with CCUS is currently USD 1.4-3.1/kg H2.

However, it is anticipated that costs would significantly decline in the medium term, maybe reaching approximately USD 1.5/kg H2 in the long term in areas with abundant solar and wind resources.

To guarantee that coal-based production routes with CCUS are truly low-emission, CO2 capture rates must be high and upstream emissions must be minimal. The greenhouse gas (GHG) emissions intensity of low-emission hydrogen produced from fossil fuels with CCUS in China could be 3.5-4.5 kg CO2eq/kg H2 for coal-based production and 2.6-3.1 kg CO2eq/kg H2 for natural gas-based production, assuming CO2 capture rates of 90-95% and upstream fuel emissions are taken into account.

In the current electricity system, producing electrolytic hydrogen with grid electricity would result in GHG emissions of 29–31 kg CO2/kg H2, whereas producing electrolytic hydrogen with renewable energy typically results in emissions of between 0.3 and 0.8 kg CO2/kg H2, including emissions from the production of the hydrogen production units. Therefore, the emissions intensities of both coal- and gas-based production using CCUS might satisfy China’s present “clean hydrogen” criterion of less than 4.9 kg CO2/kg H2 (the first formal standard in the world). However, criteria will probably need to be lowered over time, including to satisfy currently being developed international market norms.

Cost-competitive hydrogen expansion is supported by CCUS
Together, the deployment of CCUS and hydrogen generation may be advantageous and supportive. The least expensive method of CO2 capture is to equip facilities with CCUS since the creation of hydrogen offers a stream of CO2 that is quite pure. The Chinese government is given early opportunities to develop CCUS technology and facilitate foreign investment in the nation’s CO2 infrastructure at the same time. In the APS, the Chinese energy sector in 2060 will have caught 2.6 Gt CO2.

Industrial clusters can act as hubs for the implementation of CCUS and the scalability of low-emission hydrogen production. Industrial clusters are more likely to be the center of both the supply and the demand for hydrogen, some of which are close to prospective CO2 storage locations. Deploying facilities for CO2 transport and storage while also expanding low-emission hydrogen infrastructure might be possible at a minimal cost by retrofitting existing capacity with CCUS. Additionally, clusters are prospective locations from which to expand the use of hydrogen in other industries due to the co-location of potential demand (for example, for heavy-duty trucks).

Key ingredients for the future manufacture of synthetic fuels are hydrogen and captured CO2. Synthetic fuels, despite their high production costs, are one of the few ways to cut emissions from long-distance transportation, especially aviation, for which direct hydrogen use and electrification are difficult. China’s carbon dioxide emissions can potentially be used to produce chemicals, cement, and improved oil recovery (CO2-EOR). In order to verify emissions reductions in applications where CO2 is released back into the atmosphere (such as the combustion of synthetic fuel), careful accounting is required.

Utilizing CCUS to produce hydrogen from bioenergy could help reduce carbon emissions and counteract those from other sectors of the economy. In order for China to meet its carbon neutrality objectives, including balancing residual emissions from the industry and transportation sectors, carbon removal will need to play a significant role. Although the technology is still in its infancy, it may help with carbon removal to produce hydrogen from biomass using CCUS. However, this method of production requires access to a steady supply of biomass, which could be threatened by competing demands for it for other purposes, such as the production of fuel.

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