China's solar giants seeking to dominate green hydrogen power

BEIJING • Chinese companies have spent 10 years aggressively manoeuvring to become the dominant players in solar power. Now they are attempting to lead the way in developing the next big thing in clean energy: hydrogen.

Top solar manufacturers, including Longi Green Energy Technology, are ramping up the production of electrolysers, the equipment needed to make green hydrogen, the cleanest form of the fuel.

They are accelerating investments on a bet that a market will boom as industries and consumers switch to lower-carbon fuels.

To come out in front in the global hydrogen race, Chinese companies are following the same playbook used to dominate solar - slashing prices and production costs, dramatically increasing installations and accelerating the development of new technologies.

Mr Wang Yingge, deputy general manager of Longi's hydrogen energy technology unit, said: "In hydrogen equipment, Longi will continue to focus on and invest heavily on research and development."

Longi plans to build 1.5GW of production capacity of electrolysers by the end of next year, up from 500MW now. The world's largest renewable asset owner, State Power Investment, aims to build 10GW of electrolyser manufacturing capacity by 2027.

The China Hydrogen Alliance said earlier this year that the fuel could make up 20 per cent of the nation's energy mix by 2060.

Yet despite the positive outlook, the solar giants face steep challenges in developing the hydrogen market.

Green hydrogen is far from competitive compared with other fuels. Hydrogen produced by renewables currently costs at least US$3.22 (S$4.40)per kg in China, nearly double the price using coal, according to BloombergNEF.

And dirtier grey hydrogen, produced by fossil fuels, makes up the bulk of China's hydrogen market.

It accounted for more than 63 per cent last year, compared with only 1.5 per cent for green hydrogen, according to a white paper published by China Hydrogen Alliance.

Ms Libby Zhong, co-leader of Ernst & Young's greater China energy and resources sector, said: "The biggest challenge ahead is the cost."

China has yet to introduce a national hydrogen plan, and the only statewide subsidy programme is limited to supporting fuel cell batteries, which will directly drive the consumption of hydrogen but will not necessarily favour a clean production process or bolster electrolyser development.

Another big difference between the development of solar panels and hydrogen electrolysers is the market they are selling into.

While solar customers can plug panels into existing grids and immediately begin selling the electricity, allowing for fast adoption, the uses for hydrogen are more limited and disjointed.

China's state-owned giants are trying to close that gap. More than one-third of state-owned companies are making plans for hydrogen production, storage, distribution and utilisation, according to China's State-Owned Assets Supervision and Administration Commission.

While the state-owned firms are making bigger bets across the board on hydrogen, private companies such as Longi and Sungrow Power Supply for now are sticking with the more limited focus on electrolyser development.

Nonetheless, the solar giants expect to remain at the forefront of the industry as companies from oil refiners to steel-makers gravitate towards hydrogen.

Mr Wang said: "Solar mainly addresses the carbon reduction issue in the electricity field, but as the industrial sector deepens emission cuts, we see hydrogen as an indispensable clean secondary energy."

BLOOMBERG