China's hydrogen push to support power grid may target domestic market

China is accelerating the development of energy storage and renewable hydrogen for building a new power system, a move that signals a stronger push to serve the domestic market amid a weak outlook for exports, an analyst said.

The National Development and Reform Commission outlined a strategy to focus on power market reforms, coordinated planning and technological breakthroughs, according to Li Chao, deputy director of the policy research office and spokesperson for the commission, in a Nov. 27 media briefing.

"With the continuous improvement of the installed scale and proportion of new energy, such as wind power and photovoltaic in our country, the power system regulation capacity has become an important link in the construction of a new power system," said Li.

"Energy storage, hydrogen energy and other industries are important aspects of improving the regulation capacity."

China has built over 150,000 metric tons/year of renewable green hydrogen production capacity and is extending hydrogen applications to include renewable green ammonia and renewable methanol production, Li said.

The NDRC's strategy to accelerate renewable hydrogen and energy storage development extends the Central Committee's Recommendations for the 15th Five-Year Plan, announced Oct. 28, Zhiyee Teh, senior market analyst at S&P Global Energy, said Dec. 2.

"That identified hydrogen as a key future industry, with specific emphasis on distributed energy, zero-carbon industrial parks, and new-type energy systems," Teh said.

"Domestic policies supporting zero-carbon parks and the new energy system expansion could anchor this demand while China prepares for improved conditions in international markets."

Emphasis on storage

China's renewable energy capacity continues to expand rapidly, creating a greater need for grid flexibility and storage solutions, Li said. Energy storage projects will thus be encouraged to participate in power markets and auxiliary services.

China's energy storage installed capacity now exceeds 100 GW, more than 30 times the level at the end of 2020 and accounting for over 40% of global capacity, according to the NDRC.

"Energy storage facilities have a short construction period, flexible layout, and fast response speed, and can quickly assume the power system regulation function," Li said, highlighting their role as a "superpower bank" providing crucial support for peak power supply.

The NDRC has established an interministerial coordination mechanism for hydrogen industry development, continuously improving policies, standards and institutional systems while supporting innovation in renewable hydrogen preparation and fuel cell technologies, Li said.

The commission is promoting integrated industrial layouts that cover renewable hydrogen and ammonia alcohol production, storage, transmission and use, Li added.

Building up scale

China's domestic hydrogen ecosystem is evolving from pilot projects to commercial deployment, especially in mobility and industrial decarbonization, said Nishaanth Balashanmugam, CEO and director of trade body Green Hydrogen India.

"China has moved faster than any other major economy in scaling the hydrogen value chain end-to-end," Balashanmugam told Platts, part of S&P Global Energy.

"It now accounts for more than half of global electrolyzer manufacturing capacity and continues to drive down costs through scale, localization, and strong industrial policy support."

Platts assessed Western Australia hydrogen produced via alkaline electrolysis, including capital expenditures, at $3.34/kg Nov. 28, up 7.4% month over month.

Platts assessed Japan hydrogen produced via alkaline electrolysis, including capex, at $4.52/kg Dec. 1, up 4.63% month over month.