Green hydrogen production in China will grow rapidly, with demand for electrolyzers rising from just over 2GW in 2023 to 40GW in 2028, according to a recent report by financial institution CICC.

Since the cost of foreign electrolyzers is three to four times that of Chinese electrolyzers, there is also great export potential, and Chinese manufacturers are also expected to sell low-cost electrolyzers in Europe and the United States in the near future, the report said.

Initial demand for electrolyzers in China comes from around 8GW of demonstration projects, with 350MW and 776MW to be shipped in 2021 and 2022, respectively. We predict that the domestic demand for electrolyzers will reach more than 2GW in 2023, and the market space will be 3.8 billion yuan. In 2028, the domestic demand for electrolyzers will exceed 40GW, and the new market space is expected to exceed 50 billion yuan." It is estimated that China will produce 4 million tons of green hydrogen in 2028.

CICC also predicts that overseas demand for electrolyzers will exceed 110GW by 2028. In terms of the production of alkaline electrolyzers, there is almost no technical difference between domestic [that is, made in China] and foreign countries. In terms of cost, the average price of alkaline electrolyzers in China will be about US$343/kW in 2022, while the price of alkaline electrolyzers in western countries will be as high as US$1,200/kW. We believe that with the further improvement of China's electrolyzer technology, Chinese companies are expected to enter the European and American markets through joint ventures and other means, broadening the long-term market space.

The bank estimates that the current cost of green hydrogen in China is 20.53 yuan per kilogram, while the cost of hydrogen produced from coal gasification and natural gas is 10.02 yuan and 17.32 yuan, respectively. However, the large-scale production of electrolytic hydrogen production equipment, the advancement of electrolysis technology and the reduction of new energy electricity prices will reduce the cost of hydrogen production, and the cost of renewable hydrogen is expected to drop rapidly.

According to the National Development and Reform Commission's "China 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 respectively /kWh. With the cost of electrolyzers falling, electricity prices of 0.25 yuan/kWh and 0.1 yuan/kWh will make green hydrogen reach cost parity with fossil gas and gray hydrogen made from coal, respectively.

CICC explained that while demonstration projects are currently the driving force for electrolyser procurement, the rate at which green hydrogen replaces gray hydrogen will gradually accelerate as the price of renewable hydrogen falls. At the same time, when the cost of green hydrogen falls, it is expected to further expand to emerging applications such as railways, ships, industrial/building heating, and peak shaving.Editor/XingWentao