China’s coal-to-hydrogen shift stalled by costs, infrastructure gaps

Green hydrogen demands huge renewable power and expensive storage.

China’s push to replace coal with green hydrogen in its power sector faces steep costs and infrastructure hurdles, making a full transition unlikely in the near term.

The country has the most coal power plants at 1,195—four times more than 290 in India, which ranks second—according to German online data platform Statista. Under its action plan for low-carbon transformation, Beijing targets a 50% cut in carbon dioxide emissions by 2027 from 2023 levels of 8,551 million metric tonnes.

Authorities are testing green ammonia co-firing in existing plants and exploring hydrogen as a peaking fuel for renewables. But experts said green hydrogen remains costly, requiring vast renewable power and transport and storage systems.

Asian Power talked to industry experts about China’s green hydrogen push. Here’s the rest of the interviews.

Yujia Han and Martin Weil
Researchers, Renewables & Other Power
Global Energy Monitor

Most experts agree that using green hydrogen for routine electricity generation is wasteful, with up to 80% of the original clean power lost in converting it to hydrogen and then back to power. Whilst essential for decarbonising heavy and chemical industries and long-duration storage, it is far less efficient and more costly for the power sector than batteries, pumped hydro, or demand management.

Specifically in the power sector, green hydrogen could help displace coal power in the long run by offering seasonal, long-duration storage of wind and solar power. But in the near-to-medium term, cheaper options like massive renewable build-out, batteries and other forms of energy storage, transmission upgrades, demand response, and energy efficiency are better positioned to replace coal at scale. 

China is still at the very early stage of development of green hydrogen power plants. A number of utilities and manufacturers have launched trial-scale fuel cell or hydrogen gas turbine projects in various locations, including an initiative by China Southern Power Grid Company Ltd. to use hydrogen stored in solid state form in Guangzhou and Kunming in 2023, marking the first time that solar power-generated hydrogen is applied within the power system.

In the same year, a Shanghai company announced the country’s first utility-scale green hydrogen peaking projects using its fuel cell technology in three locations, each in Xinjiang and Inner Mongolia. However, the company recently announced the postponement of an EPC (engineering, procurement, construction) bid in Fengzhen District, Inner Mongolia due to “changes in industry policy.”

A 30-megawatt (MW) hydrogen power project in Otog Banner, Inner Mongolia developed by the established generation utility Shenzhen Energy is likely to be the first to actually come on stream. Both the electrolytic hydrogen facility and the 505 MW of wind and solar farms to power it are well into construction, and the owner announced the start of work on the hydrogen power plant itself with target completion by year-end.  

Green hydrogen in China typically costs around $0.2 to $0.25 (RMB1.4 to RMB1.8) per cubic metre, mainly due to the electricity needed for electrolysis, whereas coal-based hydrogen costs only about $0.084 to $0.11 (RMB 0.6 to RMB 0.8) per cubic metre. Whilst this substitution does not yet offer direct cost savings, the environmental benefits are considerable.

The main hurdle in the adoption is the high costs on both the supply and demand sides. Even as the renewable levelised cost of electricity (LCOE) falls and brings down hydrogen costs, electrolysis remains far more expensive than grey hydrogen because electricity dominates green hydrogen’s cost structure; low power prices are hard to secure and are mostly achievable only in a few resource-rich Northern regions.

On the demand side, hydrogen and its derivatives (ammonia, methanol, olefins) are priced under a single benchmark without valuing lower carbon from green pathways, so green and grey compete on the same terms; this weak offtake signal undermines project economics and discourages the infrastructure commitments needed for large-scale integration.

Judging by current trends, China will likely add hundreds of thousands of tonnes of green hydrogen production capacity over the next five years, with primary end-uses consisting of conversion into chemicals such as ammonia, methanol, and olefins, as well as vehicle fuel and possibly steel and other metal production. Industry and the research establishment will focus on overcoming key technological barriers in green hydrogen production, storage, and use.

Nigel Rambhujun
Analyst, Hydrogen Research
Rystad Energy

With half of China's power generation coming from coal, ammonia co-firing is an attractive way to decarbonise the power sector in the short term instead of mothballing coal power plants.

However, using green hydrogen or ammonia to decarbonise the power sector will be an expensive option. 

The cost of low-carbon ammonia co-firing will depend heavily on the cost of green/blue hydrogen used as a feedstock. Assuming a hydrogen price of $5 per kilogram, equivalent to an ammonia price of $1,000 per tonne, Rystad Energy estimates that the LCOE of a 10% ammonia blend will be around 50% higher than the LCOE from coal generation alone.

Most of the costs associated with green hydrogen come from the electrolyser stacks' capital expenditure, which has been going down in China due to strong domestic competition amongst original equipment manufacturers. Potential savings from green hydrogen adoption will depend on domestic and international policies, such as the Carbon Border Adjustment Mechanism in Europe, where companies with higher emissions will face added costs.

Companies like Xinjiang Goldwind Science & Technology Co. Ltd. and Envision Energy Co. Ltd. are leading the way in developing export-scale green hydrogen projects due to their vertical integration of renewable energy infrastructure. General hurdles in the industry will be retrofitting power plants to run on hydrogen/ammonia. So far, no large-scale trial for ammonia cofiring has been completed in China, whilst Japan has already completed a successful trial at a co-firing rate of 20% ammonia.

Transporting the hydrogen or ammonia from the production plants (mainly Inner Mongolia) to the power plants will be an infrastructure challenge. China is currently building hundreds of kilometres of hydrogen-specific pipelines to transport hydrogen to demand centres.

China plans to introduce 10% co-firing of biomass and green ammonia at coal-fired power plants to halve emissions compared with 2023 levels, but it will take time to retrofit or accommodate the new co-firing technology.