State-controlled Sinopec’s construction of the world’s biggest green hydrogen project in China is becoming a template for similar large-scale developments as Beijing looks to ramp up production of the fuel.

The RMB3.0bn ($446mn) demonstration project, located in China’s far western region of Xinjiang, will be the world’s biggest hydrogen production facility when it goes online next summer. It will have the capacity to produce 20,000t/yr of green hydrogen, equal to 10-20pc of the 100,000-200,000t/yr China wants to produce by 2025 under its first national hydrogen strategy.

Sinopec’s project covers the entire hydrogen supply chain, from solar-powered electrolysis to transport of hydrogen via a 6.5km pipeline to the end-user—a refinery owned by the company. Sinopec has identified hydrogen as a key feedstock for its oil refining business as it looks to achieve net-zero emissions by 2050.

The firm confirmed in May that it had picked three domestic electrolyser manufacturers to supply 260MW of alkaline electrolysers and core components for the plant worth RMB358mn. This milestone means Sinopec has chosen providers for most of the core equipment and services for the project, with a total bidding value of RMB2.56bn.

260MW – Capacity of electrolysers needed by project

The dedicated solar array being built to feed clean energy to the electrolysis facility will have a capacity of 361MW, according to a document released in January. This was scaled back by nearly two-thirds from the 1GW outlined in Sinopec’s original design last year.

The system design contains some technical innovations—such as high-powered 650MW solar panels and 40MW electrolysis modules—approaches that the firm hopes will improve project economics.

Sinopec expects the captive solar plant to generate 618GWh/yr, which corresponds to a capacity factor of 19.54pc. Assuming electrolysis consumes 53kWh/kg of hydrogen produced, the solar plant will be able to supply 11,660t/yr of hydrogen, which is 58pc of Sinopec’s production goal of 20,000t/yr for the project, according to research firm BloombergNEF

Sinopec has been unclear about the source of electricity for the remaining 42pc of output, describing it only as to come “from nearby windfarms or other clean power sources”. This has raised questions about how green the hydrogen will be—Sinopec is understood to be negotiating with the local grid company about the source and price of the extra power.

Bidding down project costs

Besides its scale and technical innovations, another unique aspect of the project is that Sinopec has chosen equipment and service providers through a competitive bidding process intended to drive down prices.

Sinopec required all electrolyser bidders to build a 20MW test facility and demonstrate operations for a week. Only three companies—domestic players Cockerill Jingli, Longi Hydrogen and a subsidiary of one of China’s biggest shipbuilders, Peric—entered bids, all of which were selected.

The cost of each test project likely reached around RMB40mn, with the three winners each incurring a loss of around RMB13mn on construction and operation, a source at a separate electrolyser manufacturer tells Hydrogen Economist. The companies were not entitled to reimbursement from Sinopec for the test projects.

While the three successful bidders’ electrolysis equipment is all made in China, the losses on the demonstration facilities mean they will struggle to break even on Sinopec’s project. Hydrogen Economist understands that at least one large state-owned enterprise is following in the footsteps of Sinopec and will select electrolysis equipment providers based on demonstration facilities this year.

There has also been speculation among industry insiders that at least one of the three winning bidders built their test project without a legal permit to produce hydrogen, which is necessary because the flammable gas can cause fires and explosions if not handled properly.

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Author: Shi Weijun