[Haichuan Technology Insights] Sinopec’s “Turnaround”: Aiming to Become China’s Largest Hydrogen Energy Company”

Aiming to become “China’s largest hydrogen energy company,” hydrogen is regarded by the industry as the ultimate form of clean energy. Against the backdrop of moving toward carbon neutrality, exploring new business models for hydrogen energy development has undoubtedly become an important challenge for businesses. As a large-scale petroleum and petrochemical enterprise group in China, Sinopec took the lead in carrying out transformation, positioning hydrogen energy as the main focus of its new energy initiatives. As early as July 2019, the oil-hydrogen integrated station in Zhangkeng, Foshan, operated by Sinopec Guangdong Petroleum was completed. It is reported that this is China’s first new-type facility that integrates the supply of oil, hydrogen, and electricity, as well as various convenience services, with a daily hydrogen production capacity of 500 kilograms. Since then, Sinopec has made consistent efforts to develop its presence in the hydrogen industry, entering into partnerships with companies such as Air Liquide of France, Enze Fund, and Cummins China to advance the growth of this industry. Regarding the strategic partnership established with LONGi Green Energy Technology this time, Zhang Yuzhuo said that against the backdrop of carbon peak and carbon neutrality, Sinopec will work to foster an industrial structure characterized by \"one foundation, two wings, and three new areas\": a foundation based on energy resources, with clean petroleum products and modern chemicals serving as the two wings, and new energy, new materials, and the new economy acting as key drivers for growth. In the future, Sinopec will also make hydrogen energy a key focus of its new energy business efforts, aiming to become the largest hydrogen energy company in China.

The reporter learned that Sinopec currently has over 30,000 gas stations across the country. In the face of the trend of transformation in the energy and automotive industries, Sinopec is accelerating its transition from a traditional oil product seller to a comprehensive energy service provider offering oil, gas, hydrogen, electricity, and other forms of energy. At present, Sinopec is already one of the largest hydrogen energy suppliers in China, with an annual hydrogen production capacity of over 3.5 million tons, accounting for about 14% of the country’s total production. “To address the challenges in hydrogen production, Sinopec has leveraged its strong R&D capabilities to make breakthroughs in various fields such as hydrogen production and storage. ”Zhang Yuzhuo said that while the company is rapidly developing blue hydrogen (hydrogen produced as a by-product of industrial processes), it is also actively investing in green hydrogen (hydrogen produced from renewable energy sources), in order to create a clean and sustainable source of growth for transformation and development. In the past, green hydrogen produced through water electrolysis faced issues such as high costs and small scale. And this challenge is improving as China’s photovoltaic industry grows rapidly. “With the rapid decline in the cost of electricity generated by photovoltaic systems in recent years, low-cost photovoltaic hydrogen production has become a reality. ”Industry insiders said.

It is understood that Sinopec has launched wind and solar-powered hydrogen production projects in various regions such as Xinjiang, Inner Mongolia, and Shandong. By adapting to local conditions, it employs various technical approaches including those that involve connection to or exclusion from the power grid, explores optimal control systems for reactors, and develops demonstration projects for green hydrogen. Zhang Yuzhuo said, \"As the most professional company in the photovoltaic sector, LONGi has extensive experience in the field of new energy. Working with LONGi will enable us to make full use of our respective strengths and achieve deep collaboration and development across all aspects of the new energy industry.\" It is hoped that in the future, the two companies will be able to innovate their methods of cooperation, expand their channels of collaboration, and achieve mutual benefit and common development. ” The combination of hydrogen energy and photovoltaics creates a wonderful chemical reaction. Hydrogen energy can be considered the best approach for large-scale, long-duration energy storage of centralized renewable energy. Ouyang Minggao, an academician of the Chinese Academy of Sciences, said in a media interview that in terms of the efficiency of energy utilization, the high-capacity, long-duration energy storage capability of hydrogen enables more efficient use of renewable electricity ； In terms of the economic efficiency of large-scale energy storage, fixed-scale hydrogen storage is an order of magnitude cheaper than battery-based energy storage ； In terms of complementarity with battery discharge, hydrogen energy is a high-capacity, long-duration flexible energy source ； Furthermore, hydrogen can be produced, transported, and stored in flexible ways, including using tank trailers, pipeline transportation, or a combination of long-distance power transmission with local hydrogen production. Li Zhenguo, president of LONGi Green Energy Technology, said that over the past years, LONGi’s growth has been driven by continuous investment in research and development as well as technological innovation; in this process, the company has also played a leading role in promoting product transformation and reducing the cost per unit of electricity generated in the photovoltaic industry. Longi and Sinopec have previously held numerous discussions on cooperation models, establishing a strong relationship of trust. In the future, LONGi will also do its utmost to assist Sinopec in its low-carbon development in areas such as photovoltaics and hydrogen energy.

The trillion-dollar market holds great potential. The establishment of the goals of reaching carbon peak and carbon neutrality has drawn unprecedented attention to new energy industries such as photovoltaic, wind, and hydrogen energy. In China, hydrogen energy has become a popular field of focus; not only are companies competing to get involved in it, but various regions have also begun to plan the development of their local hydrogen energy industries. Based on the hydrogen-related plans for the 14th Five-Year Plan period in various provinces, at least 23 provinces (including the cities within them) have already outlined strategies for the development of hydrogen energy, with the aim of creating hydrogen energy industry clusters. To date, China has basically established four regional industrial clusters in the Beijing-Tianjin-Hebei region, East China, South China, and Central China. On April 7, the Beijing Municipal Bureau of Economy and Information Technology released the \"Implementation Plan for the Development of the Hydrogen Energy Industry in Beijing (2021-2025)\\" (draft for comments). It proposes to build 37 hydrogen refueling stations by 2023, promote the use of 3,000 fuel cell vehicles, and achieve an industrial scale for the hydrogen energy sector of over 50 billion yuan. By 2025, 37 new hydrogen refueling stations are to be built; the total number of fuel cell vehicles in use is expected to exceed 10,000 units. The goal is for the hydrogen energy industry chain in the Beijing-Tianjin-Hebei region to reach an industrial scale of over 100 billion yuan. Statistics show that by 2050, hydrogen energy will create 30 million jobs, reduce carbon dioxide emissions by 6 billion tons, and generate a value of $2.5 trillion. According to projections by the China Hydrogen Energy Alliance, by 2050, hydrogen will account for over 10% of China’s total final energy consumption, with the annual output value of the related industry reaching 12 trillion yuan.

On the other hand, despite the promising market prospects, China’s hydrogen production industry still faces certain bottlenecks at present. “The industry generally believes that the bottlenecks restricting the development of hydrogen energy mainly lie in two areas: one is the cost issues arising from factors such as immature technology ； Secondly, laws and regulations need further improvement; a standard system must be established urgently, there are insufficient application scenarios, and the business models are still not mature. ”Industry insiders said. It can be seen that although hydrogen energy is regarded by the industry as the ultimate form of clean energy, it is a new type of energy source for which technological applications were developed relatively late and whose application scenarios are limited; compared to wind and solar energy, its level of maturity is relatively low. “The most obvious point is that when ordinary people go to fill up their cars, gas stations can be found everywhere; however, if one buys a hydrogen fuel cell car, it’s not so easy to find places where hydrogen can be refilled. ”The industry experts mentioned above said that due to various factors such as awareness, safety, and approval processes, compared with countries in the West, the deployment and construction of hydrogen refueling stations in China are still in their initial stages. Although the development of hydrogen energy in our country is still in its initial stages, its potential for growth is undoubtedly enormous. Taking hydrogen fuel cell vehicles as an example, replacing petroleum with fuel cells would be highly beneficial for ensuring China’s energy security. It is understood that China currently has a total of 8,000 to 10,000 hydrogen fuel cell vehicles in use. Ouyang Minggao once said in an interview that the source of fuel cells is hydrogen, while the main components of oil are carbon and hydrogen; in future carbon-free and low-carbon strategies, hydrogen will be used to replace them. So the use of hydrogen is not just for cars, but for large-scale renewable energy. Hydrogen energy also has clear advantages in terms of energy storage. It can be stored in abandoned underground mine spaces, enabling low-cost, large-scale, and long-term energy storage. Moreover, once hydrogen is stabilized, it can be traded globally, addressing the issue of difficulty in exporting electrical energy storage.

At the beginning of 2016, there were only 3 operating hydrogen refueling stations in China: Beijing Yongfeng, Shanghai Anting, and Zhengzhou Yutong. In recent years, driven by Sinopec and local authorities, the construction of hydrogen refueling station projects has been accelerating. In March this year, Sinopec’s first oil-hydrogen integrated energy station in Guizhou – the Shuanghong Oil-Hydrogen Integrated Energy Station in Liupanshui City – was put into operation recently. The station has a daily hydrogen supply capacity of 500 kilograms, and it will provide hydrogen refueling services for Guizhou Province’s first hydrogen-powered bus route. It is reported that Sinopec plans to establish 1,000 hydrogen refueling stations or stations that combine hydrogen refueling with oil services over the next 5 years. By the end of 2020, Sinopec’s sales division had carried out 27 pilot projects for hydrogen refueling stations. Reporters learned that over the next 5 years, in addition to building a thousand hydrogen refueling stations, Sinopec’s sales division will also promote distributed photovoltaic power generation projects as an important way for oil sales companies to achieve carbon neutrality; 7,000 gas stations equipped with such photovoltaic systems will achieve net-zero emissions. At Sinopec’s 2020 performance briefing held recently, Zhang Yuzhuo said that against the backdrop of achieving carbon peak and carbon neutrality, Sinopec is committed to reaching its carbon peak target before the designated deadline, striving to do so 10 years ahead of schedule, with the goal of achieving carbon neutrality by 2050.

At the beginning of 2016, there were only 3 operating hydrogen refueling stations in China: Beijing Yongfeng, Shanghai Anting, and Zhengzhou Yutong. In recent years, driven by Sinopec and local authorities, the construction of hydrogen refueling station projects has been accelerating. In March this year, Sinopec’s first oil-hydrogen integrated energy station in Guizhou – the Shuanghong Oil-Hydrogen Integrated Energy Station in Liupanshui City – was put into operation recently. The station has a daily hydrogen supply capacity of 500 kilograms, and it will provide hydrogen refueling services for Guizhou Province’s first hydrogen-powered bus route. It is reported that Sinopec plans to establish 1,000 hydrogen refueling stations or stations that combine hydrogen refueling with oil services over the next 5 years. By the end of 2020, Sinopec’s sales division had carried out 27 pilot projects for hydrogen refueling stations. Reporters learned that over the next 5 years, in addition to building a thousand hydrogen refueling stations, Sinopec’s sales division will also promote distributed photovoltaic power generation projects as an important way for oil sales companies to achieve carbon neutrality; 7,000 gas stations equipped with such photovoltaic systems will achieve net-zero emissions. At Sinopec’s 2020 performance briefing held recently, Zhang Yuzhuo said that against the backdrop of achieving carbon peak and carbon neutrality, Sinopec is committed to reaching its carbon peak target before the designated deadline, striving to do so 10 years ahead of schedule, with the goal of achieving carbon neutrality by 2050.

The direction is correct; with so many gas stations and pipeline networks available, they can all be converted into hydrogen stations in the future. There is currently a large amount of gray hydrogen, and by adding carbon capture, it can be turned into blue hydrogen; green hydrogen production is also possible.

Hydrogen refueling stations and CNG refueling stations are both directions for future development.

I saw a hydrogen-powered bus today