How does Longi view the relationship between hydrogen, solar PV, and storage?
Li Zhenguo: Longi believes that green power plus green hydrogen is the best solution to achieving carbon neutrality Looking at the progress of solar power over the past 10 years, we believe cost reductions in PV will play a key role in promoting the development of hydrogen.
Solar power (green electricity) fundamentally reduces carbon emissions in hydrogen production and provides a clean energy source for green hydrogen. Its production is an extensive application of solar energy that can bring hundreds of gigawatt-level increments. In addition, green hydrogen is a new type of energy storage that can address intermittency issues. This is what we call the “green electricity–green hydrogen–green electricity” cycle.
The world currently consumes about 80 million tons of hydrogen every year, and most of it is gray. If green hydrogen accounts for 15% of consumption, it requires about 450 GW of PV installations to support it. That is why we say solar PV and hydrogen production are inextricably linked in terms of scale and cost.
As a solar PV company, entering the hydrogen industry requires a strategy change. How have you approached this?
In 2018, Longi began to conduct strategic research into the hydrogen value chain. On Mar. 31, 2021, we officially established Longi Hydrogen Energy Technology Co., Ltd, and our first hydrogen energy equipment manufacturing plant in Wuxi, China. The first 1,000Nm3 / h alkaline water electrolyzer was officially launched in October 2021, and so far, several more have been delivered to our customers and put into production. The production capacity of the Wuxi plant will reach 1.5 GW by the end of 2022 and is expected to reach 5 GW to 10 GW by 2025.
The “green power plus green hydrogen” solution fully covers synthetic methanol, synthetic ammonia, steel smelting, petroleum refining, and other industries that are in urgent need of decarbonization. Hydrogen production will grow rapidly due to the substantial expansion of downstream hydrogen energy utilization and dominate in the future era of dual carbon targets.
As a renewable energy industry leader, we will continue to invest in R&D to increase efficiency and reduce the cost of both solar PV and hydrogen production. Longi Hydrogen has gradually established technology, operations, and marketing teams with experience in large-scale hydrogen energy equipment manufacturing and operations management. In addition, we have developed a five-year development strategy for the hydrogen business and are committed to accelerating the global transition to clean energy.
What are Longi’s strategic hydrogen plans?
Longi has launched its alkaline water electrolyzer, which marks a significant milestone, and means we have taken a key step towards becoming a world-leading hydrogen technology company. Our electrolyzer can provide a hydrogen output of 1,000Nm3/h and we have already provided a 4000Nm3/h hydrogen production system for the world's largest green hydrogen project. The service life of the equipment exceeds 200,000 hours. The distributed I/O control system realizes automatic and unattended operation. We will continue to invest in R&D and innovation and push for the development of products based on our technical abilities.
What is the biggest challenge for the development of hydrogen and how can it be solved?
Like other green energies, the development of green hydrogen is highly dependent on policy. Interest rates and carbon prices play critical roles in the cost of green hydrogen. We have made a simple calculation: If the technical cost is considered, the cost of green hydrogen is around $1.17 to $1.33 per kg, which is very close to or even lower than that of grey hydrogen. This calculation is sensitive to interest rates. If the local interest is 5%, the cost of green hydrogen will grow to around $3.33. Therefore, green hydrogen is financially competitive in countries with low-interest rates, like Europe and Japan; but there are still cost difficulties in China.
The second constraint is carbon price. Compared to gray hydrogen production, green hydrogen saves around 20kg of carbon dioxide emissions for each kilogram of hydrogen. Based on the present carbon price in Europe – which means an extra income of about $1.33 – it makes green hydrogen more cost competitive. Therefore, green hydrogen has an absolute economical advantage in regions such as the European Union with low-interest rates and high carbon prices. However, in China, the current carbon price from Shanghai Carbon Exchange is only around $8.33 per metric ton, which means a compensation rate of around $0.17 for green hydrogen per kg. This is far from enough for the development of China’s green hydrogen.
We believe China needs more policy support and has a long way to go to achieve large-scale commercialization and hydrogen energy industrialization. First, we need a standard definition of “green hydrogen” and a clear penetration target for our fourteenth and fifteenth five-year plans. The country ought to encourage the use of water electrolysis with renewable energy.
Second, green hydrogen must be included in the energy management system, and green hydrogen incentive policies must be introduced. The industry needs appropriate subsidies and incentives for green hydrogen and improvement of the carbon trading market. Lastly, like in the Top-Runner program for solar PV, we can promote and demonstrate advanced hydrogen technology in the hydrogen top-runner program initiated by the government. I believe with the support of the state and joint efforts of all market players, China’s green hydrogen industry will grow rapidly and contribute to the realization of the dual carbon targets.
What are the trends in green hydrogen prices?
It is possible to realize $0.25 per cubic meter on the production side. The cost rise in the PV industry supply chain in the past two years is temporary. I believe the cost of solar PV will continue to decline, and eventually, in many places, PV power will reach 3.33 cents or even lower per KWh. In that case, the power cost for water electrolysis would be around $0.15 per cubic meter, thus allowing hydrogen to achieve$0.25 per cubic meter.
What are the main applications of green hydrogen?
We see a variety of industries that need hydrogen, and especially green hydrogen. For example, in petroleum refining, hydrogen is used as a feedstock, reagent, and energy source. Hydrotreating is one of the key links in the refining process, involving processes such as hydrogenation, hydrodesulfurization, hydrodenitrogenation, and hydrodemetallization. Gasoline and diesel hydrogenation, wax oil hydrogenation, and hydrocracking units also require a lot of hydrogen consumption. The global oil refining industry consumes 38 million tons of hydrogen every year, accounting for 33% of the global hydrogen demand. The International Energy Agency estimates that demand for hydrogen in the refining industry will continue to grow. Meanwhile, tighter standards for air pollutants will lead to an extra 7% increase in hydrogen use in refining.
In the field of iron and steel smelting, we can use green hydrogen instead of coke as the main reducing agent to reduce iron ore to produce steel. Unlike conventional blast furnaces using carbon monoxide as a reducing agent, which will result in a large amount of carbon dioxide emissions, the utilization of hydrogen will reduce these and realize low-carbon or zero-carbon steelmaking. The steel industry has long been one of the industrial sectors with the most significant carbon emissions, accounting for 18% of China's total carbon emissions – second only to the power generation and heating sector. That is why we say the use of hydrogen steelmaking technology to replace the traditional steelmaking process will contribute to achieving Chinas carbon neutrality targets.
What role will hydrogen play in helping China achieve its carbon targets?
When we talk about carbon neutrality, there must be a carbon sink to correspond to the carbon dioxide emission limit. China has only a few hundred million tons of forest carbon sink per year, which cannot fulfill the national emission demands.
Today, 42% of China's carbon dioxide emissions are tied to electricity generation, and the remaining are mainly from energy, chemical, iron and steel smelting, and other fields. Vehicles in future cities can be decarbonized directly with clean electricity, but ocean freighters and aviation aircraft cannot do this. The battery energy density is still too low to provide continuous power for long-distance transportation. In addition, daily heating, cooking, and other energy consumption activities also need cleaner energy. Therefore, the introduction of green hydrogen can help human society to achieve deep decarbonization.
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Hydrogen is hampered by the lack of infrastructure to deliver it safely and efficiently to those that need it. It was thus a mistake to leave it to market forces to set up the hydrogen infrastructure. Direct government involvement is needed for hydrogen to take hold — starting with the buildout of a pipeline to connect all major U.S. cities. Pronto too, since hydrogen remains our most effective means to fight climate change at scale. Why? Because hydrogen can be produced in many ways and because hydrogen has a multitude of uses — including being a carbon-free fuel for transportation — be it via land, water, or air. Hydrogen can also heat our homes and businesses and it can make carbon-free fertilizer, cement, and steel. Most importantly, yet most overlooked, hydrogen fits our existing business model for the delivery of fuel and natural gas — one that has proved durable for over a century.
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