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In this guest commentary, Pascal Menges, Head of Equity Investment Process and Research, Lombard Odier Investment Managers discusses how China is taking actions to promote green, low-carbon growth through its hydrogen development policies, as it embarks on a path towards carbon neutrality.
China is fast emerging as a hydrogen giant and expects the power source to comprise 10% of its energy share by 2050. It has also commissioned the world’s largest green-hydrogen project, planned for completion next year, and has announced more than 50 large-scale hydrogen projects. This amounts to over $180 bn in committed or announced investments. About half of China’s announced projects will support transport, a key sector in its energy-transition plan.
Green-hydrogen investments have accelerated in China on expectations that the market will boom as industries and consumers switch to lower carbon fuels after the nation announced its target of net-zero emissions by 2060 and peak carbon emissions in key sectors by 2030.
Global electrolyser sales are expected to quadruple in volume in 2022 to between 1.8 to 2.5 gigawatts from last year, with China accounting for two-thirds of demand, driven by state-owned enterprises keen to show compliance with national decarbonization goals, energy intelligence firm BloombergNEF said in a forecast last month.
Chinese companies are following the solar-power development playbook: slashing prices and production costs, increasing installations and accelerating new technologies using government funding and policy support for hydrogen projects. Also, electrolysers, like solar panels, are relatively inexpensive and easy to mass-produce in China owing to lower cost of labour and raw materials.
Additional factors that could drive the adoption of renewable hydrogen in China include the nation’s scale-up in clean-energy production from a total capacity of 500 GW in 2020 to 1,200 GW by 2030, according to the Hydrogen Council, a global CEO-led initiative of more than 130 companies committed to the commercial development of the hydrogen economy.
China has also committed to developing a high-quality transmission grid and expanding its storage capacity to ensure it has the flexibility needed to increase the share of energy produced by renewables.
Pascal Menges
Head of Equity Investment Process and Research
Lombard Odier Investment Managers
Pascal Menges is a Client Portfolio Manager in Global Equities within Lombard Odier IM. Before joining the firm in May 2006, Menges was a sell-side analyst at Exane BNP Paribas, covering the European energy sector having held the same position at Oddo Pinatton. He began his career at Elf Aquitaine/ Total.
