【China will have more than 29.8 million FCEVs on the road by 2050】
In 5th June 2020, to shorten the development period of fuel-cell product and accelerate the commercialization of FCEV in China, Toyota together with SinoHytec, FAW, Dongfeng Motor, GAC Group, and BAIC, signed a joint venture contract to form United Fuel Cell System R&D (Beijing) Co., Ltd. The mission of this firm is to develop fuel-cell system for commercial vehicles that could contribute to a clean and environmental friendly transportation ecosystem1.
China published its technical roadmap about fuel-cell vehicle in 2016. In this technical roadmap, the short term (2016-2020) goal is to initialize (large-scale) pilot program in public area of fuel-cell vehicle with FC hybrid system. The mid-term (2021-2025) goal is to reach the large-scale commercialization of fuel-cell vehicle with FC hybrid system. The long-term (2026-2030) goal is to build complete hydrogen supply infrastructure to support the commercialization of FCEV in passenger vehicle sector and big commercial vehicle in scale of millions2.
Now, as we are about to reach the mid-term phase, what scale could fuel-cell vehicle reach and what would be the major driver of growth?
1. Summary: FCEV population projection to 2050
FCEV population will continue to grow as the government plan is to lower the reliance on petroleum energy, to reduce air pollution and carbon emission, and to promote the development of automotive engineering.
The early adopter of hydrogen vehicle would be cities in Yangtze River Delta Area (Shanghai, Jiangsu, Zhejiang), Jing-Jin-Ji Region (Beijing, Hebei, Tianjin), Pearl River Delta Area (Foshan, Guangzhou, Shenzhen, Yunfu etc.).
Commercial FCEV sector be developed prior to passenger FCEV sector because passenger vehicle would need a complete supply of hydrogen infrastructure (HRS) when commercial vehicle needs less. However, in the long term, passenger FCEV will be the majority.
Different scenarios: Because the FCEV population is subjected to the influence of government support, and the progress of phasing out ICEV in accordance to the carbon reduction target of ‘Paris Agreement’, we orchestrated three different scenarios to better describe the potential hydrogen energy.
・Pessimistic: This is the most conservative scenario. We projected FCEV population based on ‘MIIT’s Energy Saving and New Energy Vehicles Technology Roadmap’, ‘China Hydrogen Industry Infrastructure Development’ and ‘Made in China 2025’, the national target of which is lower than the sum of target of each province.
・Basic scenario: We made the projection based on the growth pattern of China’s ICEV population and NEV population.
・Optimistic scenario: In this scenario, we assume China will manage to phase out all the ICEV and enter a low-emission era.
2. FCEV population projection to 2050
The growth FCEV population will be driven by policies in the early stage.
FCEV is underdeveloped at this moment (By May, 2020, FCEV population has exceeded 6,0003 and is expected to reach 10,000 by the end of this year.), it is listed in China’s ‘Energy-saving and new energy vehicle technology roadmap (2016)’ and is expected to experience substantial growth in the future.
During the early stage, the FCEV population growth will be driven by government policies, (before 2030). After 2030, with the completion of hydrogen infrastructure, the FCEV population will depend on how responsive the society is towards decarbonization of transportation sector. And we orchestrated three scenarios accordingly:
Most optimistically, if China manages to transform into a zero-emission economy, the amount of FCEV could reach to 104 million while phasing out all the ICE vehicles by 2050.
A more realistic situation is that the population of FCEV could reach to 29.8 million by 2050 if the decarbonization process of China’s transportation sector could remain its current growth momentum.
Our projection indicates that in the most conservative situation the amount of FCEV would reach 50,000 by 2025 and 1 million by 20304 according to ‘MIIT’s (Ministry of Industry and Information Technology) Energy Saving and New Energy Vehicles Technology Roadmap’. And FCEV amount is planned to reach 10 million by 20505 as indicated in ‘China Hydrogen Industry Infrastructure Development Blue Book 2016’.
Commercial vehicle segment will lead the growth of FCEV in the early stage
1. Environmental perspective
After getting subsidized for almost 10 years, BEV is now taking up more and more shares in passenger vehicle market while commercial vehicle still relays heavily of fossil energy. According to the data from ‘China Mobile Source Environmental Management Annual Report 2019’, commercial vehicle only takes up no more than 12.3% of the total vehicle population but contributes to 40.2% of CO, 46.2% of HC, 88.5% of NOx, and 98.9% of PM6. Commercial vehicle is now without doubt the No.1 source of air pollution in transportation sector.
During the 21st United Nations Climate Change Conference, China promised to reduce 60%-65% of its carbon dioxide emission (compared with 2005) per unit GDP by 2030. Moreover, ‘China 6b’ emission regulation which has the strictest restriction on PN (Particle Number), will be applied to all the vehicles by 2021 and put more pressure on manufacturers to seek alternative energy solution.
As the regulation gets stricter, the demand for new energy commercial vehicle will become imminent as well. However, due to the essence of commercial vehicle’s mission, long-distance driving and long operation hour, BEV cannot meet commercial vehicle’s requirement due to its range limit and long charging hour. In this case, we will expect the huge demand of new energy commercial vehicle to be met by hydrogen fueled vehicle.
2. Economic Perspective
Additionally, BEV has its own limit during long distance trips or on heavy duty vehicle due to the excessive weight of battery. FCEV on the other hand is the optimal option considering its short charging time and longer-range capability. Consequently, domestic vehicle manufacturers have decided to enter fuel-cell vehicle market with commercial vehicles. This decision was made out of the following concerns:
・BEV cannot meet the vehicle range requirement of long-distance vehicles such as long-distance bus and truck because the battery weight will increase a lot in order to achieve longer vehicle range (500km+)7or to carry heavy load and that is not efficient.
・BEV has very long charging hour and that is unacceptable for commercial vehicles that needs to be operationally efficient. However, fuel-cell vehicle could finish filling hydrogen in 5 – 8 minutes8 and reduce the waiting time.
・Commercial vehicle (bus, truck, logistic vehicle) typically has more vehicle space and is less weight sensitive to setting up hydrogen system.
・Commercial vehicle operates on a few fixed routes and does not require a high density of HRS.
・The growth of FC commercial vehicle could facilitate the construction of hydrogen infrastructure and then drive the growth of FC passenger vehicle.
For the above reasons, no FC passenger vehicle has been sold since 2017. By 2020, 55.77% of FCEV are trucks and 44.23% of FCEV are buses9.
The amount of passenger vehicle will surpass that of commercial vehicle in the long term
As the hydrogen supply infrastructure gets more completely constructed, passenger vehicles will start to grow in number. The major growing momentum will be in large passenger vehicle segment compared with small and medium passenger vehicle because they are less price-sensitive and more space-sensitive. In comparison, small passenger vehicle segment will be dominated by EV because it does not have a demand for long vehicle range.
Among total vehicle market, passenger vehicle’s market share is 7 times more than that of commercial vehicle. The growth of FC passenger vehicles is amplified and its amount is projected to surpass that of commercial vehicles, which according to our projection, will happen between 2025-2030, as 2025 hydrogen demonstration project facilitates the construction of HRS.
3. Demography of FCEV population
Besides strong government support, an ideal location to develop FCEV would be cities that have direct access to hydrogen energy source to ensure the supply, key players within the hydrogen value chain to manufacture core components, and regional logistics distribution centers to consume the supply. Judging from these aspects, the population of FCEV will most likely to rise in Yangtze River Delta Area, Jing-Jin-Ji Region, and Pearl River Delta Area, mostly promoted by local government. Then it will gradually spread out to the middle-west part of China, Hubei and Sichuan.
Yangtze River Delta Area
Yangtze River Delta Area is the largest hydrogen producing area in China, contributing close to 50% (40.51 K tons)7 of China’s by-product hydrogen production capacity in 2017. The estimated amount of hydrogen produced from by-product production and hydrogen reforming of natural gas/coal could supply the operation of 400 million passenger vehicles and 1.28 million commercial vehicles. Also, Yangtze River Delta Area is the one of the largest logistic centers, with the largest amount of ecommerce dealers, the demand for logistic vehicle is high.
By 2019, 6 HRSs have been put into operation (in Shanghai, Rugao, Zhangjiagang, and Jiashan) and another 17 HRSs are under construction/planning. Also, 636 fuel-cell logistic vehicles and 24 fuel-cell buses have been put into use in Shanghai, Rugao, and Zhangjiagang.
China-SAE released the ‘Yangtze River Delta Area Hydrogen Corridor Development Plan’10 in May, 2019, aiming to promote the construction of hydrogen supply infrastructure, accelerate the commercialization of FCEV, explore sustainable business model, and improve the current standard and policy system.
Additionally, Yangtze River Delta Area has China’s largest automotive industry agglomeration that are developing fuel-cell stack, fuel-cell system, hydrogen storage tank and other components within the hydrogen value chain.
On 15th July, 2020, SAIC Motors and Baowu Group signed a strategic corporation framework agreement to build a ‘National hydrogen industry demonstration zone’ with two hydrogen industrial parks, one hydrogen highway corridor, and 10 – 25 HRSs, to increase their influence in hydrogen value chain11. SAIC has already put into operation some of their fuel-cell vehicles, Maxus FCV 80 in 2017, and Sunwin FCV Bus in 201812. Another major player, Re-fire Technology is collaborating Bao Steel, providing hydrogen fuel-cell system to replace diesel logistic trucks in steel plant13. Re-fire is also working with Toyota, building FCEV heavy truck demonstration project in Changshu to contribute to a green logistic system14.
Jing-Jin-Ji region is a high energy consumption area with lots of energy-intensive industries such as electricity, steel, and construction that relay mostly on coal and fossil energy. Also, the amount logistics service via heavy truck in this area is higher than national average, causing a severe air pollution issue. As a result, government policy in this area is focusing on adjusting energy structure and resort to clean energy source15.
Hebei, with surplus wind power, has the generic advantage in producing hydrogen and developing FCEV. In November 2017, the wind power generation part of a large-scale model project in Dongxing district, Guyuan County, Hebei Province, which generates hydrogen by using abandoned power from wind power generation was completed. There are 90 installed wind turbines with a total capacity of 200 MW (200 MW = 200,000 kW). When the electrolysis part is completed, it will be the China’s first and the world’s largest electrolytic hydrogen production system using 10 MW wind power generation, producing 17.52 million m3 of hydrogen annually. In July 2019, the water electrolysis hydrogen production facility for the project was completed, and hydrogen production is expected to begin within the year.
By 2020, the total number of FC buses, FC logistics trucks and FC taxis used in Zhangjiakou is expected to reach 1800. The number of FCEVs is expected to reach 10,000 with the use of hydrogen-fueled vehicles at the 2022 Winter Olympics. In response to this growing demand for hydrogen energy, 14 hydrogen stations will be built, producing 20,000 tons of hydrogen annually. In the future, Zhangjiakou will build a fully comprehensive value chain that includes hydrogen production, transportation, storage, refueling, and FCEV R & D, manufacturing, and testing16.
SinoHytec as one of the leaders in fuel-cell engine, is working with up- and down-stream companies to accelerate the progress of FCEV. In 2018, 60 Foton FC buses with SinoHytec fuel-cell engine onboard have been put into pilot operation in Beijing and another 49 FC bus in Zhangjiakou, to gain operation experience and better serve the XXIV Olympic Winter Games in 202217.
Before, there was only one HRS in Beijing, the Yongfeng HRS operated by SinoHytec. Under the context of zero emission Olympic Games, fuel-cell vehicles will be responsible for the daily shuttle service and the hydrogen supply is becoming the bottleneck. To ensure the hydrogen supply during Olympic Games period, Winter Olympic (Yanqing) HRS is now under construction by Henan Hydrogen Technology Co., Ltd. The expected hydrogen capacity of Yanqing HRS is 500kg/day and could supply the daily operation of up to 30 FC buses18.
In 2019, SinoHytec will form a strategic alliance with SINOPEC in the field of hydrogen energy. Hydrogen produced by the SinoHytec’s hydrogen production plant using the wind power in Zhangjiakou will be supplied to the Sinopec hydrogen station (Wangfu hydrogen station). The price of hydrogen at Wangfu Station is scheduled to be sold at 40 RMB / kg or less19.
In Jan 2019, SPIC, Foton Motor, and SinoHytec formed a strategic partnership to co-create hydrogen and fuel-cell technology, with the objective to launch the demonstration operation program during the XXIV Olympic Winter Games in Beijing20. According to the released plan, they will finish fuel-cell stack demo and vehicle integration in 2019, and manufacture 1000 FC buses before 2022.
Pearl River Delta Area
In Pearl river delta area, Foshan and Yunfu are leading power in promoting hydrogen industry. Foshan government provides strong local purchasing subsidies for FCEV and for the construction and operation of HRS. Foshan City has set the goal of producing 20 billion RMB for hydrogen-related industries by 2020, 50 billion RMB by 2025, and 100 billion RMB by 203021.
As a result, there are 440 operating FCEVs with Sinosynergy system (14 buses and 426 logistic vehicles) in Foshan by Dec, 2019 and another 386 city buses are expected to be put into operation soon22. On the supply side, Foshan had the largest number of HRSs in China (2 HRSs has been constructed and another 8 under construction) by 2018 and planned to build 28 HRSs by 2019. This would enable Foshan to supply the operation of more than 1000 FC buses23. Foshan-Yunfu is also building cross region hydrogen network. In Jan, 2019, bus line Q102 was put into operation and this is the fourth fuel-cell pilot program that runs between Foshan and Yunfu24.
The strong government support attracts both up- and downstream companies of hydrogen value chain. As a result, Foshan-Yunfu is now a leading FCEV production and R&D base in Guangdong with an agglomeration of Re-fire, Ballard, Guangdong Synergy, and Feichi Automobile Co., Ltd, etc. Sinosynergy formed a JV with Ballard to build a product line of 9SSL fuel-cell stack in May, 2016. The JV of Sinosynergy and Ballard has produced 3000 fuel-cell stacks in 2018, taking up 70% of the market share25. Feichi new energy automobile was established in Yunfu with the capacity to produce 5000 hydrogen bus annually26.
In conclusion, China's fuel cell industry is still in the early stage, and its challenge is the spread of hydrogen stations as it is required by passenger vehicle segment which will be the driver of that substantial growth that we mentioned earlier in this article. However, China’s FCEV will continue to grow as it is part of 13th Five-Year Plan and the Roadmap for Maid in China 2025.
Furthermore, the need for a better living environment and to develop automotive industry has already started to drive the growth of hydrogen fueled commercial vehicle at this early stage, especially long-distance bus and medium & heavy truck. As the population of FC commercial vehicle grows, China’s FCEV manufacturers could continue to scale and improve their technological competence. As a result, their cost level will be gradually lowered and the performance of their products will be enhanced to make their product more competitive.
Correspondingly, as they seek to lower the cost and enhance the performance, we would expect to see a lot of approaches to be made by China’s FCEV manufacturers, hydrogen providers or even system integrators in the Pearl River Delta, Yangtze River Delta, Beijing / Zhangjiakou, to form alliance with overseas companies that have more advanced technology or to import key components with superior performance such as fuel cell stack, GDL, Catalyst, PEM, hydrogen tank, or control system.
As the opportunity comes, so does the issue. As the population of FCEV grows, the demand of hydrogen will increase too and the growth will only be sustainable if there is enough supply as well. In the next article, we will talk about hydrogen supply and potential scarcity issue.