The Zhitong Finance App learned that Huatai Securities released a research report saying that hydrogen is mainly used in refining and industry. According to the IEA, global demand for hydrogen energy in 2022 will exceed 95 million tons. Green hydrogen is one of the main directions for achieving carbon neutrality. The global green hydrogen project is scheduled to be put into operation by 2030, which may exceed 10 million tons. As green hydrogen planning projects are put into operation in various countries, the size of the green hydrogen market is expected to continue to increase as penetration rates increase. Hydrogen generation from electrolyzed water is expensive on the application side at this stage, and new energy power generation is expected to improve this problem in the future.
Along with the cost reduction of green hydrogen, the hydrogen structure of chemical companies in the refining, coal chemical industry, ammonia synthesis, and methanol will usher in changes due to demand for carbon emission reduction after future carbon taxes increase and companies' demand to reduce energy consumption limits. Investment in domestic green hydrogen projects began to accelerate in 2023. Leading chemical companies took the lead and recommended Sinopec (600028.SH) and Baofeng Energy (600989.SH).
The main views of Huatai Securities are as follows:
Green hydrogen is mainly used in refining, synthesis of ammonia and methanol production, and there is broad future space as permeability increases
According to the IEA, refining/synthetic ammonia/methanol accounted for 43%/34%/17% respectively in downstream hydrogen applications worldwide in 2022, and synthesized ammonia/methanol/refinery hydrogen accounted for 32%/29%/12% respectively in downstream hydrogen applications in China in 2021. The use of green hydrogen production by enterprises can reduce the share of fuel in comprehensive energy consumption and reduce large amounts of carbon dioxide emissions.
Regarding the long-term scale of green hydrogen, Huatai Securities estimates that in 2025/2030/2035, the scale of green hydrogen in global refining will be 88/264/7.05 million tons, 161/321/12.53 million tons respectively in synthetic ammonia, and 0.014/580,000 tons in methanol, respectively. Huatai Securities estimates that in 2025/2030/2035, the scale of green hydrogen in China's refining and chemical industry will be 15/45/1.2 million tons, respectively, 47/94/3.65 million tons in synthetic ammonia, and 0.09/350,000 tons in methanol, respectively. There is broad scope for the future as the penetration rate of green hydrogen increases.
Green hydrogen has a high cost problem on the application side at this stage, and it is expected to gradually improve in the future
Huatai Securities believes that at present, most green hydrogen projects are still in the demonstration stage, and to promote large-scale application, it is necessary to resolve key issues such as policy side, cost side, and technical equipment side. On the cost side, according to the International Hydrogen Commission, the cost of green hydrogen is expected to drop by more than 60% in 2030 compared to 2020. The cost of electricity is the biggest factor affecting the cost of green hydrogen. Regarding the cost of hydrogen production from alkaline electrolyzed water, Huatai Securities calculated that when the electricity price was 0.5/0.25/0.1 yuan/kWh, the corresponding cost of producing hydrogen from electrolyzed water was 38.4/24.5/16.2 yuan/kg, respectively. Future new energy power generation is expected to improve the cost of hydrogen production from electrolyzed water. When choosing green hydrogen, in addition to the need to reduce the cost of hydrogen production to a lower level, chemical companies also need to consider the additional costs caused by volatility and the impact on stable output.
The layout of domestic green hydrogen projects continues to expand, and leading chemical companies take the lead
Investment in domestic green hydrogen projects began to accelerate in 2023. According to Huatai Securities statistics, China's planned production capacity of green hydrogen/green ammonia/green methanol is currently 43/43/9.17 million tons/year, respectively. Sinopec actively lays out the entire business chain for hydrogen production, hydrogen storage, and hydrogen use. It launched the Xinjiang Kuqa Green Hydrogen Demonstration Project in '21, which has certain advantages on the application side. Baofeng Energy also pioneered the deployment of 400,000 tons/year of wind energy to produce green hydrogen combined with coal-to-olefin, and plans to lay out more than one million tons/10 billion cubic meters of green hydrogen industry at bases in Ningxia and Inner Mongolia. With leading chemical companies taking the lead, domestic green hydrogen projects are expected to continue to grow in the future.
Risk warning: Industrial policies fall short of expectations; green hydrogen costs fall short of expectations.