Blog Posts

Is Sinopec Leading the Charge in Lowering the Cost of Hydrogen? 

Posted by | Rauf Mammadov

On February 21, Sinopec announced the world’s largest green hydrogen project, Erdos Wind-Solar Green Hydrogen Project. The project will utilize 720 MW of installed solar and wind capacity to supply 30,000 tons per year of green hydrogen to a nearby coal-to-chemical plant. But what is really important is that Sinopec is claiming that with this project it is managing to significantly cut the production cost for renewable hydrogen.

The hydrogen industry is facing a number of serious challenges as it tries to scale to meet the demand of the new energy market, the key one being cost.  Renewable hydrogen is two to three times more expensive to produce than fossil-based hydrogen plants. Hydrogen pipelines can be 10-50% more expensive than traditional gas pipelines. Therefore, most of the green hydrogen projects are currently being targeted at hard-to-abate industrial facilities where there are few other green alternatives.

Sinopec is not the only oil and gas major to announce a massive green hydrogen project. Last year Dutch Shell announced Europe’s largest project, Holland 1. Shell’s project will have 22000 tons of annual capacity and will be powering Shell’s energy and chemicals park in Rotterdam. Scale is, therefore, clearly a factor to get the cost of production down, another is going to be technology.

Game changer for the green hydrogen industry?

Sinopec did not reveal what electrolyzer technology the company will be utilizing for the project. However, it will most likely be the proton exchange membrane (PEM) electrolyzers produced by a JV that the Chinese state-owned company signed with the U.S.-based Cummins in 2021 and will begin manufacturing this year! Just as China radically slashed the cost of solar when it entered the solar panel market, so could this JV impact the green hydrogen market? The JV is both to produce and undertake R&D on electrolyzer technology. Sinopec is looking to build out a national network of hydrogen filling stations in addition to producing hydrogen in major projects like Erdos.  If this leads to significant cost reductions in electrolyzers, it could impact the global green energy market and radically change the economics of hydrogen production.

> Read our other insights on the energy sector

Author: Rauf Mammadov| Senior Energy Consultant | Fuld & Company

Tags: , , ,

Related Resources

Read More

Resurgence in Middle Market M&A: Insights from DealMAX

Nilesh Sharma has just returned from this year’s DealMAX conference, held in Las Vegas and organized by the Association for […]

Read More

BP refines energy transition strategy

International oil companies (IOCs) are facing challenges in navigating the energy transition as they struggle to balance their economic and […]

Read More

Shell pushes hydrogen into the “possible future”

With the recent publication of Shell’s  is Shell replacing hydrogen with LNG (liquified natural gas) in its drive towards net-zero? […]

Subscribe to our mailing list for our latest updates: