Portfolio performance is an evaluation metric for China’s civil service. A bureaucrat will be judged on a list of economic indicators much like a student at school. While this method of evaluating performance may seem simplistic, such a scheme does make policies designed by bureaucrats predictable. The Fourteenth Five-Year Plan (14FYP), for example, listed hydrogen energy and fuel cells as one of six future industries for China and, as a result, more than thirty provinces have written hydrogen into local policies, thus establishing topics in the hydrogen industry as new performance metrics against which bureaucrats will be evaluated.
The city of Foshan traditionally specialized in light manufacturing and in the past few decades has become one of the richest cities in the country. Foshan today is also known for automotive component manufacturing. In 2014 officials in the city encouraged foreign fuel cell firms to establish local production in an effort to connect the advanced materials and design technologies associated with fuel cells to the manufacturing expertise of local automotive components suppliers. At the time the focus for the fuel cell industry was the transport application, with fuel cell electric vehicles (FCEV) considered a future breakthrough technology.
The International Hydrogen Committee forecasts that the molecule will store 10% of energy consumed by China by 2050, with total consumption around 60 million tons per year. This impressive future goal is at odds with the relatively low levels of hydrogen storage and transport today; hydrogen may be a common by-product and indeed is often burned for fuel, but few firms in China have invested in storage and transportation technologies. Lack of transport infrastructure combined with permitting issues have kept the price of hydrogen in China stubbornly high, especially in the south of the country, where big cities with FCEV pilot fleets are located, like Guangzhou and Foshan.
Guangdong Province encompasses the Pearl River Delta and is the location of the cities of Guangzhou and Foshan. The province may have an impressive FCEV industry, but actual promotional policies are regrettably few and vague. In contrast to some interior and northern provinces with detailed FCEV promotional policies, Guangdong’s scattering of policies offer little support for core technology and the province’s roadmap strategy doesn’t designate specific applications.
The “Guangdong Province FCEV Standardization System and Planning Roadmap (2020 ~ 2024),” released in September of 2020, was considered unambitious. The “Guangdong Province Implementation Plans to Accelerate FCEV Industry Development,” released two months later, in November, also failed to offer support for FCEV pilot fleets. Reassurance came in the form of the “Guangdong Province Action Plan to Accelerate the Construction of the FCEV Pilot Cities Cluster (2021 ~ 2025),” which followed the formal inclusion of Pearl River Delta (PRD) cities like Guangzhou, Foshan, and Yunfu into a hydrogen hub known as a pilot cities cluster (PCC).
The immediate challenge facing the new PRD PCC was a lack of hydrogen fuel for FCEV fleets. Unlike northern and interior provinces like Shandong and Inner Mongolia, with plentiful hydrogen supply but little local demand, the PRC PCC had high demand but little local supply. Shandong Province, for example, built 11 hydrogen refueling stations (HRS) capable of supplying 6.7 tons per day by February of 2021 to service a fleet of only 270 vehicles. The city of Foshan, in contrast, had a much larger fleet but fewer HRS and much lower daily hydrogen production.
Subsidy Policies
Recognizing how a lack of hydrogen might handicap the PRD PCC, Guangdong Province commissioned a study in early 2022 titled: “Guangdong Province Hydrogen Resources Layout and Hydrogen Generation Capabilities Analysis.” The major finding of this study was that the province could consider buying by-product hydrogen from the local petrochemical refining industry, concentrated along the coast. Such new sources would provide much needed diversification away from the firm Ju-Zheng-Yuan, a local propane dehydrogenation (PDH) plant based in Dongguan. Ju-Zheng-Yuan had been providing much of the hydrogen used in Foshan as a by-product from the PDH process, but a safety incident in July of 2020 interrupted hydrogen supply for the entire region, causing many fleets in Foshan to be grounded for lack of fuel.
The introduction of fuel cell technology to Foshan in 2014 was intended to provide a new development impetus to local automotive component manufacturers and revitalize local light manufacturing. Between 2014 and 2016 the city welcomed a number of foreign fuel cell technology firms. During the FCEV Golden Age in China, between 2017 and 2019, Foshan led the country in promotional policy, resulting in the certification of the city by the “PRC Market Oversight Department” as a “Hydrogen Energy Industry Standardization & Innovation Base,” the first of its kind in China.
Soon after receiving this certification award the city was invited to join Guangzhou and other municipalities in Guangdong Province to form the PRD PCC, duly certified by the PRC Finance Department, Committee #5. In contrast to the vague support mentioned in the provincial-level development plan, the “Foshan City Hydrogen Energy Industry Development Plan” specifically committed the city to develop more than 150 hydrogen energy and fuel cell firms by 2030 as well as solicit 9 billion USD of investment into local industry.
Many of the hydrogen fuel cell firms registered in Foshan are located in the Spirit Lake Hydrogen Valley; more than 90 firms have moved to the region since 2014, which now claims one of the most comprehensive fuel cell supply chains in the country. The city of Foshan also established five “industry bases:” a fuel cell tram production center in Gaoming, a FCEV bus production center in Nanhai, a FCEV logistics truck production center in San-Shui, a fuel cell system core components production center in Nanhai, and the Spirit Lake Hydrogen Valley production center, also in Nanhai. The latter has been praised as the “Silicon Valley” of China’s hydrogen fuel cell industry and is the location of the Spirit Lake Hydrogen Research Institute, established in December of 2019, and responsible for about 35 patents and for publishing more than 100 journal articles.
Foshan has one of the most advanced FCEV bus fleets in China. Indeed, the city is one of the few places in the world where the average pedestrian will see multiple FCEV buses drive by on a given day, due to the high rate of technology adoption by local public transport. As of May of 2021 the city of Foshan had more than 1,000 FCEV buses operating on over 90 bus routes and around 500 FCEV logistics trucks. The city was also the first to authorize construction of a HRS in China and now claims more HRS than any other city in the country. The PRD PCC – of which Foshan is an important member – has about one-third of all HRS in China. However, in comparison to other FCEV fleet projects around the world, the ratio of HRS to vehicles in Foshan is relatively low; the number of vehicles should be served by a network of around 300 stations, but only around 60 stations have been built so far in the region.
Large-scale commercialization of FCEVs is hindered by lack of a large HRS network. The HRS network, in turn, cannot grow due to lack of local hydrogen sources. Foshan has led the country in combining production technologies and academic research, but has struggled to solve the hydrogen supply challenge. The local government is vocal in support of new technologies but lackluster in support of chemicals or industrial gases – a position that is providing mixed messages to local FCEV fleet operators, which hurts business confidence. The hydrogen supply challenge became so severe in the first quarter of 2022 that many fleets in the city were grounded; hydrogen could not be had for any price, though prices rose to stunning heights, reaching almost 90 RMB per kg as opposed to the 30 ~ 40 RMB per kg available in other parts of China. The Ju-Zheng-Yuan PDH facility can produce around 5 tons per day, but the Foshan FCEV industry needs around 16 to 18 tons per day.
Investments in storage and transportation technologies could help to remedy Foshan’s “hydrogen famine” by, for example, allowing for the transport of hydrogen from Inner Mongolia, Shandong, and other northern provinces to Guangdong in the south and Shanghai in the east. Unfortunately, in light of the current state of hydrogen storage and transportation technologies, hydrogen produced in the north would have increased so much in price during transportation that the cost at the pump for FCEV fleets would barely fall from today’s current high prices.
What is needed is integration of the PRD PCC HRS network with local petrochemical byproduct hydrogen production. Barring sudden breakthroughs in commercial liquid hydrogen transport technology, developing local sources is the only near-term solution to Foshan’s hydrogen famine. The city already excels in fuel cell technology and FCEV fleet development. Solving the hydrogen supply challenge would remove a major drag on local industry and allow the city’s nascent hydrogen economy to pick up speed and maybe regain its lead as China’s top city for hydrogen technology.