Recent developments in the low carbon hydrogen sector in Asia

Key to the de-carbonisation plans for many companies, industries and countries globally is low carbon hydrogen and its derivatives (including low carbon ammonia, methanol and synthetic fuels) – and Asia is no exception. There has been much hype around hydrogen and ammonia in recent years but now real progress is finally emerging in policy terms from governments in Asia looking to unlock vast investment and true energy transition for many hard-to-abate parts of the global economy.

In this blog, we look at some of the recent national policy developments in hydrogen across China, Japan and Singapore.

China’s strategic plan for the development of hydrogen energy

On 23 March 2022, the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) of China jointly issued the “Medium and Long-Term Plan for the Development of Hydrogen Energy Industry (2021-2035)” (the Plan).

China is currently the largest hydrogen producer in the world, with an annual production output of about 33 million tonnes, of which about 12 million tonnes meet the quality standards of industrial hydrogen. Although China has enormous potential in green and low carbon hydrogen energy supply, China’s hydrogen industry is still in an early stage of development, with numerous challenges to overcome, such as lack of innovation capabilities, technical equipment and fundamental policy and regulatory support.

This long-awaited Plan, aiming to boost the industry, provides a three-step program to facilitate the country’s development of its hydrogen energy industry as it “races towards its carbon peaking and neutrality goals”, stated in a press release by the NDRC:

• by 2025, China expects to put in place a relatively complete system for the development of its hydrogen energy industry, with basic mastery of the core technologies and manufacturing processes. Other goals include increasing the number of hydrogen fuel cell electric vehicles to 50,000, increasing hydrogen production from renewable energy to between 100,000 and 200,000 tons per year and reducing carbon dioxide emissions by 1 to 2 million tons per year.
• by 2030, a relatively complete hydrogen energy industry technology innovation system and a clean energy hydrogen production and supply system will be formed “to offer solid support for the carbon peaking goal”.
• by 2035, “the proportion of hydrogen produced from renewable energy in terminal energy consumption will increase significantly”, which will greatly support China’s green energy transformation.

Since the release of the national Plan, actions echoing the strategic targets have been taken all around the country, among local governments, leading enterprises as well as R&D institutions:

• on 15 November 2022, the China Hydrogen Energy Industry Conference 2022 (directed by NDRC and NEA) was held in Guangdong Province, one of the concentration areas of Chinese whole-industry-chain hydrogen energy enterprises. During the conference, local governments announced the launch of 17 key hydrogen industrial projects, as well as a new service center established to support regional market players.
• on 14 November 2022, NEA announced in a press release its plan to facilitate research on and the development of industry standards for the hydrogen energy sector.
• on 28 October 2022, NDRC and the Ministry of Commerce of China published the Catalogue of Encouraged Industries for Foreign Investment (2022 Version). The catalogue introduces several new items, including the area of renewable energy technologies and products, which covers the development of green hydrogen fuel preparation technologies. Foreign investors that invest in such encouraged industries will be provided with significant benefits, such as tariff exemptions, preferential land access and price, lower corporate income tax, etc. For more information, please see our blog post.
• on 2 September 2022, Sinopec, one of the major petroleum and chemical enterprises in China, released its “Medium and Long-Term Strategic Plan for Hydrogen Development”. On 14 July 2022, Sinopec announced its entry into cooperation agreements with eight entities in different areas, including with a clean energy company, science center, and an automobile manufacturer. Such cooperation projects are focused on building the hydrogen energy industry, as well as exploring possible application options.

We expect that the industry will see further comprehensive measures to promote the development and application of hydrogen energy, including not just regulatory policies but also supporting fiscal and financial policies.

Japan’s support plans for the development of hydrogen and ammonia industry

On 4 January 2023, the Agency for Natural Resources and Energy (ANRE) released an interim report on a new strategic support for investment in hydrogen and ammonia (the Interim Report). The Interim Report outlines two major plans to support the industry, one of which is for the establishment of supply chain and the other is for the development of hydrogen/ammonia hubs.

The Interim Report states that the establishment of a robust supply chain will play an important role in reducing supply costs and creating a stable supply in a self-sustaining market of hydrogen and ammonia, with the aim of achieving net zero by 2050 and an ambitious low-carbon emissions strategy by 2030. The support scheme currently contemplated in the Interim Report is a support for suppliers representing the difference between (i) the strike price (to be determined in view of the anticipated production costs and to be reviewed periodically e.g. every 5 years) and (ii) the reference price (which will be the natural gas price for hydrogen and the coal price for ammonia). The term of support will be 15 years but may be extended to 20 years in view of the market environment at the end of the support period. In principle, only clean hydrogen/ammonia determined at a certain threshold, generally in line with international standards will qualify for the support although gray hydrogen/ammonia may be eligible in exceptional cases to support the transition.

The support for the development of hydrogen/ammonia hubs is based on the idea that it is essential to boost demand for hydrogen and ammonia and establish efficient supply chains. For the purpose of expanding the use of hydrogen and ammonia, it is planned to establish and develop about eight hydrogen/ammonia hubs (three large-scale hubs and five medium-scale hubs) for the next 10 years, where the infrastructures for storage, transportation, conversion of hydrogen/ammonia, such as tanks or pipelines, as well as carbon capture facilities will be developed.

ANRE intends to seamlessly support the establishment of a large-scale supply chain with these new support measures in addition to existing regimes. To this end, it is suggested that those supply projects involving eligible hydrogen/ammonia hubs could receive a favorable treatment in the supplier support scheme as well.

Singapore’s national hydrogen strategy

In the run up to COP27 in October 2022, Singapore announced its commitment to achieve net zero by 2050, having previously committed to achieving net zero emissions “as soon as viable in the second half of the century”. Singapore also announced at that time the launch of key initiatives to support blended finance to address climate change, as well as Singapore’s hydrogen strategy.

A joint press release by the National Climate Change Secretariat and the Ministry of Sustainability and the Environment stated that Singapore commits to achieve net zero emissions by 2050 and “reduce emissions to around 60 million tonnes of carbon dioxide equivalent (MtCO2e) in 2030 after peaking emissions earlier” as part of its revised 2030 Nationally Determined Contribution (NDC). On the same day, the Singapore government also released its national hydrogen strategy as part of its commitment to reach net-zero carbon emissions by 2050. In a press release, the Ministry of Trade and Industry stated that hydrogen could supply up to half of Singapore’s power needs by 2050.

The launch of Singapore’s national hydrogen strategy reflects the potential for low carbon hydrogen to support the decarbonisation of Singapore’s power sector and Singapore’s overall energy security given the geographical constraints in Singapore on the deployment of renewable technologies. In addition, low carbon hydrogen holds the potential for decarbonising “hard to abate” sectors that are a key part of Singapore’s economy such as shipping and aviation. As hydrogen technologies are still in a nascent stage, Singapore is well positioned to capitalise on its research and development capabilities to support the development of hydrogen technologies that would be critical in driving the development of a hydrogen economy. This is reflected in the emphasis in the Singapore national hydrogen strategy on research and development and experimenting through pathfinder projects. The development of global supply chains for low carbon hydrogen is also critical to the availability of low carbon hydrogen to support Singapore’s decarbonisation efforts, which is evident in the focus in Singapore’s national hydrogen strategy on international collaboration.  

Further reading:

• Getting Hy? Ambition and the art of the possible in the search for a hydrogen economy | Thought Leadership | Insights | Linklaters