Alternative energy in China: fuel cell Development and technology

Unlike other economies with a fledgling automotive industry, who for a century have always focused more on job creation than pollution, China ambitiously sets a goal for the best and newest industry, aiming for pollution reduction and energy savings. A visit by Chinese President Hu Jintao resulted in a memorandum of understanding that might lead to a longer term contract between Ballard Power Systems (part-owned by Daimler Chrysler AG and Ford Motor Co.) and Shanghai Fuel Cell Vehicle Powertrain Co.; the Shanghai government expects to see about 10,000 fuel-cell vehicles on the road by 2012. Many analysts believe that a central-governed economy like China’s is in effect more likely to develop a sound infrastructure for fuel-cell technology, given its aggressive scheme and devotion to the project.

While waiting for the infrastructure to be developed, Shanghai’s Horizon Fuel Cell Technologies pursued the big dream by starting with small projects: fuel-cell toy cars. The retail started in July 2006. The company is hoping to expand into making fuel cells to power cell phones and laptops, although the ultimate goal would be vehicles and household electronics.

Picture above: Beijing's smog

China is currently the world's second largest energy consumer and producer. Since the opening of Chinese markets in the 1990s, rising private wealth amongst the population has resulted in an increased demand for cheap electricity and private and public transport. Since the pollution from a growing number of vehicles creates smog in many Chinese cities, which is among the worst in the world, the pressure to develop clean vehicle technologies is mounting. In this respect, China is in a similar position to many other newly industrialized countries. Furthermore, China's oil reserves are limited. Until 1993, the country was a net crude oil exporter but since then oil imports have increased sharply to over 75 million tons in 2000. China’s oil import in 2004 was 122.7 million tons, an increase of 71%, as Chinese consumption has continued to surge higher. Experts also predict China’s oil imports could increase at a rate of about 30 percent for the next 3 years. This level of imports could cause financial problems for the country and also could stimulate inflation.

Additionally, the demand for alternative fuels in China is driven by the Chinese government's desire to reduce air pollution (China is already the World’s second largest producer of carbon dioxide emission after the U.S.), particularly in urban centers. China has six of the world's 10 most-polluted cities. The Chinese government has set a time line to improve emission standards for vehicles in China. China's National Development and Reform Commission (NDRC) has also issued a new Automotive Industry Development Policy. The new policy, which became effective on June 1, 2004, stipulates that average fuel consumption of new cars should be reduced by 15% by the year 2010.

Fuel Cells Projects

Transportation is considered to be the most important initial market for fuel cells in China. The market for replacing batteries in electric bicycles is expected to be the earliest market to be commercialized, followed by buses. Approximately 1 million buses were produced in China in 2002. This was an increase of 25% over production in 2001. Seventy-four percent of the application of fuel cells in China focuses on transportation. Fifty-four percent of fuel cell technology in China is based on proton exchange membrane fuel cell (PEMFC), the most prominent fuel cell technology for transportation applications worldwide.

Picture left: Chinese fuel cell bus

China hasn't seen much private investment in this sector. Up to 2003, only a handful of private Chinese companies are working on the issue. However, China has seen vast investments from major car and bicycle manufacturers, some of which are already working with local research institutions on fuel cell applications. But hydrogen fuel cell power has daunting technological hurdles that must be overcome before they can help solve pollution or energy challenges. Fuel cells are still extremely expensive and in transportation applications fuel cells are still very fragile. Storing and distributing hydrogen is still difficult, because hydrogen as a gas contains very little energy by volume, and therefore must be either liquefied or stored under extreme pressure in order to deliver meaningful amounts of energy. Finally, hydrogen itself must be extracted from other fossil fuels, or manufactured using electricity and water. So even if hydrogen becomes the clean energy of choice, hydrogen will have to be manufactured using other fuels.

Today, China hosts more than 60 institutions and companies, employing around 350 people working on the technology. As shown in the above figure, most of these organizations are still very much research orientated.

China's ample market and the current limited development in fuel cell technology indicate a lucrative market to foreign investors of this sector. The main opportunities for fuel cell technologies in China are in the development of prototypes of fuel cell engines and for fuel cell fuelling stations. Chinese transport authorities are looking for well-designed buses that suit their individual local environments, maintenance staff training and a high level of service. At the moment, there are two major state technology programs related to fuel cells and hydrogen research in China and some initiatives and projects, partly-funded by the government. China's Ministry of Science and Technology has also revealed their intention to expand research on fuel cell and alternative energy with large investments into related a R&D program.