Caixin Weekly | Can Direct Supply of Green Electricity Work? Impacting the Changes in East-West Industrial Layout (AI Translation)

财新周刊｜绿电直供能否跑通 牵动东西部产业格局之变

[para. 1] At the World Economic Forum in Davos, Zhang Lei, Chairman of Envision Group, presented the climate transition as an avenue for new industrial opportunities, especially for developing nations. Zhang highlighted Morocco's potential in green ammonia production, Brazil's shift towards sustainable aviation fuel, and Australia's use of renewable energy for green hydrogen and steel.

[para. 2] In Inner Mongolia, Envision Group is advancing its Chifeng Green Hydrogen-Ammonia Project. Using a pioneering "green electricity island grid," this isolated power system relies solely on renewable sources like wind and solar energy. The project's experimental phase has shown that the electricity costs can be nearly 60% cheaper than the grid electricity prices.

[para. 3][para. 4] The main goal of the Chifeng project is to produce green ammonia by using hydrogen generated through electrolysis powered by wind and solar energy. This three-phase project aims for an annual production of 1.5 million tons of green ammonia by its final phase. Initial production has experienced challenges due to unpredictable weather impacting the isolated grid's energy supply.

[para. 5] Though referred to as an isolated grid, Chifeng's project maintains a weak connection with the main power grid, utilizing it for voltage support and power fallback. The primary objective is to sell green ammonia internationally to achieve profitability.

[para. 6] The project faces technical challenges, especially in maintaining the dynamic ammonia synthesis process, which is sensitive to fluctuating renewable energy sources. The project is using self-developed equipment, continuously adjusting operations to enhance efficiency.

[para. 7][para. 8] Local policy support from Inner Mongolia facilitates the project's grid-connected model, reducing electricity costs to less than 0.2 yuan per kilowatt-hour—significantly lower than the average grid prices. This cost efficiency hinges on minimizing grid electricity purchases, as power costs account for more than half of the green ammonia production expenses.

[para. 9][para. 10] Comparatively, Envision extends the green hydrogen supply chain into green ammonia production, aiming to adapt to market difficulties like transportation costs—Sinopec's project in Xinjiang has encountered hurdles with higher than desired production costs due to insufficient downstream demand.

[para. 11][para. 12][para. 13] Envision plans to export green ammonia, focusing on markets like the European Union where incentives and premium prices for green products exist. Currently, domestic demand is limited, leading to losses in comparison to cheaper, conventional ammonia.

[para. 14][para. 15][para. 17] Rising coal costs might tip economic scales in green hydrogen's favor in the future. Chifeng and other regions are maneuvering to secure investments and capitalize on green resource potential, a trend accelerating as energy-intensive companies seek cost-effective and environmentally friendly alternatives.

[para. 19][para. 20] Initiatives in other Chinese provinces also promote integrating renewable energy systems to reduce costs and emissions, fostering competition for green projects. Jiangsu, Fujian, and others aim to meet domestic and international green energy demands, with policies supporting projects that could significantly alter China's energy landscape.

[para. 22][para. 23][para. 24] Public and private sectors are exploring direct supply models and large-scale renewable projects to offer competitive, sustainable energy solutions. The push for a standalone green electricity network, if successful, could dramatically transform industry practices and economic strategies across China, aligning with national policy goals for a low-carbon future.