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Article

Hydrogen as a Transition Tool in a Fossil Fuel Resource Region: Taking China’s Coal Capital Shanxi as an Example

1
College of Economics and Management, Taiyuan University of Technology, Taiyuan 030024, China
2
Global Energy Interconnection Development and Cooperation Organization, Beijing 100031, China
3
Shanxi Development and Reform Commission, Taiyuan 030002, China
*
Authors to whom correspondence should be addressed.
Sustainability 2023, 15(15), 12044; https://doi.org/10.3390/su151512044
Submission received: 12 June 2023 / Revised: 26 July 2023 / Accepted: 4 August 2023 / Published: 7 August 2023
(This article belongs to the Section Resources and Sustainable Utilization)

Abstract

:
Because of the pressure to meet carbon neutrality targets, carbon reduction has become a challenge for fossil fuel resource-based regions. Even though China has become the most active country in carbon reduction, its extensive energy supply and security demand make it difficult to turn away from its dependence on coal-based fossil energy. This paper analyzes the Chinese coal capital—Shanxi Province—to determine whether the green, low-carbon energy transition should be focused on coal resource areas. In these locations, the selection and effect of transition tools are key to ensuring that China meets its carbon reduction goal. Due to the time window of clean coal utilization, the pressure of local governments, and the survival demands of local high energy-consuming enterprises, Shanxi Province chose hydrogen as its important transition tool. A path for developing hydrogen resources has been established through lobbying and corporative influence on local and provincial governments. Based on such policy guidance, Shanxi has realized hydrogen applications in large-scale industrial parks, regional public transport, and the iron and steel industry. This paper distinguishes between the development strategies of gray and green hydrogen. It shows that hydrogen can be an effective development model for resource-based regions as it balances economic stability and energy transition.

1. Introduction

China is seeking to move from a follower to a leader in global climate and energy policy through a number of efforts that demonstrate its commitment to reducing CO2 emissions. In 2015, the Chinese government submitted its Intended Nationally Determined Contributions based on the Paris Agreement. Furthermore, in September 2020, Chinese President Xi Jinping announced targets for carbon peaks by 2030 and carbon neutrality by 2060. The country also launched the “Four Revolutions” agenda, which includes a technological revolution, consumer revolution, production revolution, and institutional revolution in the domestic energy sector. Based on the fact that China has been the world’s top carbon emitter for many years in a row and accounted for 28.8% of global emissions in 2019, 1.2 times that of the USA and EU combined [1], the above government decisions to reduce carbon emissions are of great significance for combating climate change. If China achieves carbon emissions transition by 2030, the global climate governance about emission targets will achieve substantial milestones.
To achieve its carbon emission goals, China has begun a top-down allocation of emission reduction tasks, with each province and city formulating reduction strategies according to their economic and energy structure characteristics. Since 2012, China has put forward the “12th Five-Year” [2] and “13th Five-Year” [3] energy development plans. However, it only defined the energy revolution as a long-term national development strategy in 2014 [4], while the Energy Production and Consumption Revolution Strategy (2016–2030) was released in 2016 [5], emphasizing the goal of reducing CO2 emissions per GDP unit more than 65% in 2030 compared to 2005. Nonetheless, China’s coal consumption still accounted for 56.8% of the total national energy consumption by 2020 [6]. In particular, its internal energy supply crisis triggered by the global energy shortage [7] means that the dominant position of coal in China’s energy structure will be difficult to change. The most complicated transition areas are resource-based provinces that have fossil energy production as their economic pillar [8].
Therefore, the success of energy transition in Chinese regions dominated by coal production and consumption has become the key for meeting national carbon reduction targets. The most prominent feature of these areas is the fact that coal dominates the local social and economic lifeline [9], even in Europe is no exception [10,11]. Thus, if coal production and consumption were to be cut to reduce carbon emissions, the economy would undoubtedly be negatively affected [12], further destabilizing the local society. Therefore, the most challenging issue is finding a transition tool that would ensure meeting the national carbon peak and would also maintain the vitality of the local economy [13]. In addition, such research may be valuable for the global carbon reduction transition in other fossil energy resource countries.
Shanxi Province represents a Chinese administrative region with an enormous coal output [14]. From 1949 to 2018, its cumulative coal production is 19.24 billion tons, which accounts for a quarter of China’s total coal production. And, the provincial net shipment of coal reached 11 billion tons, accounting for three-quarters of China’s total net shipment. In addition, coal production only increased in the following three years, especially in 2021, when it reached a record high of 1.193 billion tons and accounted for 29.2% of the national coal output [15]. According to the IEA report, China ranked first in coal production in 2021, accounting for 59.31% of global production. Moreover, its total coal consumption has also been ranked first for 10 consecutive years [16]. Shanxi Province accounts for 17.1% of the global coal output and thus holds the title of the “coal capital” of China and the world. At the present stage, because of the pressure of the global sustainable energy transition and China’s efforts to reduce carbon emissions, it is an objective fact that China must try its best to get rid of the traditional fossil energy consumption pattern and grasp the energy initiative. Shanxi Province, a typical fossil fuel resource-based region, must find new energy transition tools to decrease coal production and consumption rates. More importantly, it can provide a practical transition experience for similar areas in countries worldwide.
This paper chose Shanxi Province as its research object. During the past four years, the region unexpectedly adopted hydrogen as its transition tool for moving away from the traditional fossil energy limitation. This paper discusses the motivation, strategic planning, and specific actions of Shanxi Province’s hydrogen development. The main goal is to determine the reasons why a coal-dependent province chose to adopt emerging clean energy technologies that are not yet economically optimal or technically mature. Furthermore, the paper wishes to understand which innovations have been implemented to promote hydrogen use according to local conditions.
The traditional research paradigm began with empiricism, presenting the situation in China, which is a common practice whose research is focused on the Chinese economy. However, this paper is not an empirical analysis of a mature and large-scale topic but chooses a unique and typical pioneer case. Instead of the standard hypothetical model and empirical verification research method, it pays more attention to the qualitative research method, which chooses the logical deductive recursive research method, focusing more on the perspective explanation. Analyzing motivations, policy paths, and specific actions gives the universal experience more research value and enlightenment worthy of special attention. Specifically, we systematically attribute a series of changes caused by the coal turmoil in the past decade. These changes have become the political motivations for Shanxi to choose hydrogen. Based on this research, according to the bottom-up perspective from enterprises to provincial and prefectural governments, we can answer the formation path of regional hydrogen macro policy in a short period of five years and further test the science and effectiveness of hydrogen planning path through the application of specific industrial parks and different industries.
There are two primary sources of innovation for this paper. First, from a research perspective, it is not an absolute option for China to reveal the energy transition of resource-based regions, rather, exploring and raising much room. There is no need to passively wait for one-way help from superior governments or economically developed areas. Choosing emerging transition tools based on existing pressure and resources can effectively achieve carbon reduction targets while reducing political and economic stress. Second, from the perspective of research content, the Chinese government has repeatedly emphasized the importance of energy supply security and the determination of a clean energy transition. Still, the actual pace of implementation in different regions is not consistent. This paper focuses on resource-based provinces, especially those relying on coal to drive the economy. As a critical part affecting the success of the national energy transition, Shanxi has other transition options besides cutting coal, which are practical and effective and can be used as a positive case for reference in other regions.
The rest of the paper is organized as follows. The Section 2 is the literature review. The Section 3 presents the core motivation of choosing hydrogen as a tool for the energy transition in Shanxi, and the Section 4 is the formation path of Shanxi hydrogen planning at the macro level, pointing out that the internal relationship among enterprises, local governments, and provincial governments promotes the development. The Section 5 presents the micro-analysis based on the macro path, the specific exploration actions of hydrogen in Shanxi, including the closed-loop application of hydrogen in large industrial parks, the demonstration of public transport and the decarbonization innovation of the iron and steel industry, and discusses the actual results, respectively. This Section 6 is the conclusions and policy implications because of the scarcity and experimentation of the research cases, mainly including the prospect of future research.

2. Literature Review

To achieve the climate goal set by the Paris Agreement, hydrogen has become an essential type of energy for countries to reduce carbon dioxide emissions effectively. The academic research on the specific technology, industrial chain, specific application, and social impact of hydrogen energy has been more systematic and comprehensive, which forms a reference for studying the application of hydrogen in fossil fuel resource regions.
From the perspective of the type development, technology, and industrial chain of hydrogen, on the one hand, the research focuses on green hydrogen and its role in the energy transition. The definition of green hydrogen refers to the hydrogen source that must be limited to renewable energy and is also the most encouraged type in the world. International Renewable Energy Agency (IRENA) has continuously released the technology outlook, policymaking, and cost reduction possibility analysis of green hydrogen [17,18] and made an optimistic judgment on the development situation of the whole industry [19,20]. However, it is also pointed out that the biggest obstacle to the development of green hydrogen is the high cost of electrolyzer [21], and taking Germany as a specific case, the transition process of hydrogen from blue to green is analyzed [22]. On this basis, McPherson et al. emphasized that the effect of hydrogen in energy transition can be expanded through power storage [23]; Abad and Dodds explored how green hydrogen has been defined, which included green hydrogen characterization initiatives, and the main challenges that standards and guarantee of origin schemes [24]; Schlund and Theile et al. pointed out that hydrogen is a promising supplement in future energy systems with high penetration rates of renewable energy generation [25].
On the other hand, the economic effects of hydrogen technology and industrial chain directly affect competitiveness of a country or region. Review the development of hydrogen in the past 20 years, the future developments of a green hydrogen society strongly depends on new materials, recycle of chemical catalysts and efficient use of energy in the short term [26]. The relevant research not only focuses on the possibilities for safe and waste-free hydrogen electric power generation technology for processing industrial and life wastes [27], and budgetary allocation of hydrogen-related technologies [28], but also analyzes the economic cost of hydrogen energy long-distance transportation. For example, Ishimoto et al. compared the production and transportation value chain of hydrogen from Norway to Europe and Japan, showing that the liquefied hydrogen chain is more efficient and has a smaller CO2 footprint than the ammonia chain [29]. Reuß et al. pointed out that salt caverns, as well as transmission pipelines, are key technologies for future hydrogen infrastructure systems through the German case [30], larger fleets are capable of decreasing hydrogen production costs significantly [31]. In addition, hydrogen mixing into the pipeline is also an important mode of transition. Academic research focuses on the specific mixing proportion and combustion efficiency of hydrogen in the pipeline [32]. Europe is the most active region [33], but China has not carried out large-scale promotion.
The research on the application of hydrogen energy mainly focuses on transportation and iron and steel industries, in which fuel cell is the key. Because fuel cell vehicles and carsharing depict the potential solution to pollution and noise from city traffic, sustainability assessment of fuel cell buses has become a key element in public transport promotion market [34]. As the fuel cell is mainly used in non-commercial passenger vehicles, the research focuses more on the design of the fuel cell heavy truck and the safety of the battery itself [35,36]. Al-Mufachi and Shah emphasized the role of hydrogen and fuel cell technology in coupling the building, transport, and industrial sectors has been demonstrated in the U.K. [37].
Compared with Europe and the United States, although the fuel cell in China started relatively late [38], the market scale developed very fast. The research not only includes greenhouse-gas emissions of hydrogen supply chains for fuel cell vehicles and the heavy-duty truck fleet from diesel and natural gas to hydrogen [39,40], but also analyzes the economic feasibility, obstacle identification and solutions of hydrogen fuel cell vehicles under the carbon neutrality target, and discussed the relation between energy policies and the competitiveness of hydrogen produced from renewable energy and the fuel cell vehicles [41,42]. The application of hydrogen in iron and steel industry has just started, and the application scale in Europe is relatively small. The research summarized the applications of hydrogen in the blast furnace (BF) production process, direct reduction iron (DRI) process and smelting reduction iron process [43], therefore, hydrogen has great potential to apply in Chinese steel industry.
From the strategy perspective, previous academic discussion around hydrogen has predominantly focused on national and international strategies [44,45,46]. A research perspective concentrated on finding practical solutions for developed economies to boost their economic recovery after COVID-19 [47], such as the EU [48] and Germany [49] have released their hydrogen strategies. The other option is for significant oil and gas resource exporting countries to fight for international energy transition discourse and influence [50,51], such as Saudi Arabia and the UAE releasing large-scale hydrogen production and export plans [52]; even Russia is involved in hydrogen competition [53]. On this basis, relevant studies emphasize that hydrogen trade shows different characteristics from traditional energy [54]. The potential for green hydrogen production and leadership in industrial applications is distributed unequally around the globe. China and the United States could emerge as frontrunners in future markets and lead in industrial applications [55]. Not only that, but hydrogen also changed the social research perspective. The potential impacts of emerging hydrogen transitions would result in significant social impacts [56] and will require a broader and deeper engagement with theories of social practice, energy justice, and place attachment [57].
But, the study of hydrogen is not all optimistic; academia has been studying the uncertainty of the development of hydrogen, and the main point is whether hydrogen can really support the energy transition in the power sector and so on [58,59]. Some European countries with rapid energy transition are particularly concerned about it. For example, Cheng shows that time is of the essence, and action needs to be taken during this window of opportunity for low-carbon hydrogen to play an important role in Norway’s energy transition [60]. Tang and Rehme et al. studied long-term uncertainties of hydrogen production in the Swedish power sector [61]. The current research pays less attention to the development of hydrogen in the fossil fuel resource region in developing countries [62], and also in China, focuses on large-scale green hydrogen demonstration and commercialization [63]. And, the promotion of green hydrogen, transportation cost, and production optimization are mentioned in the above research but have more economies of scale compared with other countries [64,65,66]. The studies of Moreno-Brieva et al. have shown that hydrogen needs to go from gray to green step by step. Those technologies developed for hydrogen based on fossil energy sources have enabled novel applications based on renewable energies [67]. In other words, hydrogen cannot exist alone without fossil energy in the short term. In the transition from a petroleum economy to a low-carbon society, hydrogen has the potential to be a source of new income [68].
In summary, the existing research on hydrogen has been very mature and comprehensive. Still, there is no systematic analysis and practical action research on whether the resource-based areas can use hydrogen to carry out transition or development in China or other regions. The key reason lies in the lack of actual cases. Therefore, this paper extends previous research to apply the policy evolution, formation, and exploration behavior of hydrogen in Shanxi under the background of the global energy transition. Shanxi, as a coal capital, effectively promotes the development process of hydrogen on the ground. It establishes the three major factors to make relevant judgments and choices; analyzes the formation logic that Shanxi can put forward hydrogen energy planning at the present stage, exploring the current dilemma and way out for the current resource-based areas to realize China’s energy transition; and provides new research perspectives and values to smoothly achieve target emission peaks and carbon neutrality. In addition, the study of the Shanxi case can also answer whether the development of China’s local hydrogen industry is based on the hasty response of the central government’s carbon reduction pressure or the systematic planning and action of local actors after careful consideration. This has essential reference significance for countries or regions with the same characteristics worldwide to smoothly transition to a cleaner and low-carbon environment in the fierce energy competition.

3. The Motivation for Choosing Hydrogen as a Transition Tool in Shanxi

Coal resource-based areas are more vulnerable to the economic and environmental dilemmas paradox [69]. Namely, halting coal production and consumption will harm the local economy, possibly causing an unstable crisis of continuous recession. However, the present coal development is not in line with the need for carbon reduction [70]. To avoid the above predicament, the Shanxi government and energy enterprises used existing coal resources to develop hydrogen industry chains, i.e., high-purity hydrogen, specify hydrogen-fueled vehicles, even before China proposed a medium and long-term plan for the hydrogen industry [71]. After four years of deployment and development, it is crucial to understand why Shanxi Province chose to avoid the economic and environmental paradox analysis for resource-based areas under the high uncertainty of industrial prospects.

3.1. The Window Period of “Clean Utilization” of Coal

At present, the global stance on coal has been consistent, i.e., implementing the coal phase-out plan should be performed as soon as possible [72]. According to E3G statistics, 24 of the OECD and the EU member states have entirely phased out coal by 2020 [73]. Moreover, developed industrial countries, including France and Italy, have declared a “coal phase-out”, which means coal power generation will be eliminated by 2030 [74]. With the global trend of lopsided coal denial, the Chinese government’s attitude toward coal is seemingly complicated [75].
Because of this, China has become increasingly cautious about coal power development. As the world’s largest coal power investor, in 2021, China announced that it will not build new coal-fire projects abroad [76]. Furthermore, in March 2021, a research report released by the China Coal and Power Industry Association recommended that domestic coal production should be controlled within 4.1 billion tons by 2025 [77].
However, the stability and security of the domestic energy supply have been the core concerns of the Chinese government. Because the demand for oil and gas resources cannot be met domestically, it is challenging to decrease the proportion of coal consumption in more than half of the national energy structure.
In the fall of 2021, a large-scale energy supply crisis occurred in China, leading the government away from positive transformation measures. In 2021 and 2022, the Chinese government has not announced any detailed targets for reducing coal production, rather choosing to emphasize the clean and efficient use of coal.
The national government has also lifted restrictions on the total domestic coal consumption limit and the proportion of primary energy consumption, only vaguely proposing strict control of coal consumption [78] and re-emphasizing the role of coal in energy production. Although the need to achieve the committed NIDC target and carbon peak by 2030 has been reaffirmed, it is only emphasized to ensure a reduction in total coal consumption, and the quantified goals are not officially precise. Its ambiguous attitude toward coal production shows that China still views coal as the cornerstone of the national energy supply in both the short and medium term.
With a window less than eight years, China’s official policies for managing coal production and use are yet to be clarified. Still, a significant coal reduction trend is bound to occur until the carbon peak target in 2030. The CNPC released a report predicting that, as the domestic energy structure adjusts, China’s coal consumption will drop to 43% by 2030 [79]. Moreover, the BP Energy Outlook indicates that this number will reach 35% by 2040 [80], meaning that a decline in national coal production and consumption will be inevitable around 2030. In other words, coal as a domestic “ballast stone” for energy stability is time bound. Before 2030, reversing the use of coal properties may be expected to achieve a regional transition. Otherwise, the fate of coal being marginalized is doomed, demonstrated by global situation of the coal phase-out.
Shanxi Province is more aware of the coal above trends than other Chinese regions. As a province whose economy is coal dependent, it must find a clean and efficient use for coal, thus becoming a new energy base that the country can rely on. Before 2014, coal was the social and economic pillar of Shanxi Province. However, the collapse in coal prices after 2015 led to an industrial and economic downturn in the region [81]. For a smooth socio-economic transition, Shanxi cannot be separated from coal in the short term and must explore new utilization modes before the window closes. As the use of hydrogen is compatible with the low-carbon clean transition, the development of hydrogen-rich tail gas from the coal coke chemical industries and downstream industrial chains has become a transition direction for certain prefecture-level administrative regions.

3.2. Political Pressure from Local Governments

As the main policy formulation body, the Shanxi government at all provincial levels has actively promoted energy transition with strong political motivations. Firstly, the reduction in government corruption in Shanxi Province weakened the connection between the coal industry and local officials. Thus, newly appointed officials could promote industrial reform more ambitiously. Second, the performance assessment of local government officials by the central government in China involves a variety of indicators and is not fixed. In Chinese politics, the degree of policy implementation is related to the career prospects of officials, with a particular emphasis on the implementation of central government policies. When assessing a local official, the central government reviews officials’ performance in environmental protection and carbon reduction.
This kind of political pressure is related to the relationship between coal and economic development in Shanxi Province. Namely, coal production and use have driven the region’s rapid economic growth since 1990. Therefore, the provincial economy is highly dependent on coal, with large interest groups dependent on the energy industry and even able to dictate local policies. However, in 2012, the new President, Xi Jinping, adjusted the national development policy, focusing more on the quality of economic development than speed. Since then, Shanxi began an unprecedented political rectification by the new central government due to the bundling of deep interests in the coal economy and politics. Even though there was no visible anti-corruption campaign before, which involved a large number of high-level officials, more than 3300 Shanxi Province officials were punished at the end of 2015, mostly because of benefit transfer or bribery related to the energy industry.
In China, the assessment of successful governance involves the redistribution of benefits from the central to the local level, leading to competition among local officials for governance performance. After the anti-corruption campaign, officials in Shanxi Province were eager to change the political structure of the province and tackle the issue of energy transition. Thus, the central government’s decisions regarding the national energy revolution can be implemented in Shanxi Province.
The central government’s assessment standards are adjusted according to the actual situation. After 2012, China began to adapt its new strategy to focus on the environmental philosophy of “green waters and green mountains are golden mountains and silver mountains” [82]. After another new change in government in 2017, the responsibility for environmental protection and emission reduction has been further strengthened. The regions dependent on fossil energy are trying to find new industries to replace the traditional high-carbon ones and thus meet the central assessment requirements for environmental protection and emission reduction. Therefore, coal-production regions in Shanxi Province have begun promoting hydrogen and extended its use to the provincial level. By bringing the coal-coking industry closer to the hydrogen one, the province created a novel economic pillar and showed a positive trend of green economic transformation.

3.3. The Survival Demands of High Energy-Consuming Enterprises

It is difficult for resource-based regions to develop local high-tech, light assets, or high-end manufacturing enterprises. Shanxi Province has suggested several industrial directions and made efforts to attract high-end equipment manufacturing enterprises but with little effect. The pillar industries are still high-carbon and high-energy-consuming enterprises, such as coal coking, the chemical industry, and iron and steel. However, getting rid of the traditional enterprises directly is difficult to achieve an effective transition. It is also the common dilemma of resource-based regions that still have fossil fuels as the primary industry.
The pressure on Shanxi Province enterprises comes from production profits, energy production targets, and environmental protection indicators, which are controlled by the Chinese government. Since 2012, China has established a set of assessment standards for rational energy consumption and carbon emissions. Even though the implementation details differ across regions, the main purpose is to reduce high emissions and high energy-consuming production capacity indicators and to adjust enterprises to low-carbon environmental protection standards. If a project does not meet these standards, it will be shut down and rectified. Between 2016 and 2019, 106 coal mines were closed, with an exit capacity of 115 million tons in the territory of Shanxi [83].
For the overall development of Shanxi Province, one side is the economic gain of high energy-consuming industries if production is guaranteed to be sustainable and profitable. The other side is the intense pressure of fossil energy transition under the carbon emission reduction constraint. Therefore, high energy-consuming enterprises in Shanxi Province must find tools that can not only retain the existing industry’s leading body in 2030 and before 2060 for sustainable profits but also ensure that the transfer of high-carbon capacity meets the requirements for carbon reduction. At present, hydrogen is the most realistic option for meeting both demands.
Our research paid particular attention to the differences between state-owned and private enterprises. Namely, state-owned enterprises often place more emphasis on political standing than economic efficiency at the macro-environmental level. On the other hand, private enterprises prioritize economic gains and emphasize that transitions are based on development demands. Thus, private enterprises’ choice of transition tools is more valuable for research.
Since 2019, large private energy-consuming enterprises with significant profits in Shanxi have adopted hydrogen as a transition tool, such as Lvliang’s largest coal-coking enterprise (Pengfei), Jinzhong’s largest coking iron and steel enterprise (Meijin and Lubao), and the most important coal steel coking enterprise in Changzhi (Lubao). Some large state-owned enterprises related to the hydrogen industry have also started to follow [84], such as the largest state-owned steel enterprise in Shanxi Province (Baowu TISCO), which is involved in the research and development of high-pressure hydrogen storage bottles. Essentially, enterprises developed hydrogen to ensure the economic efficiency and survival of existing high-energy-consuming industries. However, it must be acknowledged that hydrogen has become an effective tool in this passive choice, forming the beginnings of a strategic energy network that is unlikely to appear in other countries.

4. The Formation Path of Hydrogen Planning in Shanxi

Based on the urgency of this transition and the pressure of governments and high energy-consuming enterprises in Shanxi Province, the policies around hydrogen present progressive bottom-to-top characteristics.
In other words, local enterprises will ensure existing production capacity and profit space through hydrogen transition and receive positive feedback after promoting hydrogen policies, which continue to influence provincial governments. Finally, a systematic policy evolution channel is formed through multiple levels of government and business actors for a virtuous cycle of hydrogen police operation (Figure 1).
In the second part of the literature review, it is pointed out that academic research focuses on green hydrogen. Gray hydrogen is not considered clean energy but is the most economical and productive type. From the beginning, prioritizing green hydrogen has become a key factor restricting the large-scale development of the hydrogen industry in Europe and other regions. Before the cost of electrolyzer is reduced and commercialized on a large scale, gray hydrogen may be a viable or necessary option for some countries or regions, particularly developing countries, during the transition period. This paper especially emphasizes that at the present stage, the hydrogen source in Shanxi mainly comes from coke oven gas and gas purification, which belongs to gray hydrogen; however, the rich gas source and extremely low economic cost promote the growth and development of hydrogen industry in Shanxi in a short time, and the formation path of hydrogen planning also reflects the characteristics from gray to green.

4.1. Lobbying by Enterprises to Local Governments

This section analyzes the cases from three cities in Shanxi Province for illustration.
Datong, a prefecture-level administrative unit and an important coal-producing area, is a national model reform area for resource-based regions. Because of the transition pressure and environmental protection responsibility, its local enterprises proposed to use coal-bed methane and hydrogen-rich tail gas for hydrogen production in 2019, and the Datong Government adopted these suggestions. It then published the Datong Hydrogen Industry Development Planning (2020–2030) [85] in 2020, which focused on the scale purification of hydrogen-rich tail gas, renewable energy power generation electrolysis of water hydrogen production, and distributed methanol hydrogen production as the basis for the commercialization and large-scale application of hydrogen, leading the traditional energy industry to strategic emerging industry.
Changzhi represents a prefecture-level administrative unit and energy base in the southern part of Shanxi Province. Its largest local coal-coking enterprise (the Lubao Group) was inspired by Datong’s hydrogen reform, also put forward a hydrogen transition plan at the end of 2019 and lobbied the government with its taxing influence. The People’s Government published the Changzhi Hydrogen Energy Industry Development Planning (2020–2030) based on the advantages of Changzhi’s coal chemical industry and geographical location. The aim of this plan was for Changzhi to become a hydrogen supply base for the Central Plain city cluster, with Zhengzhou as its core and spanning from northern Henan Province and southern Shanxi Province. Therefore, Changzhi has focused on the application of hydrogen fuel cell vehicles and equipment accessories, thus expanding the zero-carbon logistics closed-loop network based on hydrogen fuel cell heavy trucks.
Lvliang, an important coal-production city in central Shanxi, also abides by this hydrogen policy. For instance, the Pengfei Group, a local private enterprise with high energy consumption, has a production capacity of 20 million tons of coal, 3.76 million tons of coking, 600,000 tons of methanol, and 400 million cubic meters of LNG. Its total output value is 86.2 billion CNY, with profits and taxes of 8.3 billion CNY in 2021, ranking the enterprise 354th in China, the first and only private enterprise selected in Shanxi [86]. Because of this, Pengfei has a great influence on local government decisions and economic operations. However, as the high profit of fossil energy is unstable, high energy-consuming enterprises must transition to green and low-carbon practices to survive. In 2020, the Pengfei Group proposed a 78 billion CNY investment in hydrogen for sustainable development. This proposal was based on the existing coke oven tail gas, renewable energy cells, and chemical products, relying on its industrial park with hydrogen refueling stations and fuel cell heavy trucks. This plan included 200,000 tons of coke oven tail gas, 100,000 tons of photovoltaic power generation, 100,000 tons of liquid hydrogen storage and liquid hydrogen filling stations, 50 comprehensive hydrogen refueling energy stations, and 300,000 units per year of hydrogen fuel cell vehicles [87].
However, an enterprise cannot complete the above transition alone. As Pengfei is an economic pillar of Lvliang and has influence in the local government, lobbying has become an inevitable choice. The primary way is that the head of Pengfei has repeatedly emphasized the critical role of the hydrogen industry in promoting the transition of Lvliang in various economic meetings. More importantly, the Lvliang government also responded positively, as the “eye of the storm” that experienced Shanxi’s political rectification in 2014, the new government team has a stronger driving force and determination to transform. Meanwhile, combined with the repeated lobbying of Pengfei based on local industrial characteristics, hydrogen has become a suitable strategic transition tool in the government’s comprehensive decision-making study. The new municipal party secretary even regarded hydrogen as a key project during his term of office and has set up a special working group with himself as the leader. In the Chinese political system, the municipal party secretary is the highest regional head, not the mayor. In 2022, under the impetus of the working group, the Lvliang Medium and Long-term Development Planning of the Hydrogen Industry (2022–2035) [88] was officially proposed by the local government. The plan urged for the construction of a local demonstration base for the hydrogen industry chain. The Pengfei hydrogen industrial park was listed as a pivotal tool for regional industrial transition and economic development, which may be closely related to lobbying by the Pengfei Group.
The above cases illustrate that the energy industry gives Shanxi energy enterprises a strong policy influence, actively shaping policy awareness and meeting the goals of the energy transition.

4.2. The Influence of Local Government on Provincial Government

There are two policy implementation modes in China. The first is government led and driven from scratch. It is most commonly seen in the electric vehicle market, which represents a vast new industry created through government subsidies. The other mode is a pilot exploration through which enterprises or individual regions would lead development, then judged to be mature and implemented from point to face. The hydrogen policies of Datong, Changzhi, and Lvliang were formed by the local government after the explorations based on the local industrial foundation and enterprise transition. Therefore, it is clear that the development of hydrogen polices in Shanxi Province belongs to the latter, and the chain of influence between local and provincial governments has not been interrupted. After three years, the above-mentioned local government exploration and promotion impacted the provincial government’s decision on energy transition, which is no longer only concerned with coal production, and clarified the feasibility of developing the hydrogen industry in Shanxi Province.
In 2022, after the early pilot actions in three regions, the Shanxi provincial government began to support the development of the hydrogen industry on the provincial level through administrative policies. As a measure to promote the reform of the Shanxi energy revolution, hydrogen production and use was selected as one of the first 10 pivotal industrial chains in Shanxi Province [89]. In the 14th Five-Year Plan of Shanxi Province, the hydrogen industry was also one of the seven pioneering future industries to enhance the province’s position in the development of new industries [90]. Moreover, in July 2022, the Development and Reform Commission of Shanxi Province announced the Medium and Long-Term planning for the development of the hydrogen industry in Shanxi Province (2021–2035) [91]. This plan sets provincial goals for hydrogen development in 2035, including transportation, energy storage, building more than 100 hydrogen refueling stations, promoting 10,000 fuel cell vehicles, accumulating a total industrial value of more than 100 billion CNY, and creating a national highland for future hydrogen industry development [92].
In addition, local and provincial hydrogen policies provide detailed instructions on the coloration of hydrogen sources, proposing a gradual shift from gray and blue to green within 10 years. Even though still dominated by gray and blue hydrogen in the short term, it at least shows the positive attitude and practical application of the transition. It is an area that the Shanxi government pays more attention to, i.e., the government is concerned with improving its negative image caused by coal corruption rather than discussing hydrogen chromaticity. Before, Chinese provinces that developed hydrogen were concentrated in economically developed areas, the southeast coast, and centers like Beijing, Tianjin, and Hebei. No resource-based region had made such large-scale hydrogen initiatives except Shanxi Province. The promotion of hydrogen policies in Shanxi Province indicates that the green and low-carbon energy transition is not simply an economic issue but also a significant political consideration.

5. Specific Case Analysis: Hydrogen Exploration in Shanxi

Shanxi Province selected hydrogen as a tool for its green and low-carbon energy transition. Even though Shanxi Province had to deal with external questions about the temporary gray of a hydrogen source, its reforms were not unplanned. The practice and explorations of hydrogen in the Shanxi fossil energy industry have achieved positive results in critical fields such as transportation, iron, and steel, which are all difficult to decarbonize.

5.1. Closed-Loop Application of Large Industrial Parks

As a medium for decarbonization, hydrogen is most widely applied in the transportation sector, mainly on large commercial vehicles, such as heavy hydrogen trucks, buses, and other functional vehicles. Shanxi Province is well known for its large-scale industrial parks and mining camps, which are based on long-cycle coal mining and transportation. Thus, it may represent a feasible scenario for hydrogen-powered heavy trucks and transport vehicles.
At present, at least five large chemical parks in Shanxi have realized internal closed-loop hydrogen transportation (Table 1). One of these parks is the Huasheng Chemical Park of the Meijin Group—one of the largest coal coke and steel-integrated mega-industrial parks in central Shanxi—with an annual output of 3.85 million tons of coke, 300,000 tons of ethylene glycol, and 150,000 tons of LNG and has built a project with a yearly production of 20,000 tons of high-purity hydrogen [93]. Moreover, this park transports its hydrogen to the internal hydrogen refueling station through a pipeline and provides 200 hydrogen heavy trucks and 34 hydrogen commuter vehicles for use, thus realizing the entire hydrogen cycle from production to application. The second planned park belongs to the Pengfei Group. It represents a large industrial park with a vast hydrogen investment and planning scale. It has put 300 heavy hydrogen trucks, five commuter buses, five reception buses, and three hydrogen refueling stations into operation. In addition, nearly 1000 hydrogen-fueled heavy trucks and 10 hydrogen refueling stations are going to be placed into operation. The Pengfei Group plans to create a logistics park with 10,000 hydrogen heavy trucks in the next five years in China [94]. As this plan relates to Lvliang’s hydrogen strategy, it is regarded as a government-supported project, which has already completed 30% of the progress by June 2022 [95].
Furthermore, certain shallow mines in Shanxi Province have also created short-island transportation of heavy hydrogen trucks. For example, the Pingding Coal Mine in Yangquan City explores low-carbon green transportation as a means of transition. The mine has also powered 10 heavy hydrogen trucks for uninterrupted transit in a 5 km area, from the mine entrance to the loading station, with one hydrogen refueling station [96].
The above examples represent positive transitions in fossil fuel resource-based regions. Previous models advocated a crude shutdown for carbon reduction, which would damage the local economy and affect social stability. However, creating a low-carbon closed-loop transportation network through chemical-rich hydrogen resources has become a practical innovation for such high-emission industries. Since the source of hydrogen is still gray, the next stage would be transitioning to blue hydrogen through CCUS for the relevant parks.

5.2. Development of Regional Hydrogen Public Transport

At present, the use of hydrogen in the transportation sector concerns functional vehicles. Namely, the onboard high-pressure hydrogen storage cylinders must be secured in the open field and thus cannot be used in small commercial vehicles. In addition to heavy trucks and environment-friendly vehicles, buses are the leading choice for carbon reduction in public transportation. However, as hydrogen-fueled buses are still in their early stage of application, the unit price is twice as high as that of electric or hybrid vehicles. Thus, hydrogen buses are mainly used in economically developed mega-city circles, where urban public transportation has entirely transitioned to hydrogen-fueled buses [97]. As Beijing is the host of the 2022 Winter Olympics, the ski competition area (i.e., Zhangjiakou) was replacing its hydrogen-fueled buses throughout the city to ensure green and low-carbon transportation for the event [98].
Datong and Lvliang have also used the hydrogen policy to promote regional hydrogen bus networks. In addition to being a pivotal coal-producing area, Datong is also rich in wind energy resources. With funding for the local hydrogen strategy, a hydrogen refueling station focused on hydrogen-rich tail gas purification and wind power hydrogen production was built to power four transportation lines for 100 buses in the urban area [99]. As Lvliang’s hydrogen strategy is linked to the Pengfei enterprise, the hydrogen fuel plan for public transport involves commuting routes between urban and rural areas. However, compared to Datong, Lvliang is still in the preliminary stage, which means that hydrogen buses and hydrogen refueling stations are not yet mature. And, this local hydrogen bus network is expected to be in operation by June 2023. To maximize the influence of the local hydrogen energy transition, the special government finance of Lvliang involves a procurement plan of powering 100 hydrogen-fueled buses, with an emphasis on local enterprises.
It is essential to emphasize the demonstration and research value of Shanxi Province’s exploration of hydrogen use in public transportation. Namely, the province has made an active attempt to reduce carbon usage in less developed areas of intensive fossil fuel resource extraction. Hydrogen-fueled public transportation improves the living environment and serves as an example for similar fossil energy areas to explore similar environmental and economic alternatives.

5.3. Decarbonization Innovation in the Iron and Steel Industry

The iron and steel industry has the most potential to apply hydrogen use. Namely, as a reducing agent, hydrogen can replace coking coal, which is essential for blast furnaces. European iron and steel enterprises led by HYBRIT have achieved application and promotion in the sector of hydrogen-reduced iron [100]. China has begun to involve similar technologies, with the difference that the source of hydrogen comes from the hydrogen-rich tail gas that is already available within the coal coke industry. Even though it is not as clean as green hydrogen, it is a realistic carbon reduction initiative in fossil resource regions, solving the issues of tail gas pollution and carbon emissions.
Due to the geographic concentration of the coal and coke industry and a large number of carbon reduction links, some energy enterprises in Shanxi Province cover the integrated coal-coking chemical iron and steel industries. Within these industries, hydrogen represents a link for both carbon reduction and transition. A typical representative of these industries is the Jinnan Steel Group, the largest private iron and steel chemical enterprise of Linfen in southern Shanxi, with an annual production of 8 million tons of iron, 10 million tons of steel, 3.15 million tons of coke, 600 million cubic meters of hydrogen, 450,000 tons of high-end chemical products and 1300 MW of photovoltaic power generated by 2021 [101]. However, three years ago, Jinnan Steel had no hydrogen and photovoltaic industry and was only a high energy-consuming steel and chemical enterprise. Due to the transition pressure and the need to protect production capacity and corporate profits, the enterprise began to explore the possibility of using hydrogen-reducing iron and renewable energy.
At present, Jinnan Steel purifies hydrogen by-products through the ethylene glycol that is produced by its chemical industry and then applies it to the smelting blast furnace shaft, where the iron ore particles are reduced with hydrogen acting as the reducing agent. The single blast furnace is enriched with 15,000 cubic meters of hydrogen per hour, thus reducing 30 kg of coke per ton of iron. With this enterprise, only three blast furnaces can save 200,000 tons of coke a year, reducing CO2 emissions by 500,000 tons [102]. By using hydrogen, the unit consumption of coke powder is reduced by 1 to 2 kg, while the annual CO2 emissions are further reduced by about 23,000 tons. The institutional structure of large state-owned steel enterprises in China makes it difficult to explore other investments. In comparison, as a private enterprise, Jinan Steel has enough flexibility to implement technical tests for hydrogen-reduced iron.
To transition to green hydrogen, Jinnan Steel has also explored renewable energy power generation channels and built a 1300 MW photovoltaic power generation project. With an annual power generation capacity of 1.65 billion degrees, Jinnan Steel has the most significant single photovoltaic power generation project approved by the Shanxi provincial government. On this basis, 20,000 standard square/hour PV hydrogen production and hydrogen storage projects will be built in 2022 [103]. This means that part of the green electricity produced during the day will be stored and used together with plus low-peak electricity to reach the demand for regular power supply and hydrogen production. The produced green hydrogen will also be used in the steel industry to achieve a zero-carbon change.
The above exploratory actions have several characteristics in common, including the combination of industrial advantages and regional features, the need for enterprise innovation, government support, projects designed according to local conditions, the use of an experimental exploration approach, and more emphasis on the effectiveness of individual projects. The most significant advantage of the experimental approach is the possibility of avoiding large-scale investment mistakes, as a single pilot project will not have a notable impact on the entire enterprise. However, this approach does have problems, including failing to account for hydrogen technical standards and carbon emission reduction benefits.
As a technology-intensive process, hydrogen and its derivatives have a reshaping effect on the value chain, supply chain, and production network. Shanxi Province has effectively implemented carbon reduction by promoting hydrogen in the transportation and steel sectors. It presented a sustainable approach for adjusting the traditional energy pattern, thus creating the foundation for the next stage in the national and international clean energy initiative.

6. Conclusions and Policy Implications

This paper has set out to examine an energy transition path of resource-based regions in China. It can contribute to a small but growing body of empirical research on the real opportunities of implementing green transitions in the same areas of other countries. The existing literature on hydrogen as a transition tool has mainly focused on green hydrogen with a comparably strong production and trade network, the economic potential for specific application fields, and even for exports of green technologies. Much less attention has been paid to fossil fuel resource-based areas.

6.1. Main Conclusions and Policy Implications

This paper found that Shanxi Province, a fossil fuel resource-based region, proposed a suitable model for balancing energy transition and economic stability. The region chose hydrogen as its tool to begin the sustainable evolution of coal-coking and other energy-intensive industries. This choice is not a coincidence, and hydrogen is not an end [104]. Hydrogen helps industries meet climate governance goals and assists developing countries in achieving carbon neutrality.
From a broader perspective, the findings of this paper highlight the particularity of selecting specific transition tools and the complex challenges of sustainable development in fossil resource-based areas. In the context of a developing country, such a strategic choice may be easier to achieve in a coal-based resource region. This paper reveals that in the traditional environment, transition and development-enhancing goals are rather difficult to achieve through large green infrastructure projects such as wind power and photovoltaic. This is largely because of the shortage of talent, backward technology, and a single economic structure in such areas, which can not be compared with economically developed areas or areas rich in renewable energy.
First, it must be pointed out that gray hydrogen is not the final choice but the phased choice in the window period of clean utilization of coal. Although gray hydrogen should not be encouraged as a suitable energy source, it is still better than the possible economic collapse caused by the complete closure of enterprises in the coal-producing area. This model emphasizes the importance of the transition in phases, i.e., after the process of hydrogen utilization, the plan advocates for the transition to blue hydrogen through CCUS technology in Shanxi Province.
Before this implementation of hydrogen in fossil fuel resource regions, hydrogen use was promoted solely in developed regions. For instance, Germany and Sweden focused on green hydrogen and electrolyzer technology, while Japan and South Korea were concerned with fuel cell vehicles and accessories. Even though China has encouraged the development of hydrogen industry chains, it did not focus on coal resource-based areas until Shanxi Province chose the hydrogen industry to explore and develop. Also, because the more emerging types of energy are more technical, the more difficult it is to control the cost and stability. In this context, driven by the coal transition, the local governments’ pursuit, and the sustainability of local enterprises, Shanxi Province explored a new application model with resource attributes centered around local conditions. This plan provides a reference for other resource-based regions with similar issues.
Second, this paper aimed to analyze the sustainability and value of the Shanxi Province approach, as the choice of hydrogen as a transition tool should become a gradually remarkable trend. At present, there is a global non-traditional phenomenon. As more fossil-dominated regions become eager to transition to cleaner energy, the more prominent they are in reducing carbon emissions compared to the affirmed climate leaders. For instance, Saudi Arabia and the UAE have begun the construction of large-scale photovoltaic power projects and are producing and exporting hydrogen. Furthermore, Russia has published instructions for hydrogen development.
Third, while we find evidence of benefits, these benefits cannot prove that hydrogen can be fully promoted without scruples, and macro-strategic requirements at the national level must be considered. China is still a developing country with uneven internal development, which cannot adopt exactly the same energy transition strategy as developed countries. The security of the energy supply is consistently a top priority in China’s energy transition, and Shanxi, as the main area of coal supply, is the core of supply security. The best option is to explore a smooth and mature transition plan without affecting energy supply and economic and social stability.

6.2. Future Research

Exploiting transition in resource-based areas is not unpopular, but more attention is paid to the justice of transition, economic impacts, and carbon emissions [105,106]. Hydrogen exists more in strategic choices at the national level than in regions. The research in this article was exploratory in nature, that is, the summary of the unscaled transition tool, using a perspective approach that sought to seek insights from projects with significant variation in the selected transition tool and local resource conditions. Future research should address these limitations by examining the generalisability of the research results. Therefore, an important question for future research is whether this transition tool can be replicated and how hydrogen projects can be carried out in areas with similar resource conditions.
Last but not least, due to the renewable energy resource constraints and the high cost of electrolyzers, green hydrogen has not yet reached the level of large-scale application. However, it is necessary to encourage the development of green hydrogen because hydrogen as a tool to promote energy transition is not a mere or occasional attempt but a competition with the technical advantage of the current industrial revolution. The development of gray hydrogen should be positioned as a short-term or temporary approach. Only then can we fight to obtain the transition time and have the ability to continue to explore the infinite proximity to green hydrogen. Thus, fossil resource-based areas should not be used up and abandoned, which would result in higher governance costs for most countries, but adjusted through a gradual and sustainable change rather than a one-step radical green revolution.

Author Contributions

Conceptualization, J.K. and R.Z.; validation, J.K., R.Z. and D.S.; investigation, W.L.; resources, D.S.; writing—original draft preparation, J.K. and R.Z.; writing—review and editing, J.K. and R.Z.; visualization, D.S.; supervision, D.S.; project administration, J.K.; funding acquisition, W.L. and D.S. All authors have read and agreed to the published version of the manuscript.

Funding

This research was undertaken as part of the Shanxi Development and Reform Commission (SDRC) Research Programme and funded by SDRC and the National Natural Science Foundation of China, grant number 72174137.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

No new data were created or analyzed in this study.

Conflicts of Interest

The authors declare no conflict of interest.

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Figure 1. Lobbying evolution logic of hydrogen industry plannings in Shanxi Province.
Figure 1. Lobbying evolution logic of hydrogen industry plannings in Shanxi Province.
Sustainability 15 12044 g001
Table 1. Statistics on the basic situation of hydrogen in Shanxi Industrial Park.
Table 1. Statistics on the basic situation of hydrogen in Shanxi Industrial Park.
Administrative RegionNumber of Industrial ParksManagement TypeNumber of Hydrogenation StationsNumber of Hydrogen Fuel Cell VehiclesHydrogen Production (Tons/Year)Hydrogen Source
Lvliang2Chemical Industry and Logistics846340,000Gray/Green
Linfen1Steel and Logistics320020,000Gray/Green
Jingzhong1Chemical Industry and Logistics18420,000Gray (Green Planning)
Changzhi1Coking and Logistics1155000Gray (Green Planning)
Yangquan1Coal Mine and Logistics1105000Gray (Green Planning)
Sources: Shanxi Development and Reform Commission’s collection of relevant industry data (not in public).
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Kou, J.; Li, W.; Zhang, R.; Shi, D. Hydrogen as a Transition Tool in a Fossil Fuel Resource Region: Taking China’s Coal Capital Shanxi as an Example. Sustainability 2023, 15, 12044. https://doi.org/10.3390/su151512044

AMA Style

Kou J, Li W, Zhang R, Shi D. Hydrogen as a Transition Tool in a Fossil Fuel Resource Region: Taking China’s Coal Capital Shanxi as an Example. Sustainability. 2023; 15(15):12044. https://doi.org/10.3390/su151512044

Chicago/Turabian Style

Kou, Jingna, Wei Li, Rui Zhang, and Dingxiong Shi. 2023. "Hydrogen as a Transition Tool in a Fossil Fuel Resource Region: Taking China’s Coal Capital Shanxi as an Example" Sustainability 15, no. 15: 12044. https://doi.org/10.3390/su151512044

APA Style

Kou, J., Li, W., Zhang, R., & Shi, D. (2023). Hydrogen as a Transition Tool in a Fossil Fuel Resource Region: Taking China’s Coal Capital Shanxi as an Example. Sustainability, 15(15), 12044. https://doi.org/10.3390/su151512044

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