(Yicai) Aug. 12 -- China has announced its first batch of nine pilot projects for liquefied green fuels as part of efforts to meet environmental targets.

The projects, which use renewable energy to produce e-fuels, include five for methanol, three for ammonia, and one for ethanol, according to the National Energy Administration's recent notice. Eight are located in northeastern China, known for abundant renewable resources, while one is in the country’s economically developed east.

The initiative can be seen as part of China's climate goals since the nation aims to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060.

Many of these projects use green hydrogen as a raw material to produce green chemicals. The process starts with generating green hydrogen from electricity supplied by solar or wind farms, which is then used to make methanol, ethanol, and synthetic ammonia -- replacing fossil-based raw materials used in traditional production. One example is Jilin Electric Power’s project in Da’an, Jilin province, which taps local wind and photovoltaic resources to produce green hydrogen and ammonia.

An investor from the photovoltaic industry told Yicai that major hydrogen-based energy projects such as those on the list are pioneering a new model for on-site consumption of green power. Consequently, future demand for green hydrogen, methanol, and ammonia will directly influence these regions’ ability to utilize wind and photovoltaic capacity.

Weak market demand remains the biggest obstacle to development. A report from energy and commodity intelligence firm JLC noted that although new green ammonia projects by Jilin Electric and Envision Technology Group, both of which began production last month, have secured supply contracts at home and abroad, a lot of the planned capacity of similar projects still lacks buyers.

High costs also hinder market expansion. Bo Cerup-Simonsen, chief executive of the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping, told Yicai that green methanol’s calorific value is lower than fossil fuels, making it price-competitive only if it falls to USD300 per ton, well below current production costs.

Cost reduction is therefore a key industry goal. Most of the newly announced projects plan to schedule electricity use during off-peak hours to control expenses, Yicai observed.

Editors: Tang Shihua, Emmi Laine