Hydrogen Emerges as Cornerstone of China’s Energy Strategy: Progress and Challenges
As China strives to meet its ambitious “carbon peak” and “carbon neutrality” targets, the strategic importance of hydrogen energy has steadily gained recognition. Under the “dual carbon” strategy, hydrogen’s significance is on the rise, cemented by recent government initiatives and policies.
In March 2022, China’s National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) released the “14th Five-Year Plan for Modern Energy System” and the “Medium- and Long-Term Development Plan for the Hydrogen Energy Industry (2021-2035),” firmly positioning hydrogen as a vital component of the nation’s energy transformation strategy.
The “Hydrogen Technology and Application” sector, along with various hydrogen utilization fields, were listed in the encouraged category of the “Industrial Structure Adjustment Guidance Catalog” issued by NDRC in 2023 (draft for public opinion). This includes a comprehensive range of technologies, from efficient hydrogen production, storage, and transportation to various end-use applications, such as hydrogen-fueled vehicles and clean alternative fuel stations.
The growing prominence of hydrogen in China’s future energy landscape can be attributed to its role as a vital medium to support the large-scale development of renewable energy, facilitate deep decarbonization in transportation, industry, and construction, and provide an optimal fuel choice in sectors where electrification is challenging. With China being the world’s largest hydrogen consumer and facing substantial carbon reduction pressure, hydrogen energy holds immense potential in the country’s energy transition and industrial decarbonization efforts.
China’s “Green Hydrogen First” strategy focuses on two main directions: decarbonizing existing hydrogen applications and addressing areas where electrification is not feasible.
The hydrogen industry is currently in its infancy, grappling with cost as a pivotal constraint. However, over the past two years, progress has been witnessed across the hydrogen value chain due to advancing technology and supportive government policies.
In hydrogen production, the deployment of renewable energy-based hydrogen demonstration projects has led to significant growth in China’s electrolyzer shipments. Between 2020 and 2022, shipments increased from 185 MW to 350 MW to 800 MW, reflecting a remarkable compound annual growth rate (CAGR) of 88.8%. Notably, advancements in alkaline electrolyzer technology are driving down costs, with some products already achieving direct current consumption below 4.0 kWh/Nm³ of hydrogen. The rapid development of renewable energy sources like solar and wind power also contributes to reducing electricity costs.
In hydrogen transportation, a breakthrough has been achieved with the inclusion of the “West Hydrogen to East” hydrogen pipeline project in China’s national energy network plan. This groundbreaking project will transport hydrogen over a distance of more than 400 kilometers, addressing supply-demand imbalances and serving as a model for future cross-regional hydrogen transportation networks.
The distribution segment has also seen impressive growth, with the number of hydrogen refueling stations in China reaching 351 by the first half of 2023, representing a global share of 32%.
Despite these advancements, cost remains a significant challenge for the hydrogen industry’s widespread application. “Green hydrogen” production costs still exceed those of fossil fuel-derived hydrogen in some sectors. However, as the industry accelerates, it is driving technological progress and cost reduction.
In conclusion, China’s hydrogen strategy is gaining traction as a crucial component of its clean energy transition. While progress has been made in various sectors of the hydrogen value chain, cost constraints remain a significant hurdle. As the industry continues to evolve, rational evaluation of its present state will be essential to achieving China’s ambitious carbon reduction goals and fostering sustainable hydrogen adoption.