Analysis Report on China’s Hydrogen Industry in 2023

China has emerged as the world leader in hydrogen production, with its hydrogen output projected to surpass 100 million tons by 2060. As per the report by the China Hydrogen Energy Alliance, China’s hydrogen production was 33.42 million tons in 2020. Following the “dual carbon” goals set in 2020, the hydrogen industry gained momentum. Under the 2030 carbon peak vision, annual hydrogen demand in China is expected to reach 37.15 million tons, accounting for about 5% of terminal energy consumption. By 2060, under the carbon neutrality vision, annual hydrogen demand is estimated to increase to around 130 million tons, representing approximately 20% of terminal energy consumption, with green hydrogen accounting for about 100 million tons.

China has achieved significant progress in hydrogen technology across its entire value chain, including production, storage, transportation, fuel cells, and system integration. Hydrogen production is currently dominated by fossil fuels, but green hydrogen, produced through renewable energy-powered electrolysis, is expected to become mainstream as renewable energy costs decrease.

High-temperature gaseous hydrogen storage is predominant, while organic liquid and solid-state hydrogen storage technologies are in early stages of industrialization. Demonstrative hydrogen applications are mainly concentrated around industrial by-product hydrogen and renewable energy-based hydrogen production, often transported using long tube trailers.

China has built 358 hydrogen refueling stations by the end of 2022, making it the global leader, with 245 stations operational. Guangdong leads in station count (47), followed by Shandong (27) and Jiangsu (26). China’s fuel cell technology and core components have reached international standards, though some materials and parts are still imported. The growing number of companies entering the fuel cell sector is intensifying competition.

Green hydrogen holds substantial low-carbon substitution potential in methanol, synthetic ammonia, and petrochemical products, aiding the chemical industry in achieving carbon neutrality. With the implementation of carbon-related policies, hydrogen-based green chemical production is becoming a significant area for capacity transformation. The renewable hydrogen application in the chemical industry is projected to be highest in methanol production by 2030, followed by synthetic ammonia and petrochemical sectors.

China’s hydrogen industry has experienced a financing peak in recent years. By June 30, 2023, over 240 domestic hydrogen companies secured funding, with more than 471 financing events and 28.4 billion yuan invested involving over 300 institutions. The number of financing events increased dramatically in 2021 (91 events, up 102.2%) and slightly decreased in 2022 (71 events, down 22.2%).

Investment rounds predominantly focused on early stages (seed, angel, and Series A), accounting for 74.5% of events from 2018 to H1 2023. Growth stage events (Series B and C) accounted for 20.0%, and later-stage events (Series D, E, Pre-IPO) made up 5.4%.

China’s hydrogen industry is in an early stage of development, with green hydrogen growing rapidly. A comprehensive value chain covering production, storage, transportation, utilization, and application of hydrogen has been established, yet the related technologies and markets are still in their early industrialization stages. With increasing renewable energy capacity, decreasing green hydrogen production costs, rising decarbonization demand, and accelerating technological innovations, the hydrogen industry is poised for rapid development.

Innovation is accelerating in hydrogen production (alkaline electrolyzers and proton exchange membrane electrolysis), storage (high-pressure gaseous storage), and fuel cells (proton exchange membranes, catalysts, and carbon papers). The hydrogen industry is expected to experience an explosive period of growth by 2025. The period from 2021 marked market cultivation and initial product technology development. The current phase is characterized by project demonstrations and technological breakthroughs. The industry generally predicts that the hydrogen sector will explode in development by 2025, and by around 2030, with declining renewable energy costs, improved technologies, and evolving policies and standards, the hydrogen industry will witness even greater market expansion. Sectors like chemicals are likely to be prime scenes for green hydrogen applications.

Currently, over 60% of China’s hydrogen is used in industrial sectors such as chemicals, primarily produced from fossil fuels. With carbon neutrality goals, sectors like chemicals, steel, and heavy transport have room for green hydrogen substitution. While sectors like transportation, power, and construction are yet to scale, chemicals and refining may become the primary grounds for green hydrogen applications, driving the development and cost reduction of the green hydrogen industry.