Driven by the Dual Carbon Strategy, the Hydrogen Energy Industry May Enter a Fast Track of Development by 2035 [New Energy Summit]

At the 2025 (10th) New Energy Industry Expo - Hydrogen Energy Development Forum, hosted by SMM Information & Technology Co., Ltd., Li Bingyang, Senior Partner and General Manager of the New Energy Division at Hejun Consulting, shared insights on the topic "Observations on China's Hydrogen Energy Trends in 2025." The 2024 Government Work Report first proposed accelerating the development of the emerging hydrogen energy industry; in the 2025 local Two Sessions, 21 out of 31 provincial-level administrative regions included the development of hydrogen energy in their government work reports. The national Energy Law was officially promulgated and implemented, marking the beginning of a new era for hydrogen as a future energy source, but the industry still faces the awkward situation of being praised but not widely adopted.

On January 1, 2025, China's first Energy Law of the People's Republic of China (hereinafter referred to as the Energy Law) came into effect. The Energy Law explicitly includes hydrogen energy in the energy management system, establishing its status as an energy source at the legal level for the first time.

An overview of the hydrogen energy industry development:

What is hydrogen energy:

Hydrogen energy is a clean, efficient, safe, and sustainable secondary energy source that can be obtained through various pathways, including primary energy, secondary energy, and industrial processes. Hydrogen can be used as a raw material in transportation, metal refining, oil refining, and ammonia production. It can also provide large-scale, long-term energy storage for the power sector and offer auxiliary grid services such as emergency, load tracking, and regulation reserves.

Development history: China's research on hydrogen energy began in the 1950s, with the Dalian Institute of Chemical Physics of the Chinese Academy of Sciences being a pioneer in domestic hydrogen energy research. As a highly promising clean energy source, China has issued a series of strong policies to fully support hydrogen energy innovation and sustainable industrial development, clarifying its important position in the energy system. In the medium to long term, green hydrogen will be the main direction.

Global scale: Currently, global hydrogen production has surpassed the one hundred million mt mark, but gray hydrogen accounts for the majority, with green hydrogen making up less than 1%. Major international energy organizations predict that green hydrogen has enormous potential, expected to exceed blue hydrogen by 2050. Overall, hydrogen production is conservatively estimated to exceed 500 million mt, and optimistically, it could reach 800 million mt, driving a market size of trillions of US dollars, with the highest share in the global energy structure potentially reaching 22%.

According to IEA data, global hydrogen production in 2021 was about 94 million mt, mostly gray hydrogen, with green hydrogen accounting for less than 1%. However, according to major international energy organizations, by 2050, global green hydrogen production will far exceed blue hydrogen. For example, the International Energy Agency predicts that global green hydrogen production will reach 323 million mt by 2050, 58% higher than blue hydrogen production. BNEF forecasts that global hydrogen production will reach nearly 800 million mt by 2050, all of which will be green hydrogen.

According to Goldman Sachs' report, the total size of the global hydrogen market in 2022 was approximately $12.5 billion, and it is expected to double by 2030, reaching a trillion-dollar market by 2050. In terms of the share of hydrogen in the total global energy demand by 2050, the Hydrogen Council and BNEF predict it will reach 22%, while other institutions' predictions range from 12% to 18%. Major energy experts consistently believe that the share of hydrogen will see a qualitative leap, with unlimited potential.

Core hydrogen energy industry chain: The upstream of the hydrogen energy industry chain involves hydrogen production, the midstream involves hydrogen storage, transportation, and refueling, and the downstream involves comprehensive utilization of hydrogen. From an industrial perspective, the hydrogen energy industry chain is long, involving multiple sectors such as energy, chemicals, and transportation.

At present, it is mainly driven by policy, resulting in demonstration projects. In the future, with the maturation of technology and large-scale application, the cost of the entire industry chain will rapidly decrease, leading to full commercialization of the hydrogen energy industry. The rapid development of the hydrogen energy industry will drive the rapid growth of upstream and downstream parts suppliers, raw material suppliers, equipment manufacturers, manufacturers, and service providers in the hydrogen energy industry chain.

Panorama of the hydrogen energy industry: Typical companies in the five major segments of the hydrogen energy industry chain

Hydrogen production: Electrolysis-based hydrogen production is represented by SPIC, LONGi, and Sungrow, while by-product hydrogen production from industrial processes is represented by Meijin Energy and Huachang Chemical, and fossil fuel-based hydrogen production is represented by PetroChina and Oriental Energy.

Hydrogen storage and transportation: Gaseous hydrogen storage and transportation are represented by CIMC Enric and Sinoma Science & Technology, while liquid hydrogen storage and transportation are represented by XueRen, Zhongke Fuhai, and ShenLeng. Hydrogen refueling: Hydrogen refueling station equipment manufacturing is represented by Jingcheng Machinery & Electric and ZK, while hydrogen refueling station construction and operation are represented by Sinopec, Botao, and Meijin Energy. Energy conversion: Yihuatong, Mingtian Hydrogen, and Weichai are representative companies. Hydrogen utilization: CRRC, CSSC, and Baowu Steel are representative companies.

Upstream hydrogen production: Three types of hydrogen production routes coexist—fossil fuel-based, by-product from industrial processes, and electrolysis-based. Among these, fossil fuel-based hydrogen production is constrained by "low cost" in the short term, while electrolysis-based hydrogen production leads in the long term due to its "sustainability."

Three hydrogen production routes: "Cost" constrains in the short term, while "sustainability" leads in the long term. Hydrogen production methods mainly include fossil fuel-based, by-product from industrial processes, and electrolysis-based.

Fossil fuel-based hydrogen production uses coal or natural gas as raw materials for traditional hydrogen production, with mature technology and the lowest cost, but high carbon emissions. Fossil fuels are non-renewable, limiting capacity expansion. Existing capacity will gradually integrate CCUS technology to reduce emissions.

By-product hydrogen from industrial processes is obtained through chemical processes such as chlor-alkali and light hydrocarbon utilization, with relatively low costs. However, the scale of production depends on the scale of the main product, limiting expansion, and it can serve as a supplementary hydrogen source.

Electrolysis-based hydrogen production uses the electrolysis of water to produce hydrogen. Renewable electricity-based hydrogen, known as "green hydrogen," is a zero-carbon, sustainable "ultimate route," but currently, cost remains a bottleneck for its widespread adoption. Large-scale application requires cost reduction across all links in the industry chain.

Midstream hydrogen storage and transportation: Depending on the state of hydrogen storage, there are three main transportation methods—gaseous, liquid, and solid. In the short term, long tube trailers are the primary method, while in the medium term, hydrogen transportation will combine high-pressure, liquid hydrogen tanks, and pipeline transportation. In the long term, onboard hydrogen storage will adopt technologies with higher hydrogen storage density and safety.

Midstream hydrogen storage and transportation: Hydrogen storage and transportation is a critical link in the hydrogen energy industry chain, directly constraining downstream hydrogen applications. There are many market participants, and the technical barriers are relatively high.

In terms of high-pressure hydrogen storage cylinders, leading international companies include Hexagon, NPROXX, US CPI, AP, and Faurecia. Domestic companies such as Zhejiang Juhua and Kaiyuan Weiken can produce hydrogen storage cylinders, and companies like Zhejiang LanNeng and Dongfang Boiler produce station-use hydrogen storage cylinder groups.

In terms of liquid hydrogen storage and transportation, the US, Europe, and Japan have relatively standardized standards and regulations for liquid hydrogen storage and use, including hydrogen refueling stations, and the liquid hydrogen development industry chain is relatively complete. Internationally, about one-third of hydrogen refueling stations are liquid hydrogen stations. China has the capability to produce liquid hydrogen storage tanks but is still catching up with international advanced levels.

Midstream hydrogen refueling stations: In 2024, the number of hydrogen refueling stations constructed reached 540, an increase of 66 compared to 2023, covering 31 provinces (municipalities, autonomous regions). With the widespread application of hydrogen and hydrogen fuel cell vehicles, the hydrogen refueling station industry will have broader prospects for development. The construction of hydrogen refueling stations is mainly led by Sinopec, PetroChina, and Hopetop, with Sinopec accounting for nearly 25% of the market. The top five hydrogen refueling station equipment manufacturers account for about 90% of the market, with Guofu Hydrogen ranking first with a 28.4% market share.

Downstream - Fuel cell systems:

Regarding the fuel cell system industry chain, the upstream focuses on core materials such as proton exchange membranes and gas diffusion layers, the midstream centers on the integration of fuel cell stack systems, and the end-use applications are primarily in the transportation sector.

Downstream - Fuel cell vehicles:

The market concentration of fuel cell vehicle manufacturers is relatively dispersed. In 2024, BAIC Foton ranked first in sales, with a market share of 15.5%, and the top three companies accounted for 39.1% of the market. Commercial vehicles have a significant advantage, with cumulative promotion volumes ranking first globally.

In 2022, the market share of the top five fuel cell vehicle manufacturers (CR5) was 43%, and from January to June 2023, CR5 was 44%, indicating a slight increase in concentration. Specifically, during the period from January to June 2023, Foshan Feichi's cumulative sales accounted for 11%, ranking first, followed by Dongfeng Motor with 10%. Seven other vehicle manufacturers, including Xiamen King Long, Shaanxi Auto, Golden Dragon, Zhengzhou Yutong, BAIC Foton, and Nanjing King Long, had cumulative sales shares ranging from 4% to 8%, showing a relatively dispersed performance.

In 2024, BAIC Foton ranked first in sales, with a market share of 15.5%, and the top three companies accounted for 39.1% of the market. Commercial vehicles have a significant advantage, with cumulative promotion volumes ranking first globally.

Analysis of capital market investment and financing situation: Capital market industry index:

The hydrogen energy index has shown a rollercoaster trend in recent years, hitting a low in February 2020. With the support of policies, technology, and capital, the trend gradually strengthened, reaching a peak value exceeding 1,200. At the beginning of 2022, the index declined rapidly due to the impact of the pandemic, with weak market demand. Thanks to favorable policies, various links in the industry chain gradually recovered. Industry financing situation:

In 2023, the domestic hydrogen energy industry's financing was in full swing. Apart from the "unicorn" State Hydrogen Technology raising 4.5 billion yuan, the established company Guohong Hydrogen successfully listed on the Hong Kong Stock Exchange, raising 1.456 billion yuan, laying a solid foundation for diversified business development. In terms of financing directions, hydrogen fuel cells, hydrogen production equipment, and hydrogen storage and transportation equipment remain the focus of market attention.

In 2023, although no domestic hydrogen energy company achieved the same "unicorn" status as State Hydrogen Technology, which raised 4.5 billion yuan, 38 hydrogen energy companies completed 47 rounds of financing, raising over 4 billion yuan. In addition to Guohong Hydrogen's successful listing on the Hong Kong Stock Exchange, raising 1.456 billion Hong Kong dollars, Sungrow Hydrogen's year-end financing exceeded 660 million yuan.

Several companies completed two or more rounds of financing in 2023, with Shanghai Carbon Edge, Hydrogen Innovation, Hydrogen Easy Energy, and Guoke Lingxian completing two rounds each, and Zhongke Hydrogen Easy and Suzhou Fortune completing three rounds, with very close intervals between the rounds, highlighting their strong fundraising capabilities.

From a financing direction perspective, hydrogen fuel cells, hydrogen production equipment, and hydrogen storage and transportation equipment remain the key areas of financing and investment.

Industry financing situation: 2024 was an extremely challenging year for the entire hydrogen energy industry, but the successful listings of Reshaping Energy and Guofu Hydrogen on the Hong Kong Stock Exchange injected confidence and boosted morale for the industry's continued development. Throughout the year, 67 companies completed a total of 72 rounds of financing, indicating that the capital's enthusiasm for investing in the hydrogen energy industry chain did not diminish but increased. Industry M&A investment situation:

In 2023, the number of M&A transactions in the hydrogen energy industry was 57, maintaining the highest level in four years. However, the total transaction amount decreased significantly by about 66% compared to 2022, and company valuations gradually returned to rational levels as the capital market cooled down. In terms of investor types, the proportion of PE/VC funds has been increasing over the past four years, reaching 82% in 2023. Conversely, the proportion of state-owned enterprises decreased, and they were more involved in the greenfield development and construction of hydrogen energy projects rather than equity investment and M&A.

Assessing the Development Trends of the Hydrogen Energy Industry

Hydrogen Energy Development Trends:Driven by the dual-carbon strategy, the hydrogen energy industry is expected to complete the layout of the technology chain and industry chain by 2030, entering a fast track of development by 2035.

Technological Innovation:Hydrogen energy has achieved a preliminary breakthrough from "0 to 1" in technology, still in the stage of commercial promotion. With the support of policies and demand, it is recommended to further focus on the core links of the industry chain.

Leading enterprises with a full industry chain layout,forming business linkages from hydrogen production to hydrogen utilization, achieving cost reduction with the support of national policies;

leading enterprises related to the core components of fuel cell vehicles. By occupying market share in the early stage, obtaining more usage feedback, thereby driving technological innovation,gaining first-mover advantage, forming a virtuous cycle;

companies involved in the R&D and production of core components of fuel cell vehicles,the increase in the localization rate of core components can reduce the production cost of fuel cells, promote the progress of fuel cell vehicle promotion, and accelerate the commercialization process of fuel cell vehicles.

New Added Value of the Industry Chain:National policy support and increasing market demand promote the upward growth of the value of each link in the industry chain, with the incremental value of end-use applications reaching trillions, the market space is huge and there are many investment opportunities, the demand for electrolyzers in the hydrogen production link remains robust in the medium and long term.

Market Space:The market size of the segmented fields of the fuel cell industry chain is huge, the market size will reach 34.3 billion yuan by 2025.

According to the "Energy-saving and New Energy Vehicle Technology Roadmap 2.0" plan, the ownership of fuel cell vehicles in China will reach 100,000 FCVs by 2025, based on the compound annual growth rate from 2021 to 2025, the sales of fuel cell systems are expected to be about 45,322 units in 2025, with a CAGR of about 131.21% from 2021 to 2025;

with the promotion of fuel cells in commercial vehicles such as medium and heavy trucks, the demand for large power fuel cells increases, based on the trend of the average installed power of fuel cells from 2016 to 2021, the average power of fuel cell systems is expected to reach 161 kW by 2025, driven by the increase in single vehicle installed power and fuel cell vehicle sales, the annual sales power of fuel cell systems is expected to be about 7,312 MW in 2025, with a CAGR of about 162.57% from 2021 to 2025; based on the ownership and single vehicle installed power, the cumulative installed scale of vehicle fuel cell systems will reach 14,401 MW by 2025;

according to the "Energy-saving and New Energy Vehicle Technology Roadmap 2.0" plan for ownership and DOE's prediction of the cost reduction channel for large-scale fuel cell systems, the price of fuel cell systems is expected to drop to 2,384 yuan/kW by 2025, corresponding to a vehicle fuel cell system scale of 34.3 billion yuan in 2025, with a CAGR of nearly 90% from 2021 to 2025.

Penetration Rate of Hydrogen Fuel Cell Vehicles: The market penetration rate of hydrogen fuel cell vehicles will gradually increase in the future, boosting the expansion of production and application scale.

The main way to reduce the cost of hydrogen fuel cell vehicles is to expand the scale of mass production. For enterprises:

first, by increasing the procurement volume of key components such as membrane electrode assemblies, reducing the unit procurement price;

second, improving the automation and intelligence level of production lines, reducing labor costs;

third, improving the capacity utilization rate of production equipment, such as automatic stacking equipment;

fourth, using the experience of mass production, seeking lightweight and low-cost alternatives, reducing safety design redundancy, effectively reducing the use of raw materials, thereby reducing costs.

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