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 Industry Development Forum hosted by SMM Information & Technology Co., Ltd. (SMM), Bingyang Li, Senior Partner and General Manager of the New Energy Division at Hejun Consulting, shared insights on the topic "Observing China's Hydrogen Energy Trends in 2025."

The 2024 Government Work Report first proposed accelerating the development of the emerging frontier hydrogen energy industry. In the 2025 local Two Sessions, 21 out of 31 provincial-level administrative regions included hydrogen energy development in their government work reports.

The National Energy Law was officially promulgated and implemented, marking the beginning of a new era for hydrogen energy as a future energy source. However, the industry still faces the challenge of "high praise but low adoption."

Starting January 1, 2025, China's first Energy Law of the People's Republic of China (hereinafter referred to as the "Energy Law") will officially come into effect. The Energy Law explicitly incorporates hydrogen energy into the energy management system, establishing its status as an energy source from a legal perspective for the first time.

Overview of the Hydrogen Energy Industry Development Landscape

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

Development History: China's research on hydrogen energy began in the 1950s, with the Dalian Institute of Chemical Physics under the Chinese Academy of Sciences being a pioneer in domestic hydrogen energy research. As one of the most promising clean energy sources, China has introduced a series of robust policies to fully support hydrogen energy technological innovation and sustainable industrial development, clearly defining its significant role in the energy system, with green hydrogen as the primary focus in the medium to long term.

Global Scale: Currently, global hydrogen production has surpassed the 100 million mt threshold, but gray hydrogen dominates, with green hydrogen accounting for less than 1%. Major international energy organizations predict significant development potential for green hydrogen, which is expected to surpass blue hydrogen by 2050. Overall hydrogen production is conservatively estimated to exceed 500 million mt, with optimistic projections nearing 800 million mt, driving a trillion-dollar market size and potentially accounting for up to 22% of the global energy mix.

According to IEA data, global hydrogen production in 2021 was approximately 94 million mt, primarily gray hydrogen, with green hydrogen accounting for less than 1%. However, major international energy organizations predict that by 2050, global green hydrogen production will far exceed blue hydrogen.

For instance, the International Energy Agency forecasts that global green hydrogen production will reach 323 million mt by 2050, 58% higher than blue hydrogen production. BloombergNEF predicts that global hydrogen production will reach nearly 800 million mt by 2050, all of which will be green hydrogen.

According to a Goldman Sachs report, the global hydrogen market size was approximately $125 billion in 2022, is expected to double by 2030, and reach a trillion-dollar market by 2050.

In terms of hydrogen's share in global energy demand by 2050, the Hydrogen Council and BloombergNEF predict it will reach 22%, while other organizations estimate values between 12% and 18%. Leading energy institutions unanimously agree that hydrogen's share will achieve a qualitative leap, showcasing its immense potential.

Core Hydrogen Energy Industry Chain: The hydrogen energy industry chain consists of upstream hydrogen production, midstream hydrogen storage and transportation, and downstream comprehensive utilisation of hydrogen. From an industrial perspective, the hydrogen energy industry has a long chain, involving multiple sectors such as energy, chemicals, and transportation.

Currently, policy-driven demonstration projects dominate. In the future, as technology matures and large-scale applications emerge, the entire industry chain's costs will rapidly decline, leading to the full commercialisation of the hydrogen energy industry. The rapid development of the hydrogen energy industry will inevitably drive the growth of upstream and downstream parts suppliers, raw material providers, equipment manufacturers, producers, and service providers within the hydrogen energy industry chain.

Panorama of the Hydrogen Energy Industry: Five Key Segments and Representative Enterprises in the Hydrogen Energy Industry Chain

Hydrogen Production: Electrolytic hydrogen production is represented by SPIC, LONGi Green Energy, and Sungrow. Industrial by-product hydrogen production is represented by Meijin Energy and Huachang Chemical. Fossil energy 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 Technology. Liquid hydrogen storage and transportation are represented by Snowman Co., Sinochem Fuhae, and Deepcold Co.

Hydrogen Refueling: Hydrogen refueling station equipment manufacturing is represented by Jingcheng Machinery and Supcon. Hydrogen refueling station construction and operation are represented by Sinopec, Botao Co., and Meijin Energy.

Energy Conversion: Representative enterprises include Yihuatong, Tomorrow Hydrogen, and Weichai.

Hydrogen Utilisation: Representative enterprises include CRRC, China State Shipbuilding Corporation, and China Baowu Steel Group.

Upstream Hydrogen Production: The three hydrogen production routes—fossil fuel hydrogen production, industrial by-product hydrogen, and electrolytic hydrogen production—coexist. Fossil fuel hydrogen production is "cost-effective" in the short term but constrained, while electrolytic hydrogen production is "sustainable" and leads in the long term.

Three Hydrogen Production Routes: "Cost-effective" in the short term, "sustainable" in the long term. Hydrogen production methods mainly include fossil fuel hydrogen production, industrial by-product hydrogen, and electrolytic hydrogen production.

Fossil fuel hydrogen production is a traditional method using coal or natural gas as raw materials for reduction hydrogen production. It is technologically mature and the most cost-effective but has high carbon emissions. Additionally, fossil fuels are non-renewable, limiting capacity expansion. Existing capacity will gradually integrate CCUS technology to reduce emissions.

Chemical by-product hydrogen is obtained as a by-product from chemical processes such as chlor-alkali and light hydrocarbon utilisation. It is relatively low-cost but limited by the scale of the main product's production, offering limited expansion potential and serving as a supplementary hydrogen source.

Electrolytic hydrogen production involves the electrolysis of water to produce hydrogen. Hydrogen produced using renewable electricity is called "green hydrogen," which is a zero-carbon, sustainable "ultimate route." However, its current cost remains a bottleneck for widespread adoption, and its large-scale application requires cost reductions across the industry chain.

Midstream Hydrogen Storage and Transportation: Depending on the storage state, hydrogen transportation methods include gaseous, liquid, and solid-state transportation. In the short term, long-tube trailers dominate. 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 higher-density and safer storage technologies.

Midstream Hydrogen Storage and Transportation: Hydrogen storage and transportation are critical links in the hydrogen energy industry chain, directly constraining downstream hydrogen applications. The market has many participants, and technical barriers are relatively high.

In terms of high-pressure hydrogen storage cylinders, leading international companies include HeXagon, NPROXX, US-based CPI, AP, and Faurecia. Domestically, Zhejiang Juhua and Kaiyuan Weike can produce hydrogen storage cylinders, while Zhejiang Lanneng and Dongfang Boiler manufacture station-use hydrogen storage cylinder sets.

In liquid hydrogen storage and transportation, the US, Europe, and Japan have relatively standardised regulations and complete industry chains from storage to usage, including hydrogen refueling stations. Internationally, nearly 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 leading levels.

Midstream Hydrogen Refueling Stations: In 2024, the number of hydrogen refueling stations built reached 540, an increase of 66 compared to 2023, covering 31 provinces (municipalities and autonomous regions). With the widespread application of hydrogen energy and hydrogen fuel cell vehicles, the hydrogen refueling station industry has broader development prospects. Hydrogen refueling station construction is led by Sinopec, PetroChina, and Houpu Co., with Sinopec accounting for nearly 25%. The top five hydrogen refueling station equipment manufacturers (CR5) account for approximately 90%, with Guofu Hydrogen Energy ranking first with a market share of 28.4%.

Downstream - Fuel Cell Systems: In the fuel cell system industry chain, the upstream focuses on core materials such as proton membranes and gas diffusion layers. The midstream core lies in fuel cell stack system integration, while the transportation sector accounts for the largest share in end-use applications.

Downstream - Fuel Cell Vehicles: The fuel cell vehicle market is relatively fragmented. In 2024, BAIC Foton ranked first in sales, with a market share of 15.5%. The top three companies accounted for 39.1% of the market, with a strong advantage in commercial vehicles, achieving the world's highest cumulative promotion volume.

In 2022, the top five companies (CR5) in fuel cell vehicle sales held a market share of 43%, which increased to 44% in January-June 2023, indicating a rise in concentration. Specifically, during January-June 2023, Foshan Feichi's fuel cell vehicle sales accounted for 11%, ranking first, followed by Dongfeng Motor at 10%. Seven automakers, including Xiamen King Long, Shaanxi Auto, King Long United, Zhengzhou Yutong, BAIC Foton, and Nanjing King Long, each accounted for 4%-8% of cumulative sales, showing relatively dispersed performance.

In 2024, BAIC Foton ranked first in sales, with a market share of 15.5%. The top three companies accounted for 39.1% of the market, with a strong advantage in commercial vehicles, achieving the world's highest cumulative promotion volume.

Analysis of Capital Market Investment and Financing Trends

Capital Market Industry Index: The hydrogen energy index has shown a "roller-coaster" trend in recent years. After hitting a low in February 2020, it gradually strengthened with the support of policies, technology, and capital, reaching a peak of over 1,200. In early 2022, the index declined rapidly due to weak market demand caused by the "pandemic." However, thanks to favorable policies, the industry chain gradually "recovered."

Industry Financing Situation: In 2023, the domestic hydrogen energy industry experienced "in full swing" financing activity. Apart from the "unicorn" Guohydrogen Technology securing 4.5 billion yuan in financing, Guohong Hydrogen Energy successfully raised 1.456 billion yuan through its IPO on the Hong Kong Stock Exchange, laying a solid foundation for diversified business development. Hydrogen fuel cells, hydrogen production equipment, and hydrogen storage and transportation equipment remained key areas of market focus.

Although no company in the domestic hydrogen energy industry in 2023 achieved financing as significant as Guohydrogen Technology's 4.5 billion yuan, 38 companies conducted 47 financing rounds, raising over 4 billion yuan. In addition to Guohong Hydrogen Energy's successful IPO raising 1.456 billion yuan, Sungrow Hydrogen Energy secured over 660 million yuan in year-end financing.

Several companies completed two or more financing rounds in 2023, including Shanghai CarbonTech, Hydrogen New Technology, Hydrogen Easy Energy, and Guoke Lingxian, which conducted two rounds of financing. Zhongke Hydrogen Easy and Suzhou Fucheng completed three rounds of financing, with very short intervals between rounds, highlighting their strong capital attraction.

In terms of financing direction, hydrogen fuel cells, hydrogen production equipment, and hydrogen storage and transportation equipment remain the focus of financing and investment.

Industry Financing Situation: 2024 was an extremely challenging year for the entire hydrogen energy industry. However, the successful IPOs of Re-Fire Energy and Guofu Hydrogen Energy on the Hong Kong Stock Exchange injected confidence and boosted morale for the industry's continued development. Throughout the year, capital investment in the hydrogen energy industry chain increased rather than decreased, with 67 companies completing 72 financing rounds.

Industry Mergers and Acquisitions:

In 2023, the hydrogen energy industry recorded 57 merger and acquisition transactions, maintaining the highest level in four years. However, the total transaction value decreased significantly by approximately 66% compared to 2022, and company valuations gradually returned to rational levels as the capital market cooled. In terms of investor types, the proportion of PE/VC funds has increased annually over the past four years, reaching 82% in 2023. In contrast, the share of state-owned enterprises declined rapidly, appearing more in greenfield development and construction of hydrogen energy projects rather than equity investment and mergers.

Analysis of Hydrogen Energy Industry Development Trends

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 development track 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 use, achieving cost reduction under national policy support;

leading enterprises related to the core components of fuel cell vehicles. By occupying market share in the early stage, obtaining more usage feedback, thereby promoting 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 in 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 in 2025;

according to the "Energy-saving and New Energy Vehicle Technology Roadmap 2.0" plan for ownership and the 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 in 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 large-scale 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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