Is the Hydrogen Energy Industry at an Inflection Point? Government Incentives of Up to 1.6 Billion Yuan Unlock Trillion-Yuan Market as Industry Tackles Key Challenges

AI · Why Are Hydrogen Energy Costs So High, and How Can Technological Breakthroughs Promote Large-Scale Application?

“Science and Technology Innovation Board Daily” March 21 — Reporter Wang Chufan China’s hydrogen energy industry is entering a period of intensive policy releases and a critical turning point for industrialization.

Recently, the Ministry of Industry and Information Technology, the Ministry of Finance, and the National Development and Reform Commission jointly issued the “Notice on Conducting Hydrogen Energy Comprehensive Application Pilot Projects” (hereinafter referred to as the “Notice”). It proposes that cities within urban clusters apply for hydrogen energy comprehensive application pilot projects, with the central government providing a total of up to 8 billion yuan in demonstration subsidies over four years. Meanwhile, the 2026 government work report further elevates hydrogen energy as a new growth point, with green fuels being included in the report for the first time. The “14th Five-Year Plan” also elevates it to a strategic level as a “future industry.”

Driven by energy security and deep decarbonization, hydrogen energy is moving beyond the demonstration phase. Most companies interviewed agree that they will continue to closely monitor relevant policies, accelerate government-enterprise cooperation, leverage policy support to develop the entire industry chain, and seize development opportunities.

Up to 1.6 Billion Yuan Reward Limit per Urban Cluster

The Energy Law of the People’s Republic of China, which took effect in 2025, explicitly classifies hydrogen energy alongside coal, oil, natural gas, nuclear, water, wind, and solar energy as a statutory energy type, establishing its energy attribute at the legal level for the first time. Article 33 of the law states: “The state actively and orderly promotes the development and utilization of hydrogen energy to foster high-quality hydrogen industry development.” This fundamentally breaks the previous restrictions caused by hydrogen being classified as a hazardous chemical, providing legal support for the development of the hydrogen industry chain.

According to the “Notice,” the central government will adopt a “performance-based reward” approach to support city clusters with funding. The reward standards will be set based on application scenarios or hydrogen scale. The pilot period for each city cluster is four years. The reward cap for a single city cluster during the pilot is no more than 1.6 billion yuan. The reward funds are to be used by local governments to support hydrogen comprehensive applications and are not to be used for budget balancing, debt repayment, or clearing overdue payments to enterprises.

Following a “pre-advance, post-settlement” approach, after approval of the pilot, the central government will pre-allocate a certain proportion of reward funds to support the launch of hydrogen application pilots in city clusters. After each pilot year, the three departments will evaluate performance based on annual assessments, with each performance point roughly rewarded with 80,000 yuan.

By 2030, hydrogen in urban clusters will be scaled across transportation, industry, and other sectors, with the average terminal hydrogen price dropping below 25 yuan per kilogram, aiming for around 15 yuan in some advantageous regions; the national fuel cell vehicle fleet is expected to double from 2025, reaching 100,000 units.

The Ministry of Industry and Information Technology’s Department of Energy Conservation and Comprehensive Utilization emphasizes that the 1.6 billion yuan subsidy is not “blanket funding,” but rather a performance-linked mechanism that encourages funds to be directed toward actual operational effectiveness, fundamentally changing the previous industry issues of “car purchase subsidies and vehicle idling.”

Specifically, the reward standards are set based on application scenarios or hydrogen scale. After each pilot year, the leading city in each cluster should review and summarize the previous year’s pilot work, prepare a self-assessment report, and have a third-party organization issue a performance evaluation report. The central government will then allocate reward funds according to the evaluation results.

Additionally, to keep track of progress and better support performance evaluation, a hydrogen comprehensive application pilot management service platform will be built to monitor real-time data on hydrogen supply systems, application scenarios, and hydrogen consumption, providing detailed data support for performance assessments.

Policy Implementation Boosts Industry Confidence

In response to the “Notice,” downstream project operators have shown cautious attitudes. The “Science and Technology Innovation Board Daily” contacted several related companies as investors, with some indicating they are not yet familiar with the policy.

A staff member from China Energy Construction Corporation told reporters: “The policy was just released. Our hydrogen energy deployment has been ongoing for years, with large-scale projects already in operation since late last year, and several more planned.” When asked whether they would apply for the pilot, the person admitted: “It’s still uncertain whether our projects fully meet the pilot requirements. Government-enterprise cooperation is ongoing.” The company’s Songyuan hydrogen project has received support from the National Development and Reform Commission, the National Energy Administration, and other policies, as well as long-term special government bonds.

Many companies have expressed positive expectations for the policy benefits. For example, a representative from Weichai Power said: “The policy documents released by the Ministry of Industry and Information Technology on hydrogen comprehensive application pilots are fundamentally a major boost for industry development. Overall, the policy will effectively promote rapid industry growth and accelerate commercialization. For our company, it’s a real benefit that will positively impact our business development.”

Personnel from Longi Green Energy and Dongfang Electric also noted that the policy provides positive guidance for hydrogen industry development. Longi Green Energy has built a “PV + energy storage + hydrogen” integrated framework. Its securities department mentioned that the company focuses on large alkaline electrolyzer technology breakthroughs, such as large single-cell electrolyzers and low DC consumption; Dongfang Electric has deep expertise in hydrogen production equipment, with自主研发的碱性及大功率PEM电解槽已完成多项工程验证，核心技术自主可控。

Weichai Power disclosed on an interactive platform that it has fully deployed multiple hydrogen energy powertrains, including hydrogen fuel cells, hydrogen internal combustion engines, and SOFC solid oxide fuel cells. Their hydrogen fuel cell systems range from 13kW to 300kW, suitable for various scenarios; hydrogen internal combustion engines have achieved 560-horsepower large-power products, with thermal efficiency reaching 45%.

The Daan Wind and Solar Green Hydrogen Ammonia Synthesis Demonstration Project by J电股份 is progressing smoothly, supported by the National Development and Reform Commission as a demonstration project, becoming a national benchmark for clean low-carbon hydrogen energy, demonstrating the company’s leading position in green hydrogen integration.

A related person from Dongcai Technology said that their proton exchange membrane (PEM), a core material in hydrogen energy, has entered small-scale supply and downstream customer certification stages, promoting localization of key midstream components.

High Costs Still Challenge the Industry

In terms of competition, the current hydrogen energy industry shows a healthy pattern of “leading enterprises guiding, small and medium-sized enterprises collaborating.”

Upstream hydrogen production leaders leverage technological and scale advantages to build market barriers. Longi Green Energy, through its subsidiary Longi Hydrogen, has become a global leader in large alkaline electrolyzers, with significant advantages in scale and core technology. Sunlight Power’s subsidiary, Sunlight Hydrogen, also focuses on renewable energy electrolysis, offering alkaline and PEM electrolyzers, with applications in multiple photovoltaic and wind power hydrogen projects.

In the midstream key component sector, differentiated competition has formed. Weichai Power and Dongfang Electric, as main players in SOFC technology, compete with PEMFC companies like Yihuatong and Shanghai Reshape. Companies like Dongcai Technology continue breakthroughs in proton exchange membranes; Dalian Mingyuan relies on the Chinese Academy of Sciences Dalian Institute of Chemical Physics’ technology, continuously advancing fuel cell systems, with 160 systems supporting various projects.

On the downstream side, Yihuatong, as an industry leader, established a production base in Zhangjiakou, with core engine parts fully localized, supporting over 40 upstream and downstream projects like Haoan Qingyuan hydrogen storage and transportation equipment. YunTao Hydrogen has completed full industry chain vertical integration from bipolar plates and stacks to system integration within three years, becoming a core driver of hydrogen industry development in the Guangdong-Hong Kong-Macao Greater Bay Area.

Wood Mackenzie, an international energy research organization, states in its report that China’s electrolyzer annual capacity has exceeded 50 GW, with unit costs dropping from about $250/kW to below $100/kW, profoundly influencing global hydrogen industry evolution.

Despite the improving industry chain and ongoing policy support, core bottlenecks remain. The industry has long been constrained by the high cost of “not being able to afford it.” A representative from Weichai Power revealed that high industry chain costs are still a major issue.

Wu Liang, chief engineer of Shanghai Hydrogen Era Technology Co., Ltd., believes that large-scale hydrogen application requires breakthroughs in every link of “production, storage, transportation, and utilization.” On one hand, technology must mature and stabilize; on the other, costs must come down. The scale application of hydrogen energy needs a comprehensive chain of breakthroughs, from green hydrogen sources to end-use consumption, with all links working together to make hydrogen economically viable.