Hydrogen law, regulations & strategy in China

More than half of the projects announced globally in the last 12 months have been in China – both in size and in number. The Chinese government has continued to promote the development of hydrogen energy projects as part of its broader strategy to achieve carbon peaking and carbon neutrality. The Medium- and Long-Term Plan for the Development of the Hydrogen Energy Industry (2021-2035) (the “Hydrogen Energy Industry Plan”), published in 2022, offers strategic guidance for the industry's development over the next decade.

According to the statistics provided by the Hydrogen Energy Subcommittee of the China Industry Development Promotion Association (“CIDPA”), the number of contracted, approved, and announced green hydrogen projects in China reached a total of 74 in 2023. The total planned investment for these projects exceeded 470 billion CNY.

In the first half of 2024, 9 projects were approved, 22 hydrogen energy projects were signed, 17 hydrogen energy projects commenced construction, and 8 projects were put into operation, resulting in a total of 54 additional hydrogen projects currently in progress. The majority of projects use renewable energy sources, primarily wind and solar power, with some projects involving coal-based and biomass-based hydrogen production. As of June 2024, the total installed capacity for domestic demonstration projects for electrolytic hydrogen production, both under construction and planned, stands at 75 GW, with a further 74 GW (equivalent to 5.55 million tonnes) of green hydrogen projects in various stages of development.

With regard to pipeline transportation, China is currently engaged in the establishment of a nationwide hydrogen transport pipeline network, including  long-distance pure hydrogen pipelines such as SINOPEC's planned 400-kilometre hydrogen pipeline from Inner Mongolia to Beijing. Advancements have also been made in the field of natural gas hydrogen blending technology, as evidenced by the 397-kilometre pipeline in Yinchuan, Ningxia, which is now operational with a 24 percent hydrogen blending ratio.

With regard to the consumption of hydrogen, more than 95% of China's hydrogen is utilised in the industrial sector, particularly in the context of petroleum refining, ammonia synthesis and similar industries. Furthermore, recent years have witnessed a growing emphasis on the term "hydrogen transport," accompanied by notable advancements in hydrogen fuel cell vehicles.

In the field of energy storage, as of the end of September 2023, more than 40 demonstration projects with a capacity of over 30 kW have been completed, establishing new records for single-project scale. The largest project currently under construction in China is the China Electric New Energy (Huai'an) hydrogen energy storage power station, which has an installed capacity of 200 MW. 

Hydrogen is increasingly playing a pivotal role within China's energy system. In May 2024, the National Energy Law (Draft) was released, formally including energy produced from hydrogen within the same scope of management as traditional energy sources such as petroleum.

A significant focus has been placed on green hydrogen production, which is identified as a key target for future development. In a notable development, the Guidance Catalogue for Industrial Structure Adjustment (2023) has for the first time included technologies related to green hydrogen as areas for encouraged development. This direction has been echoed by local policies.

By the end of June 2024, over 22 provinces and cities in China had explicitly permitted or were considering the construction of green hydrogen production facilities, including electrolysis for hydrogen generation and integrated hydrogen production and refuelling stations outside chemical parks. In respect of the latter, these projects are being considered without requiring hazardous chemical safety certifications. This notable policy shift has the effect of reducing the costs associated with hydrogen storage and transport, while simultaneously lowering the construction barriers for hydrogen production projects.

Furthermore, in August 2023, the National Standards Commission and five other authorities collaborated to issue the Guidelines for the Construction of a Standard System for the Hydrogen Energy Industry (2023). This document described the principal objectives for hydrogen standardisation efforts over the subsequent three-year period.

China is engaged in the ongoing process of strengthening the policies and standard systems that underpin the development of the hydrogen industry.

As previously stated, in August 2023, the Guidelines for the Construction of a Standard System for the Hydrogen Energy Industry (2023) were published. These cover 111 existing national and industry standards, including 28 that are currently under development and 19 that are planned.

In accordance with the Guidelines for Establishing Energy Industry Standard Programs, 21 industry standards pertaining to hydrogen energy are scheduled for revision or development within 2024. By 2025, it is anticipated that a comprehensive standard system will be in place, supporting the entire hydrogen energy value chain – from production to storage, transportation and utilisation – with over 30 national and industry standards formulated or revised.

The Guidelines situate hydrogen energy as a pivotal element within China's prospective national energy framework, serving as a conduit for energy sustainability. This initiative represents China's inaugural attempt to construct a comprehensive standard system for hydrogen energy, encompassing the entire industrial landscape, from production, storage, and transportation to refuelling and utilisation, while concurrently addressing safety standards. The objective is to guarantee the presence of transparent and uniform standards at each stage of the hydrogen energy process, thereby facilitating the gradual establishment of a comprehensive and integrated hydrogen industry system.

China is pursuing a policy of active support for the development of its hydrogen energy industry. As of September 2024, more than 32 policies have been issued at the national level, 188 related policies have been released by local governments, and 24 national and provincial standards-related policies have been enacted.

The majority of provinces and regions in China have developed hydrogen energy development plans at the provincial level. These plans set out medium- and long-term objectives and provide a framework for the growth of different sectors within the hydrogen energy industry.

Policies pertaining to the production and utilisation of hydrogen as an energy source have been subject to additional relaxation. In 2023, several provinces, including Guangdong, Hebei, Shandong, and Jilin, explicitly permitted the construction of integrated hydrogen production and refuelling stations outside of chemical industrial parks. This indicates a shift towards greater flexibility in hydrogen production and usage. This trend has subsequently expanded, with regions including Hainan, Sichuan, Inner Mongolia, Guangzhou, and Ordos introducing policies that permit the construction of green hydrogen production projects powered by renewable energy (via electrolysis) outside chemical parks, or that support the development of integrated hydrogen production and refuelling stations.

Furthermore, regions such as Shandong and Sichuan have implemented supportive policies for "hydrogen highways," presenting a new phase for cross-regional demonstrations and applications of fuel cell vehicles. This broader relaxation of hydrogen production and usage policies is accelerating the commercialisation of the hydrogen energy industry across a greater number of regions.

In recent years, China has placed an increasing emphasis on the production and utilisation of green hydrogen as a key component of its comprehensive decarbonisation strategy. As reported by the National Alliance of Hydrogen and Fuel Cell (“NAHFC”), grey hydrogen, derived from coal and natural gas, currently accounts for approximately 82% of the country's hydrogen production, with approximately 80% of this hydrogen utilised in industrial processes. The transition from grey to green hydrogen, therefore, presents a significant opportunity to reduce carbon emissions within these industries.

The year 2023 has been designated the "Year of Green Hydrogen" by prominent stakeholders in the new energy sector. The advancement of green hydrogen production in China is being driven by government policies. The principal methods for the production of green hydrogen in China include the utilisation of photovoltaic and wind power for hydrogen generation. Provinces such as Xinjiang and Inner Mongolia, which possess a plentiful supply of solar and wind resources, are spearheading the implementation of extensive green hydrogen manufacturing projects. These initiatives are markedly accelerating the industrial-scale implementation of green hydrogen, with notable advancements already attained.

Since the second half of 2023, many provinces and cities, including Jilin and Hebei, have eased restrictions on green hydrogen production, enabling such projects to be situated outside of chemical parks. This policy shift has the effect of reducing the costs associated with the storage and transportation of hydrogen.

As noted above, 74 green hydrogen projects were approved and announced in China during 2023, with the total planned investment for these projects estimated to exceed CNY 470 billion. It is anticipated that upon reaching full operational capacity, these projects will contribute an additional 2.8 million tonnes of new green hydrogen production capacity on an annual basis. By the conclusion of 2024, it is anticipated that the number of new green hydrogen projects will exceed 100.

In a noteworthy development, operations commenced in June 2023 at two significant green hydrogen projects: the Three Gorges Group's Ordos Photovoltaic Hydrogen Generation Project in Inner Mongolia and the Kuqa Green Hydrogen Project in Xinjiang. It is anticipated that the solar-powered hydrogen production project undertaken by the China Three Gorges Corporation will annually yield approximately 10,000 tonnes of hydrogen and 80,000 tonnes of oxygen as a by-product. The Kucha Green Hydrogen Project has an annual electrolysis capacity of 20,000 tonnes, capable of delivering 28,000 cubic metres of hydrogen per hour. It is the first large-scale project in China to directly produce green hydrogen using photovoltaic power. As of 21 December 2023, the Kuqa Green Hydrogen Project had been operational for 4,200 hours, during which time it had delivered a total of 22.36 million cubic metres of green hydrogen to the user, Tower River Refinery.

In 2024, China continued to pursue the advancement of green hydrogen development, capitalising on the preceding year's achievements. On 22 March 2024, the National Energy Administration (“NEA”) published the Guiding Opinions on Energy Work in 2024, which placed an emphasis on the development of hydrogen production from renewable energy sources. Following this, the National Development and Reform Commission (“NDRC”) and other relevant departments released a special action plan targeting energy saving and carbon reduction across four key industries: iron and steel, oil refining, ammonia, and cement. The plan proposes a significant increase in the consumption of green power and green hydrogen within these industries by the end of 2030.

Following the publication of the Hydrogen Energy Industry Plan for 2021-2035, there has been a notable acceleration in the development of hydrogen fuel cell vehicles (“FCVs”). Heavy-duty trucks, as a significant source of carbon emissions within the transport sector, are of pivotal importance to the advancement of green and low-carbon development. In comparison to diesel-powered heavy-duty trucks, each liquid hydrogen truck has the potential to reduce carbon emissions by approximately 140 tonnes per year, thereby enabling zero emissions for long-distance heavy-duty vehicles. The Chinese government has placed considerable emphasis on the promotion of new energy heavy-duty trucks.

Nevertheless, the present costs of purchasing and operating FCVs remain considerable. As indicated by the China Automotive Strategy and Policy Research Centre, the unit transport cost of an FCV is approximately 1.2 times higher than that of a conventional fuel vehicle of the same type, particularly given the high percentage of highway toll fees.

In order to address this issue, the Initiative for Building China's Hydrogen Highways, which was released in December 2023, advocates the construction of "hydrogen highways" by exempting hydrogen-powered vehicles from highway tolls. In 2024, several provinces, including Sichuan and Shanxi, implemented such policies and are also providing subsidies to support the construction of hydrogen refuelling stations along highways. The data suggests that the complete exemption of highway tolls could result in a 25% reduction in the unit transport cost of FCVs.

At the same time, the Sichuan and Shanxi provinces have implemented subsidies with the objective of guaranteeing an adequate energy supply for the long-distance transportation of hydrogen vehicles. For example, the local government in Chengdu offers a one-time subsidy of up to 30% of the actual investment in the construction of hydrogen refuelling stations, with a maximum subsidy of CNY 10 million, contingent on the size of the station and its daily refuelling capacity.

In view of the necessity for greater ranges in heavy-duty trucks, China has invested in research and development, achieving notable breakthroughs. In April 2024, Sinopec successfully conducted long-distance transport tests, covering up to 1,500 kilometres on the route from Beijing to Shanghai.  Furthermore, regular hydrogen-powered heavy-duty truck transport routes have been established in Hubei province, with provinces such as Zhejiang and Shanxi progressively implementing hydrogen-powered heavy-duty trucks.

These strategic measures are instrumental in reducing the costs associated with hydrogen FCVs, thereby significantly boosting their adoption and fostering the development of the entire industrial chain. In accordance with the Hydrogen Energy Industry Plan, the government has set a target of 50,000 hydrogen FCVs on the road by 2025. In order to achieve this objective, the Chinese government may elect to pursue the continued adoption and implementation of supportive policies.