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Business of climate change
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Climate change: China’s hydrogen sector faces overcapacity risk as ambitious production plans outstrip demand, say analysts

  • Local governments have rolled out plans to develop the industry after Beijing released its first ever national hydrogen strategy last March
  • However, the national targets were eclipsed by the production goals set out out by the provincial and municipal governments

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China’s hydrogen sector is expected to see strong growth as local governments announce ambitious plans to produce quantities of the gas that far exceed the national target, analysts said. Photo: Shutterstock
Yujie Xuein Shenzhen
China’s hydrogen sector is expected to see strong growth as local governments announce ambitious plans to produce quantities of the gas that far exceed the national target, analysts said.
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However, slow growth in infrastructure and consumption demand remain major challenges that could put the sector at risk of overcapacity.

China’s provincial and municipal governments have jumped on the hydrogen bandwagon, rolling out plans to develop the industry after Beijing released its first ever national hydrogen strategy last March.
The country aims to have at least 50,000 hydrogen fuel cell electric vehicles (HFCEVs) on the road and produce 100,000 to 200,000 tonnes of “green hydrogen” – hydrogen produced by splitting water through the electrolysis process – annually by 2025, according to the plan.
However, the national targets were eclipsed by the plans rolled out by the local governments. For example, just the combined green hydrogen production targets set by the provinces of Inner Mongolia, Qinghai, and Gansu amount to 740,000 tonnes per year by 2025. Meanwhile, 13 provinces and cities aim to have 111,000 HFCEVs on the road by 2025, with more targets expected to be announced.

“On the green hydrogen production side, major investments from state-owned enterprises are easing a significant overbuild in terms of production – an endemic issue in the energy transition where getting supply and demand more or less in balance has proven difficult and is an investment risk,” said a Citi Global Perspectives & Solutions (Citi GPS) report released this month.

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