Market and product

Following the pilot phase in the transportation sector, green hydrogen is now penetrating deeply into energy-intensive industries in China. The government has recently raised financial support to a maximum of RMB 16 billion (approximately $1.6 billion) per urban cluster, while, for the first time, incorporating four major industrial application scenarios into the national pilot program.

Expanding Pilot Programs into Industry

Unlike the previous round of pilots, which focused solely on transportation, the latest notice issued by the Ministry of Industry and Information Technology, the Ministry of Finance, and the National Development and Reform Commission requires that industrial applications account for at least 75% of pilot projects. Priority areas include green ammonia, hydrogen-based chemical feedstock substitution, hydrogen metallurgy, and hydrogen-blended combustion.

According to the China Hydrogen Development Report 2025 released by the National Energy Administration, hydrogen production and consumption in China are concentrated in heavy industrial provinces such as Shandong, Inner Mongolia, Shaanxi, Ningxia, and Shanxi. In 2024, hydrogen used for methanol and ammonia synthesis accounted for 27% and 26% of total consumption by segment, ranking first and second nationwide.

Chemical Industry: Both Producer and Consumer

A distinctive feature of the chemical industry is that hydrogen demand is already established and stable—unlike sectors such as automotive, aviation, or shipping, where demand still needs to be cultivated. Methanol, often referred to as the “mother of chemicals,” is produced through the synthesis of carbon monoxide, carbon dioxide, and hydrogen. By 2025, China’s total methanol production capacity reached 116.25 million tons.

Currently, hydrogen derived from fossil fuels—especially coal—still dominates China’s hydrogen supply. In 2024, coal-based hydrogen output increased by approximately 6.7% year-on-year. Under the pressure of the “dual carbon” goals, replacing gray hydrogen with cleaner green hydrogen is becoming a viable pathway for emissions reduction.

In March this year, China’s first deep integration project of green hydrogen and coal chemical industry was fully launched in Ordos, Inner Mongolia, expected to replace around 29,000 tons of gray hydrogen annually. Another project in Kuerle, Xinjiang, operational since 2023, is capable of reducing CO₂ emissions by up to 485,000 tons per year.

Expert Insight

“The core challenge in developing hydrogen energy lies in end-use consumption. Only when real consumers are clearly identified and demand is formed can upstream investment and technological progress be driven, ultimately reducing costs.” — Zhong Baoshen, Chairman and CEO of Longi Green Energy

Chemical Materials: The “Backbone” of Hydrogen Technology

The chemical industry also plays a crucial role in supplying foundational materials for hydrogen equipment. Proton exchange membranes—often described as the “chips” of the hydrogen sector—are core components of fuel cells and depend heavily on advancements in the fluorochemical industry. Carbon fiber enhances the strength of hydrogen storage tanks, while graphite is essential for bipolar plates in fuel cells.

Many domestic companies have achieved technological self-reliance in these areas, gradually narrowing the gap with patents held by foreign firms such as Toyota and others.

Water Constraints and the Turn to the Sea

Hydrogen production via water electrolysis requires significant amounts of freshwater—producing 100 million tons of green hydrogen is estimated to consume over 2 billion tons of water. Ironically, regions richest in renewable energy resources, such as Inner Mongolia, Ningxia, and Xinjiang, are also among the most water-scarce.

Experts predict that by 2060, China’s annual hydrogen demand will reach 130 million tons, requiring approximately 230 million tons of water for production. A promising solution is the integration of offshore wind power with direct seawater electrolysis.

Last month, China’s first seawater-based hydrogen production project in Qingdao, Shandong, completed 1,000 hours of stable operation, marking its transition into large-scale production.

Experts recommend designating offshore deep-sea areas as marine green hydrogen production reserves, while developing Xinjiang and Inner Mongolia as strategic inland reserves—moving toward an integrated sea–land model with prioritized hydrogen transportation infrastructure.