China issues renewable energy consumption rules for industry that include green hydrogen

China issued rules for the minimum consumption of renewable energy by industries on June 23 that include renewable hydrogen and its derivatives to count toward renewable energy consumption.

The "Minimum Proportion Target for Renewable Energy Consumption and the Responsibility Weight System for Renewable Energy Power Consumption" -- Notice No. 42-- will take effect from Aug. 1, the National Development and Reform Commission said.

"Notably, Notice No. 42 formally recognizes renewable hydrogen, ammonia and methanol as forms of non-electric renewable energy consumption," Jingze Zhu, analyst for hydrogen at S&P Global Energy Horizons, said June 24.

"Provincial authorities are now required to conduct separate accounting and assessments for these products, indicating that green molecules are gradually being incorporated into China's formal compliance framework..."

The use of these renewable energy molecules is also becoming an emerging legal obligation for relevant market participants, according to Zhu.

Demand-side obligations

Renewable consumption targets are split between power and non-power uses, NDRC said.

The minimum renewable share includes both renewable electricity and non-electric renewable energy, such as low-carbon industrial fuels, hydrogen, ammonia, and methanol, it said.

"Notice No. 42 creates demand-side obligations by requiring the consumption of renewable energy and green products," Zhu said.

Renewable hydrogen/ammonia/ methanol used as fuels also count toward renewable energy use, according to the policy, NDRC said.

Therefore, companies using renewable-derived hydrogen, ammonia, or methanol as integrated fuels can include the resulting energy in their non-electric renewable energy accounting, NDRC added.

Compliance pathways

Green power procurement, direct renewable supply, and green certificates are recognized compliance pathways, NDRC added.

Renewable electricity actually consumed is the main basis for meeting provincial renewable power obligations, while green certificate purchases can help cover shortfalls when direct consumption is insufficient, it said.

Notice No. 42 follows Notice No. 689 and together they establish a more integrated policy framework for energy transition, Zhu said.

On June 15, China set a strict 2028 deadline for nine key industries to meet specified energy-efficiency benchmarks, China's state-owned news agency Xinhua reported, citing the NDRC.

"The two policies [Notices] effectively close the regulatory loop between industrial decarbonization requirements and renewable energy procurement obligations," Zhu said.

"In recent months, China has issued a series of policies targeting renewable energy development and hard-to-abate industries, signaling a broader energy transition framework as the country moves toward the 15th Five-Year Plan period."