Chinese hydrogen producers target cost of production reductions

Chinese hydrogen producers have reacted positively to the news late last month that the government will include hydrogen as one of the country's key strategic objectives in its next Five Year Plan, which is expected to be announced in early 2026.

The Central Committee of the Communist Party of China announced Oct. 28 that hydrogen has been included as a strategic priority in the draft 15th Five-Year Plan for National Economic and Social Development, covering the period from 2026 to 2030 in early October.

Chinese market participants told Platts, part of S&P Energy, that the draft Five Year Plan did not include details about how the Chinese government will support the development of the hydrogen energy industry.

Plans for the detailed implementation of strategic objectives defined by the Central Committee of the Communist Party of China in different end-user markets are the responsibility of different agencies.

For example, the National Energy Administration issued guidelines on Oct. 28 to promote the integrated development of coal and new energy. The guidelines included proposals to construct a network of hydrogen refueling stations in mining areas and to promote the rollout of a fleet of hydrogen fuel cell powered heavy haul mining trucks in open-pit coal mining areas.

This would be consistent with Chinese government plans to accelerate the construction of a new energy system and "promote the safe, reliable and orderly replacement of fossil energy."

Platts has reported on Chinese government plans to extend the use of hydrogen outside the chemical production sector.

Reduction in cost of producing hydrogen targeted

Producers are now awaiting the publication of details of China's funding mechanisms to support hydrogen energy technology and demonstration projects. "We expect to see the introduction of preferential tax policies and subsidies [to encourage hydrogen substitution]," one Chinese producer told Platts.

Chinese producers have been given the target of reducing the cost of producing renewable hydrogen by up to 50% by 2030, a spokesperson at United Hydrogen told Platts.

Market activity reported to Platts in October indicated that Chinese producers are producing renewable hydrogen at prices around $3-3.5/kg.

Lowering hydrogen production costs towards $1.50-1.75/kg is expected to create the conditions for the widespread application of hydrogen energy in various fields.

The initial reduction is expected to reflect economies of scale as production volumes ramp up, along with reductions in the cost of photovoltaic and wind power, which could lower hydrogen prices by 15-20% over 2025-2027, with further declines of 15-30% seen over 2028-2030.

"Analysts are largely underestimating the cost reduction potential of green hydrogen in China, especially with the country's total vertical integration of supply chain: from renewables to electrolyzer to balance of plant to shipping, says Ciaran Roe, Chief Commercial Officer and co-founder of data analytics company Hysights.