Strategic Positioning by 2030 — An Analysis of the Logic and Prospects Behind the Rapid Growth of the Hydrogen Energy Industry

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Source: China Chemical Industry News □ China Chemical Industry News Industry Development Research Center. Phenomenon: The hydrogen energy industry is experiencing rapid growth. As the national conference has just begun, leaders of various automobile companies such as Great Wall, Dongfeng, SAIC, and Chery, along with industry figures like Nan Cunhui, chairman of Chint Group, have all called for accelerated development of hydrogen energy and related industries in China. This has helped to boost this emerging industry, which has been gaining popularity since last year, even further. 　 Hydrogen is extremely abundant on Earth. When hydrogen burns, it produces water with no pollution; therefore, hydrogen energy is recognized worldwide as a clean energy source and the ultimate energy source of the future. The exploration of hydrogen energy development and utilization around the world began at the end of the last century, so not that much time has passed yet. In March 2016, the **National Development and Reform Commission** and the **Energy Administration** jointly issued the \"Action Plan for Innovation in Energy Technology Revolution (2016–2030)\", identifying the development of hydrogen production from renewable sources sowie innovation in hydrogen energy and fuel cell technologies as key tasks ； Research and development efforts in areas such as hydrogen production, storage, transportation, and hydrogen refueling stations, as well as distributed power generation using fuel cells, should be regarded as strategic directions for innovation in hydrogen energy and fuel cell technologies ； Large-scale hydrogen production technologies, distributed hydrogen production technologies, hydrogen storage and transportation technologies, and hydrogen fuel cell technologies are listed as areas for innovation. This marked the beginning of our country’s macro strategic approach to the development of the hydrogen energy industry. 　 It should be said that in the nearly 20 years since the emergence of the hydrogen energy economy, China’s initial steps and progress in this field have largely kept pace with those of other major economies worldwide. However, since the companies that entered this industry in its early stages were mainly small and medium-sized enterprises, technological progress and market development have remained sluggish. 　 The mutation occurred in 2018. At the beginning of that year, the newly established **Energy Group took the lead in founding in Beijing an Innovation Strategic Alliance for the hydrogen energy and fuel cell industry**. Leveraging its unparalleled reserves of hydrogen resources and its strong capabilities across the entire energy value chain, it managed to seize control of the leadership position in China’s hydrogen energy industry. With the rapid development of this landmark event, the domestic hydrogen energy industry has seen rapid growth, as if a spring breeze had blown overnight, causing thousands of pear trees to bloom. Recently, numerous cities and many enterprises across China have made moves to develop the hydrogen energy and fuel cell industries. The resulting boom is unprecedented; it’s as if “summer has arrived overnight”. 　 We have briefly reviewed the development of key projects (parks or bases) in China’s hydrogen energy industry during the 13th Five-Year Plan period. Clearly, since 2018, the hydrogen energy industry has experienced explosive growth; an increasing number of cities and enterprises have, almost simultaneously, turned their attention to this industry. According to preliminary statistics, in just the past six months alone, various regions such as Beijing, Shandong Province, Foshan City, Ningbo City, Maoming City, Zhangjiakou City, Rugao City, and Lu’an City have successively introduced plans for the development of the hydrogen energy and fuel cell industries. Many organizations, including Shanghai Jiao Tong University, Jinmei Group, and Huachang Chemical, are also actively pursuing projects related to the utilization of hydrogen energy. 　 To date, seven major hydrogen energy industry clusters have emerged in China, namely those in the Beijing-Tianjin-Hebei region, the Yangtze River Delta, the Pearl River Delta, Central China, the Northwest, the Southwest, and the Northeast. Hydrogen fuel cell vehicles are already in commercial operation in various locations such as Shanghai, Zhengzhou, Zhangjiakou, Foshan, Yunfu, and Shiyan. Well-known domestic automobile companies are all making strategic investments in this field, while traditional energy firms, auto parts manufacturers, and industrial investors are also increasing their investments in the hydrogen and fuel cell industry. 　 Situation: The hydrogen economy is still in its initial development stage. Globally, the rise of the hydrogen economy is the result of various factors such as technological progress, the need to address climate change challenges, and the evolution of energy sources. Hydrogen energy and fuel cell technology, as important innovative technologies to promote low-carbon and environmentally friendly economic and social development, have gained global consensus. Since 2002, many countries including the United States, Germany, Japan, and South Korea **have introduced development roadmaps for hydrogen energy and fuel cells. Developed countries such as the United States, Japan, and Germany have even elevated their hydrogen energy plans to the level of **national energy strategies.** 　 According to the latest \"Research Report on the Future Development Trends of Hydrogen Energy\" issued by the International Hydrogen Energy Committee, by 2050, the demand for hydrogen energy will be 10 times higher than it is today, and hydrogen energy will account for approximately 20% of total energy consumption. It is estimated that by 2030, the global number of fuel cell passenger vehicles will reach 10 million to 15 million. The enormous market potential has prompted various countries and large enterprises to increase their investment in research and development in the hydrogen energy sector, with the aim of addressing energy security issues through the development of hydrogen energy and gaining a competitive edge in the international energy landscape of the future. 　 In terms of industrialization, hydrogen fuel cell vehicles are already being put into use in countries such as Japan, the United States, and Germany. The maximum driving range of Toyota’s FCV fuel cell commercial vehicles is around 700 kilometers; the fuel cell tractor units produced by Nikola in the United States have a maximum output of 1,000 horsepower, and Germany has approved the use of fuel cell trains for commercial purposes. In May 2018, **during his visit to Japan, the Prime Minister made a special stop to see Toyota’s hydrogen-powered concept car, the Mirai. Its cool and futuristic design spread online, sparking endless imagination regarding hydrogen fuel cell vehicles. In September 2018, the world’s first two hydrogen-powered trains were put into service in Germany; they can reach speeds of 140 kilometers per hour, have a range of 1,000 kilometers per charge, and produce almost no noise while in operation. In October 2018, the first World Hydrogen Energy Conference was held in Changwon, South Korea. Korean Hyundai Motor Company displayed the already mass-produced NEXO hydrogen fuel cell vehicle at the exhibition. As part of the infrastructure development for hydrogen energy, South Korea has also established the Pohang Fuel Cell Hub, the world’s largest and Asia’s first fuel cell manufacturing plant, with an annual production capacity of 50 megawatts. 　 Not only cars (trains), but also power generation, industrial energy, and construction are important application areas for hydrogen energy and fuel cells. In Japan, home-use fuel cell combined heat and power systems have been put into use, giving households their own \"power stations\" and \"heating stations\". In the aerospace field, hydrogen energy is also being increasingly used as the power source for high-thrust rockets. 　 Let’s take a look at sample analyses of the development of hydrogen energy industries in Japan and South Korea, both of which are East Asian economies. As global leaders in the hydrogen energy industry, Japan and South Korea are the most proactive in exploring the development of this sector; they have both formulated and implemented ambitious plans for hydrogen energy development. Understanding their development status is of great significance for accurately grasping the current state and development trends of the global hydrogen economy. 　 Japan leads the world in promoting the development of hydrogen energy and fuel cells through its corporate giants; Toyota and Honda in Japan have already introduced hydrogen fuel cell vehicles with long ranges. However, due to high costs and the incomplete infrastructure such as hydrogen refueling stations, these vehicles have not yet become widely adopted and are still in the stage of conceptual marketing and promotion. Furthermore, in order to promote hydrogen-powered power generation, Japan is also exploring the establishment of a global supply chain that enables the large-scale production and transportation of hydrogen, thereby strengthening its strategic planning for the future. 　 South Korean companies are even more ambitious; whether it comes to manufacturing fuel cell vehicles or building hydrogen refueling stations, South Korea has put forward ambitious development plans, demonstrating a clear strategic intent to lead the hydrogen energy era, which is still in its infancy worldwide. 　 Although a relatively mature industrial chain for hydrogen energy research, development, production, and application has been established, South Korea’s progress in this field still faces significant obstacles. The high prices of hydrogen fuel vehicles and the public’s lack of awareness about hydrogen energy are the main barriers to development, while the insufficient availability of supporting facilities such as hydrogen refueling stations also dampens public enthusiasm for purchasing such vehicles. In 2018, fewer than 500 units of Hyundai’s first mass-produced NEXO hydrogen fuel cell vehicle were sold in South Korea, while slightly over 900 units of the Tucson hydrogen fuel cell vehicle were sold worldwide. The main reason for the poor sales, in the eyes of South Korean consumers, is still the high price – it amounts to 70 million won (approximately 476,000 yuan). Furthermore, there are currently only 11 hydrogen refueling stations across South Korea, of which only 6 are open to the public. 　 To encourage the public to purchase hydrogen-powered vehicles, in 2019 South Korea will offer subsidies on a first-come, first-served basis to 300 buyers, with the subsidy amount potentially reaching up to half of the vehicle’s total price. 　 According to South Korea’s action plan, by 2040, driven by technological advancements and various supportive measures, the price of hydrogen fuel cell vehicles is expected to drop to half of its current level, making them mainstream vehicles that meet the preferences of the general public. In terms of building hydrogen refueling stations, South Korea **is considering providing subsidies for the construction of such facilities and other related infrastructure, and is also relaxing regulatory restrictions through mechanisms like \"regulatory sandboxes\" in order to encourage private investment. South Korea **also plans to promote hydrogen fuel cell vehicles in the public transportation sector, aiming to have 40,000 hydrogen fuel cell buses in use by 2040. 　 It is clear that the global hydrogen energy industry is still in its initial development stage, and there is no possibility of significant breakthroughs in the short term regarding the three major challenges to the large-scale commercialization of this industry: insufficient hydrogen supply, high costs, and a lack of supporting infrastructure. Therefore, the prospects for the \"hydrogen era\" are very promising, but it remains at the stage of being just a \"dream\" and a \"story\" for now. 　 Thoughts and suggestions: One should take a long-term perspective. Whether considering the current state of development in leading countries around the world, or drawing on past experiences from the growth of emerging industries such as solar energy, wind energy, and lithium batteries in China, it is clear that China’s hydrogen industry is still a long way away from achieving true prosperity. In a nutshell: One should take a broader perspective when viewing the world around them. 　 At present, although our country **places great emphasis on the development of the hydrogen energy industry, designates hydrogen fuel cell vehicles as one of the three key development directions for new energy vehicles, and has introduced a series of policies to support the growth of related industrial chains, the foundation for the industrialization and commercialization of hydrogen energy and hydrogen fuel cells remains the weakest compared to other forms of new energy such as solar and wind energy, as well as hybrid and battery electric vehicles, which are also considered new energy vehicles. The market does not believe in miracles, and miracles are extremely rare; we do not think that miracles of industrial iteration and leapfrog development will occur in the hydrogen energy and hydrogen fuel cell industry. Until significant breakthroughs are achieved in its three inherent challenges—low-cost hydrogen sourcing, the economic viability of fuel cells, and a well-developed hydrogen refueling infrastructure—the hydrogen economy and related industry chain will not see impressive market performance. At this stage, its commercialization process depends entirely on the **level of support and commitment. In simple terms, it comes down to determining how much financial capacity and willingness the first- and second-tier cities in China have to promote hydrogen-powered vehicles as a model. 　 The 500 hydrogen fuel cell logistics vehicles with a load capacity of 7.5 tons that are currently in use in Shanghai originally had a price of up to 1.48 million yuan before any subsidies; even after those subsidies, their price remained around 400,000 yuan, whereas diesel vehicles of the same specifications cost only around 100,000 yuan. Furthermore, hydrogen in China is classified as a hazardous chemical, and the construction of hydrogen refueling stations requires approvals from multiple departments such as those responsible for safety supervision, quality inspection, and fire protection; the approval process is much more complex than that for ordinary gas stations. Statistics show that by the end of 2018, there were less than 100 hydrogen refueling stations built in China, a number that is lower than that in Japan. 　 With a weak foundation for industrialization and commercialization, yet the market seemed to develop rapidly as if overnight. After analysis, our research team believes there could be three reasons for this: First, recently, the central and local governments have issued a series of guiding documents for the hydrogen energy industry, providing policy support in areas such as technology research and development and infrastructure construction. In particular, the establishment of the Hydrogen Energy Alliance has encouraged some astute investors to get involved quickly and seize market opportunities; of course, many local authorities have also played a role in accelerating this development. 　 Secondly, the period from 2019 to 2022 will be a time of major events in China: the 70th anniversary of the founding of the People’s Republic of China, the year when comprehensive prosperity was achieved, the year for evaluating the achievements of the \"First Centenary\" goal, as well as the year when the Party’s * congress and the Winter Olympics take place. During this time, there will be a surge in demand for hydrogen-powered demonstration vehicles across various regions. For example, as the 2022 Beijing Winter Olympics approached, the host city of Zhangjiakou increased the deployment of hydrogen-powered buses and shuttles; both the total number of such buses in service and their proportion among all bus types ranked first in the country. In the view of some market experts, this is a preview of the real boom in China’s hydrogen industry – a rare and invaluable opportunity that should not be missed. 　 Thirdly, it is possible that there are indeed some strategic investors with the necessary resources and technical capabilities who, in pursuit of their own long-term development goals, strategically invest in the hydrogen and hydrogen fuel cell industries. 　 We expect that this wave of policy-driven demand for hydrogen energy and hydrogen fuel vehicles will continue around 2023, after which there will be a long period of industry consolidation. Around 2030, as the results of relentless efforts to strengthen internal capabilities and lay a solid foundation become evident, the global hydrogen and hydrogen fuel cell industry will truly enter its golden age of rapid development. Based on this, we put forward the core argument of this paper: neither hesitate nor become overly enthusiastic; let us opt for a strategic buildup by 2030. 　 Here, we also put forward the following suggestions: First, refer to the practices of relevant developed countries and expedite the formulation of a hydrogen energy development roadmap for our country. Integrate hydrogen energy into the **energy system, and formulate medium- to long-term development strategies along with corresponding phased goals. 　 We must be highly vigilant against the excessive hype surrounding hydrogen energy in the current market. While respecting the enthusiasm of strategic investors and local authorities, it is necessary to implement appropriate interventions and regulations at the national level to prevent a rush to invest in this area. 　 II. The industry should maintain a problem-oriented approach from start to finish, focusing on the “three major pain points” in the hydrogen energy and hydrogen fuel cell industries, and concentrate on addressing these issues without being distracted by market factors. In particular, it is necessary to strengthen international exchanges and cooperation with leading countries, to ensure that China does not fall behind in the global hydrogen energy industry competition, and to strive to overtake the top teams and take the lead. 　 III. After nearly 20 years of development, China’s hydrogen and fuel cell industry has now established relatively high entry barriers. For new entrants, possessing resource advantages (with priority given to by-product hydrogen) and technical advantages (holding core technologies in the field of hydrogen fuel cells) are the two essential conditions that enable them to build a high level of risk defense barriers and qualify as strategic investment initiatives. 　 IV. **As a leader in China’s hydrogen industry, the energy group must take on significant responsibilities in areas such as key technology development, establishment of industry frameworks, market development, and maintenance of the industrial chain and related ecosystem; the Chinese people place high expectations on it in these regards. **The energy group possesses the capability to produce over 4 million tons of hydrogen per year (ranking first in the world), benefits from advantages across the entire energy industry chain, and is backed by the strong comprehensive strength of a central state-owned enterprise – advantages that are truly rare on a global scale. Therefore, in China’s upstream and midstream hydrogen industry chain, excluding hydrogen-powered vehicle manufacturing, the future development depends on China Energy Group – a claim that may be exaggerated but is not entirely unfounded. This is both an opportunity and a responsibility.