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China's hydrogen industry has gained increasing attention from the government in recent years, as it plays a crucial role in China's energy transition and carbon neutrality goals. The Chinese government has identified the hydrogen industry as a priority area for investment and innovation, and it aims to establish a comprehensive hydrogen energy system covering transportation, industry, energy storage, and other fields. In 2019, hydrogen energy was first mentioned in the Government Work Report of the State Council of China, and since then, various strategies and plans have been issued by government departments to promote the development of the hydrogen industry. A significant milestone was the release of the Medium and Long-term Plan for the Development of Hydrogen Energy Industry (2021-2035) (the “2021-2035 Plan”) by the National Development and Reform Commission of China (“NDRC”) in March 2022. The plan identifies hydrogen energy as a key direction for future enterprise development and a significant part of China's future national energy system.
The 2021-2035 Plan sets targets in three phases for the development of hydrogen energy industry in China:
The hydrogen industry in China faces several challenges that need to be addressed. One of the main challenges is the high cost of hydrogen production. As China aims at the transition to a low-carbon economy, the cost of electricity from renewable energy sources is likely to decrease, making hydrogen production more cost-effective. Another challenge is the limited infrastructure for hydrogen production, storage, and transportation. In addition, the hydrogen industry faces competition from other low-carbon technologies such as battery electric vehicles and renewable energy sources such as solar and wind power. To remain competitive, the hydrogen industry may need to develop new technologies that offer advantages over these competing technologies.
On the other hand, the development of the hydrogen industry in China has the potential to bring significant benefits. One of the most important benefits is reduced reliance on fossil fuels. As China seeks to reduce its greenhouse gas emissions, the use of hydrogen as an energy source can play an important role. Additionally, the use of hydrogen can increase China's energy security by diversifying its energy sources. Hydrogen can be produced from a variety of sources, including renewable energy sources such as wind and solar power, reducing China's dependence on a single source of energy. Furthermore, the use of hydrogen fuel cell vehicles can help improve air quality in China. These hydrogen fuel cell vehicles emit only water and heat, unlike conventional vehicles that emit pollutants such as nitrogen oxides and particulate matter, which can help reduce air pollution and improve public health.
Certain use cases attract more attention in the development of hydrogen energy industry in China, for instance:
Echoing the release of the 2021-2035 Plan, China Petroleum & Chemical Corporation (“Sinopec”), one of China’s oil giants, initiated its medium- and long-term development strategy for hydrogen energy (the “Sinopec Strategy”) in September 2022, aiming to build itself into a leading hydrogen energy company in China and worldwide. According to the Sinopec Strategy, Sinopec will focus on hydrogen energy transportation and green hydrogen refining areas and develop a comprehensive and integrated hydrogen energy business, mainly from three aspects: (1) promoting the cultivation of hydrogen industry. Sinopec aims to steadily promote the establishment of hydrogen refuelling station network which provides comprehensive energy services covering oil, gas, hydrogen, and electricity and by 2025 achieve a hydrogen refuelling capacity of around 120,000 tons per year; (2) strengthening leadership in hydrogen technology innovation. Sinopec aims to exert more efforts in tackling key technical challenges, actively participate in the formulation of industry standards and promote the domestication process of hydrogen energy technology and equipment, and (3) deepening strategic cooperation. Sinopec aims to deepen collaboration with major energy enterprises in China to enhance a coordinated development of industrial chain, supply chain, and innovation chain.
Other examples of demonstration/feasibility projects in China:
The Chinese central government has implemented various incentive programs over the years to support the development of hydrogen energy industry in the country, which are mainly focused on the development of fuel cell vehicles, but also cover other use cases of hydrogen energy.
After the issuance of 2021-2035 Plan in March 2022, certain local governments implemented various incentive programs and policies for the development of their local hydrogen energy industry.
The regulatory framework for hydrogen energy in China is at an early stage of development. There is no comprehensive laws or regulations specifically focusing on the development and governance of hydrogen energy in China. However, the Chinese government has been continuously working on creating a comprehensive legal regime for hydrogen energy in the recent years.
Certain laws and regulations in China may apply to the hydrogen energy industry from different aspects. The PRC Environmental Protection Law, for instance, regulates the prevention and control of environmental pollution and ecological damage caused by various industries, including the hydrogen energy industry.
Furthermore, there are safety regulations and technical standards that provide guidance on the safe production, transportation, storage, and use of hydrogen energy in China. In December 2022, the State Administration for Market Regulation and the National Standardization Administration jointly issued the new national standard titled the Basic Requirements for Hydrogen System Safety regulating the design and use of hydrogen production, storage, transportation, and application systems, effective from 1 April 2023.
The Chinese local governments have also issued a series of policies to support and regulate the development of their local hydrogen energy industry.
While at this stage national and local policies make more contributions to and play more regulatory roles than laws and regulations per se and there are still gaps in the regulatory framework for the hydrogen energy industry in China, the government's efforts to develop comprehensive legal regimes, safety regulations, technical standards, and supportive policies suggest a strong commitment to the growth and development of the hydrogen energy industry in China. These efforts are expected to further promote the development of the hydrogen energy industry and contribute to China's overall energy transition goals.
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