Is China's Hydrogen Economy Coming?

Authors: Nicola De Blasio and Fridolin Pflugmann

July 2020


To accelerate the global transition to a low-carbon economy, all energy systems and sectors must be actively decarbonized. While hydrogen has been a staple in the energy and chemical industries for decades, renewable hydrogen is drawing increased attention today as a versatile and sustainable energy carrier with the potential to play an important role in the carbon-free energy puzzle.

Our recent article, “The Geopolitics of Renewable Hydrogen in Low-Carbon Energy Markets” explores the global implications of renewable hydrogen adoption at scale and shows that the role countries will likely assume in global renewable hydrogen markets depends on their renewable energy resource and freshwater endowments as well as their ability to deploy enabling infrastructure.

Using the same analytical framework, this paper focuses on China and the potential role of renewable hydrogen in accelerating its transition to a low-carbon economy. Our research goal is to provide policymakers and other stakeholders the means to make informed decisions on technology innovation, policy instruments, and long-term investments in enabling infrastructure.

Renewable hydrogen offers significant advantages for China. It can help Beijing meet its climate and pollution goals — at a time when coal continues to dominate — while avoiding increased reliance on imported fuels. As a readily dispatchable means of storing energy, hydrogen can also help to address intermittency and curtailment issues as renewable energy increases its share of China’s energy mix. Furthermore, hydrogen can open new avenues for developing clean technology manufactured goods for both internal and export markets.

If water scarcity issues are addressed, China could become a renewable hydrogen export champion, supplying international markets mainly in Southeast Asia. At a national level, our analysis clearly shows how renewable hydrogen could be most efficiently and effectively produced in the Southwestern region. A region where rich renewable resources are available and water resources are less constrained, but far away from China’s economic heartland, thus requiring significant infrastructure investments to connect supply with demand, potentially making regional imports more attractive.

From a geopolitical perspective, renewable hydrogen could become a key part of the Belt and Road Initiative, symbolizing China’s technological prowess while increasing export opportunities and potentially enhancing Beijing’s status as a leader in the global fight against climate change.

Making renewable hydrogen a significant part of China’s future energy mix will require developing national and international policies and appropriate market structures aimed at spurring innovation along the value chains; scaling technologies while significantly reducing costs; and deploying enabling infrastructure.

Today, production from coal remains the lowest-cost option, about 30% cheaper than hydrogen from natural gas. Hence reducing the carbon footprint of coal-based hydrogen will be a critical factor in its viability in a low-carbon scenario, coal-based hydrogen with Carbon Capture Utilization and Storage (CCUS) is likely to remain the lowest-cost clean hydrogen production route for the middle-term.

China is piloting several new projects and policies, mainly in the mobility sector, but still has a long way to go before a hydrogen society reaches fruition. Yet if Beijing were to put its full manufacturing and policy might behind hydrogen’s value chain, it would be a true game changer with cascading effects for the entire world.

Download Full Paper [PDF]

For Academic Citation: De Blasio, Nicola and Fridolin Pflugmann (2020), “Is China's Hydrogen Economy Coming?" Harvard University, July 2020.


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