Weekend Long Read: Why China Is So Keen on Hydrogen

Shanghai has recently introduced an innovative transportation mode: hydrogen bicycles. These bicycles, which assist riders with hydrogen-powered technology integrated into their frames, have seen the deployment of around 1,500 units on the city's streets [para. 1][para. 2].

Hydrogen energy, once a subject of academic discussions, is now gaining public attention in China, with various regions promoting hydrogen-powered trucks, buses, and passenger vehicles. For instance, East China’s Shandong province announced this February that hydrogen vehicles would be exempt from highway tolls, providing significant financial relief for operators of such vehicles [para. 3].

Several Chinese cities have allocated substantial financial resources to subsidize the hydrogen vehicle industry. In Dadong, Shenyang, buyers of hydrogen vehicles can get up to 1.05 million yuan in subsidies. Wuhu in Anhui province offers up to 2.5 million yuan for constructing large hydrogen refueling stations. Companies producing hydrogen fuel cells in Xi’an’s New Area can receive up to 10 million yuan, while those producing key hydrogen fuel components in Haiyan, Zhejiang, can earn up to 20 million yuan [para. 4-7].

China’s enthusiasm for hydrogen vehicles, despite its strong electric vehicle (EV) industry, stems from its long-term energy strategy [para. 8]. BYD Co. Ltd.’s founder, Wang Chuanfu, highlighted the strategic importance of new-energy vehicles, noting that 70% of China’s oil is imported, mainly for the automotive industry, passing through the vulnerable Strait of Malacca [para. 10-12]. Hence, China aims to reduce oil consumption by promoting a broad range of new-energy vehicles, including those powered by hydrogen, methanol, ammonia, and solar energy [para. 13].

Methanol vehicles have also gained substantial support, with pilot programs in regions like Shanxi, Guizhou, Shaanxi, Gansu, and Shanghai. Notable subsidies include a 5,000 yuan offer in Guiyang for M100 methanol-fueled cars and a 30,000 yuan subsidy in Jinzhong for methanol-powered trucks. Companies like Geely Automobile Holdings Ltd. and Farizon Auto are heavily invested in the methanol economy [para. 15-19].

China has achieved significant progress in the lithium, hydrogen, and methanol energy sectors. In 2023, China was responsible for over 60% of global EV production and sales, ranked third in hydrogen vehicle ownership, and had the most hydrogen refueling stations globally. Additionally, China leads in methanol vehicle production and consumption [para. 20-22]. This growth has notably reduced its oil consumption, with an estimated 17 million tons of refined oil displaced by NEVs in 2023 [para. 23].

China seeks to further reduce reliance on imported oil by increasing domestic production. It has robust initiatives in Tianjin’s Dagang and Bohai oilfields and offshore reserves. Offshore oil production surged to over 62 million tons in 2023, with projections indicating significant growth by 2045 [para. 27-29]. Additionally, China possesses the world’s third-largest shale oil reserves, with significant production growth over recent years [para. 30].

To diversify its oil import sources, China has decreased its reliance on African and Middle Eastern oil, favoring imports from Russia and Malaysia [para. 34-35]. It has also developed alternative oil transportation routes such as the China-Myanmar pipeline and Pakistan’s Gwadar Port corridor [para. 37-39].

Moreover, state-owned enterprises like Sinopec are heavily investing in hydrogen infrastructure, with Sinopec operating 128 hydrogen refueling stations by the end of 2023 and completing a significant green hydrogen project [para. 41-44]. Whether these investments are desperate countermeasures against the rise of EVs or proactive strategies remains to be seen [para. 45].