Industrial Securities: Hydrogen Energy Market Holds Vast Prospects and Ecological Value, Recommends Green Methanol Production

Industrial Securities released a research report stating that hydrogen energy's path to large-scale adoption during the 15th Five-Year Plan period has become clearer. While it demonstrates broad market potential and ecological value, achieving economically viable and sustainable business models remains the core challenge for true commercialization. The breakthrough in business models is expected to emerge first in the green fuel sector, with the firm recommending green methanol production as a promising area for early economic feasibility. Top picks include Goldwind Science & Technology (02208, 002202.SZ) and Sungrow Power Supply (300274.SZ), both of which possess green methanol production capacity.

Key insights from Industrial Securities are as follows:

**Hydrogen Energy Industry Poised for Large-Scale Growth in the 15th Five-Year Plan Period** On October 28, the Central Committee of the Communist Party of China issued recommendations for the 15th Five-Year Plan for national economic and social development. The document emphasized forward-looking planning for future industries, exploring diverse technological pathways, application scenarios, viable business models, and regulatory frameworks to foster emerging sectors like hydrogen energy as new economic growth drivers. Compared to the 14th Five-Year Plan's focus on incubating future industries, the roadmap for hydrogen energy's scaling during the 15th Five-Year Plan is more defined.

**Commercialization at Critical Juncture, Downstream Demand is Key** The hydrogen energy industry chain encompasses production, storage/transportation, and application, forming a multidimensional, cross-sector energy ecosystem. Green hydrogen production can effectively absorb renewable energy power, enhancing the utilization efficiency of wind and solar energy. Despite its vast market prospects and ecological benefits, establishing cost-effective and sustainable business models remains the primary barrier to full commercialization.

**Hydrogen Consumption Concentrated in Chemical and Refining Sectors** In 2024, global hydrogen consumption was approximately 32 million tons for synthetic ammonia, 17.5 million tons for synthetic methanol, 43 million tons for refining/metallurgy, and 13 million tons for heating and other applications, with hydrogen primarily used as an industrial feedstock. In China, synthetic methanol and ammonia accounted for the largest shares of hydrogen consumption at 9.95 million tons and 9.5 million tons, respectively (27% and 26% of total consumption), followed by refining (6 million tons, 16%) and coal-to-chemicals (4.05 million tons, 11%). Other uses span transportation, heating, and metallurgy.

**Green Fuels Likely to Pioneer Business Model Breakthroughs** The International Maritime Organization (IMO) approved amendments to MARPOL Annex VI, setting a 43% emissions reduction target for ships by 2035 (30% baseline). Green methanol stands out as the most cost-effective and carbon-reducing alternative fuel. Since 2025, supportive policies for green fuels have been rolled out, improving the economics of downstream green methanol and potentially accelerating the scaling of green hydrogen production.

**Hydrogen Production: Focus on Green Hydrogen Equipment Demand** Green hydrogen is produced exclusively via renewable energy-powered electrolysis, emitting no carbon throughout the process. Currently, fossil fuels dominate hydrogen production, accounting for ~97 million tons globally in 2023 (66% natural gas, 20% coal, 15% industrial by-products), with low-emission hydrogen below 1 million tons. By 2030, global low-emission hydrogen output is projected to reach 49 million tons, 75% of which will come from electrolysis.

**Storage/Transportation: A Major Bottleneck for Hydrogen Adoption** High costs associated with high-pressure gaseous or cryogenic liquid storage/transportation, coupled with underdeveloped infrastructure in China, hinder large-scale deployment. Pipeline transport, though promising for its capacity and efficiency, requires technological breakthroughs. China's hydrogen resources are unevenly distributed (abundant in the north, scarce in the south), influencing demonstration project locations, which typically cluster within 200 km of production sites.

**Risks:** Lower-than-expected downstream demand, slower cost reductions in green hydrogen and fuel cell systems, and inadequate policy support.