From the hum of electrolysers at wind and solar bases in the northwestern Gobi desert to green ammonia cargo ships departing from the port of Lianyungang, China's hydrogen energy sector is undergoing a profound transformation after years of demonstration projects. Recent interviews with multiple industry players reveal that the industry has historically been heavily reliant on policy subsidies and market expectations, with most projects stuck in the demonstration and validation phase, leaving companies with weak, stable profit models.
With the implementation of the 15th Five-Year Plan, accelerated construction of the West-to-East hydrogen transmission pipeline and coastal green fuel storage and transport hubs, coupled with green ammonia exports opening new overseas growth markets, the hydrogen energy track is gradually shifting from "telling stories" to "crunching numbers" in a new commercialization phase. However, the sector still needs to address shortcomings in supply, infrastructure, and market mechanisms across multiple dimensions to push the industry from expectation-driven to performance-driven growth.
Demonstration projects move toward commercial delivery as purely conceptual ventures are weeded out
As 2026 marks the opening year of the 15th Five-Year Plan, and following the official designation of hydrogen as a non-fossil energy source in the Energy Law of the People's Republic of China, hydrogen has been integrated into the top-level design of the wind-solar-hydrogen new energy system. The industry widely believes that China's hydrogen energy sector has crossed the "valley of death" in its development, moving beyond mere technical demonstrations and transitioning toward scaled commercial delivery.
On July 28 this year, 3,750 tonnes of "Hydrogen Oasis Green Ammonia" from SPIC's Green Power subsidiary set sail from Lianyungang to South Korea, setting a global record for the largest single-batch green ammonia export. This batch of green ammonia, certified under the ISCC EU international sustainability scheme with traceable full-lifecycle carbon footprint, secured a green premium in international markets for its emission reduction value, closing the loop for the domestic wind-solar-hydrogen-ammonia full industrial chain from technical demonstration to international trade.
A representative from SPIC Green Power noted that the project's self-developed "green power-hydrogen-ammonia" flexible collaborative control system effectively overcame the world-class challenge of adapting fluctuating wind and solar output to continuous chemical production. Currently, the project site's Daan green ammonia demonstration facility is supported by 800 MW of new energy installations, producing 32,000 tonnes of green hydrogen and 180,000 tonnes of green ammonia annually, and has operated stably for over 300 days, including continuous production under extreme cold conditions of minus 30 degrees Celsius in the northeast.
"In the past, when we invested in hydrogen projects, we focused more on whether the technical process could be validated; now the market cares more about whether products can be sold, whether there are long-term orders, and whether cash flow can break even," said Wang Guangxi, Vice President of Lenovo Group and Managing Partner of Lenovo Capital. He noted that Lenovo Capital continues to track frontier tracks like hydrogen energy, and its investment logic has shifted. AI computing infrastructure itself is an energy-intensive industry, and the focus on green hydrogen, controlled nuclear fusion, and solar energy is driven by the underlying energy demands of the AI industry, not by benchmarking against traditional energy companies.
Previously, many industry projects relied on policy push; in the next phase, the industry will place greater emphasis on real orders and commercial closed loops, with purely conceptual projects gradually being weeded out by the market. Across the supply chain, hydrogen projects from multiple A-share listed companies are transitioning from construction into capacity release cycles. For example, Baofeng Energy's Ningdong base green hydrogen coupled with coal chemical project is operating stably, channeling green hydrogen directly into chemical production processes to replace traditional grey hydrogen, with plans to continue expanding green hydrogen capacity. China Energy Engineering Group's Songyuan wind-solar-hydrogen-ammonia-methanol integration project phase one officially commenced production on December 16, 2025, forming annual capacity of 45,000 tonnes of green hydrogen and 200,000 tonnes of green ammonia and green methanol, leveraging an EPC plus operations model to deliver integrated solutions. China Tianying is developing a green hydrogen and green methanol project in Liaoyuan, Jilin, having secured supply orders from international energy giants, with plans to reach 200,000 tonnes of green methanol capacity in 2026 and move toward one million tonnes by 2030.
Equipment manufacturing shows a mixed picture of prosperity. Sungrow Power's alkaline and PEM electrolyser order books are full, with batch deliveries for multiple wind-solar-hydrogen integration projects and simultaneous overseas expansion. Kingdream Public announced in July that it had completed R&D on electrolysers and high-pressure hydrogen transmission equipment for the West-to-East hydrogen pipeline project, providing packaged equipment support for long-distance transmission networks. Meanwhile, the industry has also seen some rational contraction. Vision Group terminated its "Shenzhen Vision Hydrogen Fuel Cell Industrial Park Project" in April 2026, citing sufficient existing capacity and a shift toward increased R&D investment. Zhiyuan New Energy terminated its "Hydrogen Energy Equipment Intelligent Manufacturing Project" in January 2026, reallocating remaining funds as working capital. These changes reflect the industry bidding farewell to reckless expansion and entering a bubble-squeezing phase.
"In the past, the industry evaluated projects by equipment parameters and demonstration accolades; now the priority is on long-term off-take agreements, cost calculations, and carbon certification credentials," one industrial investor told reporters. He noted that many early hydrogen projects were "policy-driven construction that ended once demonstrations concluded," but now, with green ammonia exports, industrial substitution, and hydrogen heavy-truck demonstrations opening multiple scenarios, a growing number of listed company projects are beginning to generate recurring revenue.
Supply-demand mismatch remains prominent with multiple real-world bottlenecks yet to be resolved
Despite landmark commercialization cases, experts interviewed universally caution that before a full transition into the earnings delivery cycle, the industry still faces multiple hurdles in costs, storage and transport, standards, and market mechanisms, and a turning point should not be viewed with blind optimism. Yu Zhuoping, Director of the Expert Committee at the China Hydrogen Alliance, told reporters that the 15th Five-Year Plan period is a golden window for hydrogen industrialization that cannot be missed, but the disconnect between supply and demand remains evident: green hydrogen capacity in northwestern wind and solar bases is landing at an accelerated pace, yet local consumption capacity is limited; eastern industrial, shipping, and heavy-truck demand is strong, yet stable and affordable green hydrogen sources are lacking. The production-consumption mismatch between east and west is one of the core contradictions constraining industry development.
Research indicates that storage and transport shortcomings are the biggest current bottleneck. Large-scale, long-distance hydrogen transmission still relies mainly on high-pressure tube trailers, keeping transport costs high. The planned West-to-East hydrogen pipeline is not expected to be operational until 2029, leaving the regional supply-demand gap unresolved in the near term. Additionally, the "last mile" delivery from pipeline terminals to industrial parks and factories still faces significant safety and cost challenges.
On costs, the full-chain price of green hydrogen remains significantly higher than grey hydrogen. A representative from the China Electricity Council said that using curtailed wind and solar power to produce hydrogen and then re-electrifying for peaking is not economically advantageous at this stage; electrolytic hydrogen production costs remain high, and only by relying on large-scale wind and solar bases, coupled with downstream green ammonia, green methanol, and industrial feedstock substitution, can overall investment be amortised. Key materials such as proton exchange membranes, catalysts, and high-pressure hydrogen storage materials remain weak points, and insufficient scale in equipment manufacturing further pushes up full-chain costs.
At the market mechanism level, industry insiders say the carbon footprint accounting and green value trading systems for domestic green hydrogen and green ammonia remain incomplete. Channels to monetise green premiums are limited, and investment payback periods are long. Some regions still see indiscriminate approval of electrolyser projects, with concerns over emphasising demonstrations over operations and an oversupply of low-end capacity.
"Crossing the 'valley of death' does not mean an unimpeded road ahead," Yu Zhuoping said. He believes the cost-reduction logic for hydrogen is similar to power batteries, relying on scale to drive technological iteration. The precondition for scale is opening application scenarios; the industry cannot rely solely on subsidies to sustain itself. Instead, it should establish market-based profit models through carbon assessment mechanisms, form replicable business models, and then promote them nationwide, without demanding simultaneous maturity across all regions. Wu Xianming, Managing Director of Lenovo Capital, said that from a primary market investment perspective, hydrogen-related startups need to fully leverage industry partners' scenario and supply chain resources to complete technology and product validation. CVC institutions value two-way empowerment, not just providing capital but also helping startups connect with real industrial and energy customers to complete proof-of-concept validation, avoiding technology that is disconnected from actual market demand.
Closing gaps on multiple fronts to shift the industry from expectation-driven to performance-driven growth
Looking toward the 15th Five-Year Plan, the hydrogen energy industry is addressing shortcomings across supply, infrastructure, and market mechanisms to drive the transition from expectation-driven to performance-driven growth. On the infrastructure front, preliminary work on the West-to-East hydrogen transmission pipeline is accelerating, and coastal hubs including Lianyungang, Jinzhou, and Panjin are developing green ammonia-dedicated port storage and transport facilities. Construction of green ammonia storage and transshipment facilities is advancing to open up the circulation channel of "production in the Three Norths, consumption in the East, and export overseas," building a "pipeline plus port" storage and transport network to ease spatial mismatch.
On the demand side, a dual domestic and international market is taking shape. Domestically, high-energy-consumption industrial substitution, heavy-duty transport, and natural gas hydrogen blending are key landing scenarios. Overseas, the EU's third Renewable Energy Directive (RED III) and International Maritime Organization shipping emission rules are driving enormous demand for green fuels, while international certifications such as ISCC EU have opened export channels for domestic green ammonia and green methanol, making overseas markets a significant incremental source at this stage.
Multiple experts recommend that to truly reach an earnings inflection point, coordinated efforts from government, industrial capital, and enterprises are needed. First, continue tackling core equipment and materials, encouraging leading enterprises and research institutes to form innovation consortia to develop electrolysers, flexible control systems, and key membrane materials, relying on scale to reduce full-chain costs. Second, improve a unified domestic carbon footprint accounting standard for green hydrogen and green ammonia, opening channels to monetise green value, and incorporating full-lifecycle emission reduction value into carbon-related trading systems so green premiums can be reasonably realised in domestic markets. Third, strengthen industry-wide coordinated planning to prevent low-level redundant construction of electrolysers and synthesis units, steering resources toward projects with downstream orders and consumption conditions. Fourth, continue improving safety standards and regulations, enhance public outreach to dispel societal concerns about hydrogen safety, and remove institutional barriers for hydrogen refuelling stations and storage and transport facilities.
"The trillion-yuan track will not explode overnight; an inflection point is not a moment in time but a continuous evolution process," Yu Zhuoping said. Over the next five years, we will see listed companies and projects with genuine orders and controllable costs achieve profitability, while a large number of enterprises lacking core competitiveness will be eliminated by the market. Only after this round of adjustment will the hydrogen energy industry truly complete its leap from policy-led demonstrations to market-driven self-development, becoming an important component of China's new energy system.
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