The hydrogen energy industry is at the doorstep of commercialization

How can AI and hydrogen energy pilot policies accelerate cost reduction?

Reporter Wang Yajie

On March 16, 2026, the Ministry of Industry and Information Technology, the Ministry of Finance, and the National Development and Reform Commission jointly issued the “Notice on Conducting Hydrogen Energy Comprehensive Application Pilot Projects” (hereinafter referred to as the “Notice”). The policy selects pilot city clusters through a “ranking and bidding” process, clarifies a maximum of 1.6 billion yuan over four years as “awards instead of subsidies,” and sets large-scale, cost-reduction, and vehicle promotion goals for 2030.

This is the first significant policy at the central level following the 2026 government work report, which listed hydrogen energy as a “new growth point.” It marks China’s transition from demonstration exploration to a phase of accelerated scale and commercialization of the hydrogen industry. The entire “production, storage, transportation, and utilization” chain is poised to benefit from policy dividends and market restructuring opportunities.

On March 17, the hydrogen sector experienced a broad correction, with individual stocks showing differentiated trends. On March 18, the A-share hydrogen sector surged notably, with multiple stocks such as Dayuan Pump (603757), Chengzhi Co. (000990), Tongli Tianqi (605286), and Baili Electric (600468) hitting the daily limit.

Exploration

Before the issuance of the “Notice,” regions such as Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta, Ordos-Yulin, and Chengdu-Chongqing had already begun exploring hydrogen applications. While some experience was accumulated, practical issues such as fragmented scenarios, high storage and transportation costs, insufficient cross-regional coordination, and unclear business models also emerged.

The Beijing-Tianjin-Hebei urban cluster has taken fuel cell commercial vehicles as a breakthrough point. By February 2026, over 4,200 hydrogen-powered trucks, buses, sanitation vehicles, and others had been promoted, with 76 hydrogen refueling stations built. However, long-term challenges include “more vehicles, fewer stations, and high hydrogen prices at stations.”

A senior executive from a leading hydrogen refueling station operator told Economic Observer that the terminal hydrogen price in the Beijing-Tianjin-Hebei region has long been maintained at 35–40 yuan per kilogram. Even with local subsidies, the average daily sales per station are less than 300 kilograms, and most projects are operating below breakeven.

In the Yangtze River Delta, centered on Shanghai, Suzhou, and Jiaxing, efforts focus on applying hydrogen in ports, logistics, and distributed energy. However, bottlenecks mainly lie in storage and transportation. Currently, high-pressure gaseous storage and transportation at 20 MPa (megapascals) dominate, limiting transport radius, increasing unit costs, and resulting in low efficiency and high losses in cross-city dispatching, making large-scale application difficult.

In the Pearl River Delta, supported by cities like Foshan, Yunfu, and Shenzhen, a complete supply chain of vehicles, fuel cell stacks, components, and refueling stations has been established early. Yet, application scenarios remain mainly in transportation, with slow expansion into industrial decarbonization, hydrogen-based chemicals, and other high-consumption hydrogen scenarios.

A CFO of a fuel cell system company in Suzhou said that relying solely on transportation scenarios makes it hard to form stable hydrogen demand, leading to low equipment utilization and difficulty in rapidly reducing costs.

In resource-rich areas like Ordos and Yulin, industrial by-product hydrogen and renewable energy resources enable low-cost hydrogen production. However, issues such as insufficient absorption, difficulties in external delivery, and lack of high-end applications exist. The disconnect between green hydrogen production and end-use applications prevents resource advantages from transforming into industrial advantages.

These pain points encountered in early exploration are the targeted focus of the pilot policies by the three departments. The “Notice” emphasizes “regional connectivity, industrial collaboration, and ecological closed loops” using city clusters as carriers. It concentrates on four key conditions: industrial foundation, scenario richness, hydrogen resource assurance, and complete industrial chains. Over four years, with a maximum of 1.6 billion yuan in “awards instead of subsidies,” it aims to break through institutional, mechanism, and cost barriers that hinder local pilot projects. Strict restrictions ensure funds are used solely for hydrogen comprehensive applications, not for balancing budgets, repaying government debts, or clearing overdue payments, ensuring policy effectiveness reaches the industry frontline.

On March 16, a director from the Department of Energy Conservation and Comprehensive Utilization of the Ministry of Industry and Information Technology stated that China’s hydrogen industry has achieved a “from zero to one” breakthrough and is entering a critical stage of crossing technological and economic inflection points for rapid scale-up. Currently, challenges include limited application scenarios, insufficient green hydrogen supply, high hydrogen prices, and incomplete storage, transportation, and refueling systems. Business models still need further exploration. The city cluster pilot aims to leverage applications to solve problems and promote cost reduction through scale.

CITIC Securities’ non-ferrous new materials analyst Shang Yue believes this pilot marks a milestone in shifting the hydrogen industry from policy demonstration to commercial-driven development. The 1.6 billion yuan in cluster rewards are not just simple subsidies but are designed to drive cost reductions through application scale and activate industry investment via scenario expansion. The target hydrogen price of 25 yuan per kilogram indicates that green hydrogen in transportation and distributed energy scenarios will be fully economical, creating a positive cycle of increasing volume and price.

Cost Turning Point

The core bottleneck for hydrogen energy commercialization is cost. Currently, the industry is experiencing a cost inflection point driven by technological iteration and scale expansion.

In recent years, domestic terminal hydrogen prices have long ranged from 35 to 60 yuan per kilogram, making fuel cell vehicles and industrial hydrogen projects uncompetitive in the market. According to the “China Hydrogen Industry Cost Estimation Report” published by the China Hydrogen Alliance in January 2026, when terminal hydrogen prices fall below 25 yuan per kilogram, the total cost of ownership (TCO) for fuel cell heavy trucks will be lower than that of diesel trucks over their entire lifecycle. In industrial heating and ammonia synthesis, green hydrogen can achieve parity with gray hydrogen. The cost bottom line for integrated wind and solar-powered hydrogen projects in advantageous regions is around 15 yuan per kilogram, supporting full replacement of fossil fuels with green hydrogen.

The main drivers supporting cost reduction are scale effects and technological iteration. The “Notice” states that by 2030, the national fleet of fuel cell vehicles will double from 2025, aiming for 100,000 units, directly boosting the production of core components like stacks, membrane electrodes, bipolar plates, and air compressors.

According to joint estimates by the China Hydrogen Alliance and the China Society of Automotive Engineers, increasing fuel cell system annual capacity from thousands to tens of thousands of units through scale and technological progress can reduce unit costs by 40–60%. The “China Hydrogen Industry Development Report (2025)” indicates that electrolyzer capacity expanding from gigawatt (GW) to 10 GW will cut unit equipment investment by over 30%.

Policies are also extending application scenarios from transportation to industrial decarbonization, green ammonia, hydrogen-based chemical raw materials, and hydrogen blending combustion. A large chemical park with annual hydrogen consumption of 50,000–100,000 tons can meet the needs of thousands of hydrogen trucks, ensuring stable large-volume demand for profitability.

On March 18, Luoyang issued a pollution reduction and carbon reduction pilot plan, proposing to promote 360 fuel cell vehicles, build three refueling stations, and achieve an industrial chain output value of no less than 30 billion yuan by 2026, linking with national pilots. Industry insiders expect that regions with solid industrial foundations such as Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta, Chengdu-Chongqing, and Ordos-Yulin are likely to become the first batch of city clusters.

Reconstruction of the Industry Chain

Hydrogen industry chain companies are accelerating their layout adjustments.

In the upstream green hydrogen equipment sector, leading companies are rapidly scaling up and reducing costs. Longi Hydrogen, Sunshine Hydrogen, and Cockerill rely on technological and capacity advantages to dominate the domestic alkaline electrolyzer market.

According to Economic Observer, Longi Hydrogen has achieved scale upgrades and energy consumption optimization, leveraging low-cost green electricity resources to continuously lower hydrogen production costs, supporting terminal hydrogen price targets. Currently, orders are full, and capacity is operating at maximum, mainly serving city cluster pilot projects.

In the midstream storage, transportation, and refueling segments, companies are focusing on overcoming bottlenecks. CIMC Anrui, Jingcheng Co., and Lansi Heavy Industry are accelerating localization of core equipment such as 70 MPa hydrogen storage cylinders, liquid hydrogen tanks, long-distance hydrogen trailers, and refueling machines.

A technician from CIMC Anrui told us, “High-pressure gaseous storage and transportation remain mainstream. Liquid hydrogen, solid-state storage, and pipeline hydrogen are entering demonstration verification. Every 10% reduction in storage and transportation costs can lower terminal hydrogen prices by 3–5 yuan per kilogram, which is a key breakthrough direction during the pilot period.”

CIMC Anrui is a core clean energy equipment platform controlled by CIMC Group, a leading global provider of hydrogen storage and transportation equipment and solutions, with authoritative industry status.

Downstream applications show clear differentiation. Fuel cell heavy trucks, distributed power generation, and hydrogen-based chemicals are leading the volume growth, with products from top companies rapidly approaching international standards in lifespan, reliability, and cost. Companies lacking core technology and relying on low-end processing are gradually being phased out.

On March 17, Jiangsu Securities’ Electric Power and New Materials team published a research report titled “Three Departments Jointly Deploy Hydrogen Energy Comprehensive Application Pilot, Hydrogen Industry Enters a New Scale-up Stage,” stating that the hydrogen industry is shifting from “storytelling” to “showing results.” The pilot policies will accelerate the淘汰 of weaker players, favoring companies with core technology, customer barriers, and integrated operations, which will receive both orders and funding. Small and medium enterprises lacking technological accumulation and relying on low-end processing will gradually exit. Over the next three years, the hydrogen industry chain is expected to resemble the photovoltaic and lithium battery sectors, forming a few global leading enterprises.

Regarding current industry challenges, the CIMC Anrui technician mentioned that: first, the localization of core materials and components still has room for improvement, with some high-end parts still relying on imports; second, the cross-regional storage and transportation network is incomplete, with regional supply-demand mismatches; third, safety standards, testing, certification, and metering systems need further unification. The pilot city clusters serve as “test fields” to address these issues, with concentrated efforts over four years to provide experience for nationwide promotion.