BCG Xouyang Minggao China Hydrogen Industry Outlook 1699613914

China Hydrogen Industry
Outlook
A Joint Report by Boston Consulting Group and the Team of Academician

Minggao Ouyang
August 2023
Contents
Executive Summary 1
1. The Necessity of Developing Hydrogen Energy 4

1.1 Energy Crisis and Energy Structure Transformation 4
1.2 Advantages of Hydrogen Energy 6
1.3 China’s Favorable Environment for the Development of Hydrogen Energy 8
2. End Uses of Hydrogen 12

2.1 Transportation 14
2.2 Energy Storage 21
2.3 Industrial Applications 27
3. Key Technologies Along the hydrogen Industry Chain 33

3.1 Hydrogen Production Innovation 33
3.2 Hydrogen Storage and Transportation 39
3.3 Hydrogen-to-Power Conversion 42
3.4 Hydrogen Safety 48
Conclusion 52
China Hydrogen Industry
Outlook
Executive Summary
The development of the hydrogen industry has attracted growing attention in recent
years. With the frequent occurrence of extreme weather, governments are putting more
effort into effectively responding to climate change, and thus carbon neutrality is on the
agenda for many countries. Meanwhile, the fossil energy crisis demonstrates the urgency
for clean energy transition around the world, calling for a truly sustainable, net zero
emission energy system.
Hydrogen is a clean energy source that widely exists in nature. The booming renewable
energy with its volatile and intermittent nature has granted hydrogen a unique value
in the context of carbon neutrality. Through power-to-hydrogen conversion, renewable
electricity can be easily converted into hydrogen at a large scale for long-term storage,
transportation, and energy usage, which makes hydrogen an indispensable energy source
in the future energy structure.
In March 2022, Chinese authorities issued the Medium- and Long-Term Plan for the Develop-
ment of the Hydrogen Energy Industry (2021–2035) (hereinafter referred to as “Plan”). As a
national industrial plan, it clarifies the strategic positioning of hydrogen in China’s future
energy structure and details the development goals by phase for the hydrogen industry in
China. The Plan systematically maps out hydrogen’s large-scale applications outside the
transportation sector for the first time, including energy storage, power generation, and
industrial uses. The Plan has pointed out a clear direction and strengthened confidence in
China’s hydrogen industry.
August 2023 Boston Consulting Group

2 China Hydrogen Industry Outlook
This report is a joint work of Boston Consulting Group (BCG) and the team of Minggao
Ouyang, who is an academician of the Chinese Academy of Sciences and the Chairman
of the International Hydrogen and Fuel Cell Association. The report reviews the develop-
ment trends of the global and China’s hydrogen industry from both industrial and tech-
nological perspectives, with an in-depth discussion on hydrogen’s large-scale applications,
the development path, and key technology innovation directions. The report also intends
to shed light on the prospects of the hydrogen industry.
The development of the hydrogen industry relies on the “pull effect” from the scalable
consumption of hydrogen downstream. Such high potential uses include hydrogen-fueled
transportation, hydrogen energy storage, and industrial applications. Hydrogen in the
transportation sector has made notable progress in fuel cell electric vehicles. With
continuous technology breakthroughs and business model innovations, hydrogen-fueled
transportation serves as the “leading” application of green hydrogen by connecting the
processes in the hydrogen industry chain and boosting the development of the whole
hydrogen ecosystem. Hydrogen as an energy carrier is the most promising application.
When used for long-term energy storage, hydrogen can enable the application of renew-
able energy, and significantly improve the adoption of renewable electricity in the global
energy structure. Hydrogen used as an industrial feedstock is where most hydrogen is
consumed today. With the development of the hydrogen industry chain and continuing
cost reduction, green hydrogen is expected to gradually replace gray hydrogen and thus
decarbonize the global industrial sector.
The above development cannot be realized without technology innovations across the
hydrogen industry chain. For hydrogen production, to cope with various large-scale green
hydrogen production scenarios, improvements in system efficiency, safety and intelligent
features are still required for all technology routes—including alkaline electrolysis cells
(AECs) of higher commercial readiness, proton exchange membrane (PEMEC) in develop-
ment, and anion exchange membrane (AEMEC) and solid oxide electrolysis cells (SOECs)
in the laboratory stage. For hydrogen storage and transportation, compressed gaseous
hydrogen has dominated the Chinese market, with ongoing R&D efforts on increasing the
working pressure while ensuring safety; liquefied hydrogen storage and transportation have
been commercialized at scale overseas; other hydrogen carriers are also being explored
in commercial applications. Hydrogen-to-power conversion is essential to hydrogen
utilization. Among the technology routes, fuel cells are theoretically more suited for dis-
tributed power, while gas turbines and boilers perform better in larger-scale power plants.
All three technologies have respective development routes and demonstration scenarios,
and commercial products can be launched and applied before 2030. Hydrogen safety
management has become an emerging field in recent years. The large-scale hydrogen
Boston Consulting Group August 2023

China Hydrogen Industry Outlook 3
adoption poses new challenges to safety management, hence requiring systematic safety
management of all processes combined with digital tools in terms of intrinsic safety, active
safety, and passive safety.
A new era of hydrogen has arrived. Fueled by the joint efforts of policy, technology,
demand and investment, all-around breakthroughs along the hydrogen industry chain can
be expected. The hydrogen industry is on track to grow into a trillion-dollar market in the
next decade, and ultimately to enable the zero-carbon transformation of the global energy
structure.

1. The Necessity of Developing Hydrogen Energy

In July 2023, the world experienced its hottest month on record, with extreme heat waves
sweeping across China, Europe, and parts of the US. The frequency of extreme hot weather
has increased since 2015, warning that global warming is intensifying. To avoid the
devastating consequences of climate change, we urgently need to reduce carbon emissions
through a clean energy transition.
In this context, hydrogen, as a green energy source with multiple advantages such as zero
emissions and high energy value, has received increased attention in the past decades. As
a responsible country and one of the leaders in addressing climate change, China is creat-
ing a favorable environment for the hydrogen industry to realize the 3060 decarbonization
vision.
1.1 Energy Crisis and Energy Structure Transformation
Over the past 200 years, the world has undergone three energy structure transformations.
(See Exhibit 1.) The first was the transition from traditional biofuels to coal, which hap-
pened with the first industrial revolution in the late 19th century. The second transition
Exhibit 1 | Global primary energy consumption
Global primary energy consumption, 1800–2022 3

(EJ) Renewables are
expected to replace
fossil fuels in the third
600 energy transition
Renewables
400
2 Oil and gas
Energy consumption
of oil and gas
1 exceeded that of
Energy consumption
coal
200 of coal exceeded
that of traditional
biomass
Coal
Traditional
0 biomass
1800 1850 1900 1950 2000 2022
Source: BP Statistical Review of World Energy; Our World in Data; BCG analysis.

from coal to oil and gas occurred in the first half of the 20th century, driven by the
widespread application of internal combustion engines. We are now in the third energy
transition, with renewable energy expected to replace fossil fuels in the future.
The energy crisis is one of the major factors of the third energy transition. During the past
60 years, the global primary energy consumption has almost quadrupled1. It is doomed
to be unsustainable by solely relying on fossil fuels in the long term. In recent years, the
inequality of energy resources among countries and the geopolitical tensions further exac-
erbated the impact of the energy crisis, accelerating the energy transition momentum.
Carbon neutrality is another driver for the energy transition. In 2015, 196 Parties of the
United Nations signed the Paris Agreement at COP21, targeting to limit the increase in
the global average temperature to below 2°C above pre-industrial levels, preferably below
1.5°C. To achieve this goal, at least 65% of the total final energy consumption would be or
come from renewables in 20502. (See Exhibit 2.)
Exhibit 2 | Cumulative energy-related carbon emissions forecast
Cumulative energy-related carbon emissions, 2015–2050

(Gt CO2)
1,500 CO2 budget is expected Reference case:

to be exhausted in 2037 Maintaining the
if the current carbon current carbon
1,200 emission level remains emission level,
warming at 2.6–3.0°C
by 2050
900
Energy-related CO2 budget <2°C,
2015–2050: 760 Gt1
Low-carbon roadmap:
600
Reducing carbon
emissions to keep
warming below 2°C by
300
20501
0
2015 2020 2025 2030 2035 2040 2045 2050
Source: IRENA; BCG analysis.

1
At 66% probability.
1 Our World in Data https://ourworldindata.org/grapher/global-primary-energy.

2 International Renewable Energy Agency (IRENA), Global Energy Transition: A Roadmap to 2050 https://www.irena.
org/publications/2019/Apr/Global-energy-transformation-A-roadmap-to-2050-2019Edition.

In the third global energy transition, hydrogen will be playing an important role.
• Hydrogen is a key pathway to achieve carbon neutrality, as the energy releasing

process of hydrogen is carbon free.
• Hydrogen can empower the large-scale applications of renewable energy. Power gen-
eration from renewables (e.g., wind, solar power) is by nature more volatile than that
of conventional fossil fuels, which makes it difficult to match the power supply with
the load of demand. Hydrogen can address the challenge as a long-term and scalable
energy storage carrier.
As the energy transition continues, the share of hydrogen in global final energy consump-
tion is expected to reach 10% to 15% in the net zero emissions scenario in 20503. (See
Exhibit 3.)
Exhibit 3 | Global final energy consumption
Global final energy consumption by source: 2020, 2030 & 2050

(in 2050 net zero emission scenario)
<1% <5% 100%

10%–15%
Hydrogen
Renewables1
Electricity
Natural gas
Oil
Coal
2020 2030 2050
Source: IEA; IRENA; BCG analysis.

1
Renewables refer to biofuels and waste.
1.2 Advantages of Hydrogen Energy
Although hydrogen only accounts for less than 1% of global final energy consumption
today4, it has huge potential for wider application owing to its unique advantages. (See
Exhibit 4.)
3 International Energy Agency (IEA), Global Hydrogen Review 2021 https://www.iea.org/reports/global-hydrogen-review-

2021.
2021.

Exhibit 4 | Hydrogen is a zero-emission and high-efficiency fuel
Carbon emission coefficient Higher heating value

(kg CO2/mmBtu) (MJ/kg)
Hydrogen 0 Hydrogen 142
Natural gas 53 Natural gas 54
Gasoline 71 Gasoline 45 3x
Diesel 74 Diesel 44
Black coal 104 Black coal 33
Brown coal 98 Brown coal 15 9x
Source: US Energy Information Administration; BCG analysis.
• Zero emission. Hydrogen is a unique clean energy source that can produce heat
with water as its only by-product. The energy-releasing process of hydrogen does not
produce carbon emissions or other greenhouse gases. Currently, the vast majority of
global hydrogen production derives from fossil fuels and generates carbon emissions
in the process. However, the share of green hydrogen will increase with further tech-
nology and commercial breakthroughs in electrolysis and renewable energy, making
hydrogen a fully decarbonized energy source in the future.
• High heating value. The calorific value of hydrogen is higher than that of all kinds of
fossil fuels (over three times that of gasoline, nine times that of brown coal), making
hydrogen more efficient in transportation and more powerful in energy release.
• Flexible conversion to electricity. Hydrogen and electricity share a coupled energy

system as they can be converted into each other. As electricity is and will remain to be
one of the most widely used final energy (about 20% in 2021, expected to reach about
50% in 20505) in the world, the flexibility of hydrogen-electricity conversion enables
hydrogen to become a broadly applicable energy source.
• High availability. Hydrogen can be quickly produced through the electrolysis of

water. Both two materials—electricity and water—are relatively abundant and easy
to obtain.

2021.

1.3 China’s Favorable Environment for the Development of Hydrogen Energy
As the world’s second-largest economy and largest energy consumer and carbon emitter6,
China has taken action to reduce carbon emissions, which is crucial to curbing global
warming.
Developing hydrogen energy is among the initiatives to achieve carbon neutrality. China is
currently the world’s largest hydrogen producer with an annual production of 33 million
tons, accounting for a third of the global demand. The hydrogen demand in China is
expected to reach 35 million tons in 2030, and 60 million tons in 20507. With strong supply
and demand, the hydrogen industry in China will prosper.
1.3.1 China Issued National Development Plans for the Hydrogen Industry
In China, the development of hydrogen energy has been emphasized in a series of policies.
In 2006, the National Medium- and Long-Term Plan for the Development of Science and Tech-
nology (2006–2020) for the first time put forward guidance on the development of hydrogen
production, storage and transportation, and fuel cell technologies. In March 2022, China
issued the Medium- and Long-Term Plan for the Development of the Hydrogen Energy Industry
(2021–2035) (hereinafter referred to as “Plan”) , making the first nationwide mid-to-long-
term plan specifically for the hydrogen industry in China. The Plan clarifies the strategic
positioning of hydrogen energy in the nation’s future energy structure, defines the devel-
opmental goals by phase, and systematically maps out the potential applications. Hence, it
has a far-reaching impact on the development of China’s hydrogen industry. (See Exhibit 5.)
• Strategic positioning
In the Plan, the strategic position of hydrogen energy is defined as:
 An essential part of the national energy system.

 An important energy carrier to achieve green and low carbon transition.
 A strategic emerging industry and a key direction of future industry development.
6 International Energy Agency (IEA), An Energy Sector Roadmap to Carbon Neutrality in China https://www.iea.org/
reports/an-energy-sector-roadmap-to-carbon-neutrality-in-china.
7 China Hydrogen Alliance.

Exhibit 5 | China’s Medium- and Long-Term Plan for the Development of the Hydrogen
Energy Industry (2021–2035)
Strategic position Goals
1
By 2035
By 2030
An essential part of the By 2025
national energy system A comprehensive hydrogen
A well-established hydrogen industry with diversified
100–200 kt green hydrogen technology system and a use cases of hydrogen
per year clean hydrogen production
and supply system A significant share of
50,000 FCEVs in stock renewable hydrogen
A reasonable industrial layout consumption to support
2
A number of hydrogen and wide renewable hydrogen the energy transition
An important energy refueling stations production to support carbon
carrier to achieve green peaking
and low carbon
transition
Use cases
3
A strategic emerging
industry and key
direction of future
industry development
Transportation Energy1 Industrial Others
Source: National Development and Reform Commission; National Energy Administration; BCG analysis.
1
Including power generation, and energy storage.
• Development goals
The Plan lays out the development goals for China’s hydrogen industry every five years.
 By 2025, China aims for 50,000 fuel cell electric vehicles on the road, with
a number of hydrogen refueling stations built. Green hydrogen production
reaches 100 kilotons to 200 kilotons per year, becoming an essential part of the
incremental hydrogen consumption and reducing CO2 emission by 1 million tons
to 2 million tons per year.
 By 2030, China aims for a well-established hydrogen technology innovation

system and a clean hydrogen production and supply system. China envisions a
reasonable and orderly industrial layout and wide use of hydrogen production to
facilitate carbon peaking.
 By 2035, China targets to form a comprehensive hydrogen industry with

diversified use cases covering transportation, energy storage, industrials, etc. The
share of green hydrogen in final energy consumption shall improve remarkably,
becoming a strong pillar in the green energy transition.

• Use cases
In addition to the pilots in the transportation sector, the Plan emphasizes the diversi-
fied uses of hydrogen in the industrial and energy sectors (including hydrogen, elec-
tricity, and heat). By guiding the transformation of final energy consumption and the
green development of energy- and emissions-intensive industries, hydrogen energy
will lay a foundation for carbon peaking and carbon neutrality.
Prior to the Plan, most of China’s hydrogen industry policies focused on transporta-
tion uses, especially the application of fuel cell electric vehicles. As national and local
policies gradually come into effect, the pioneer demonstrations of hydrogen energy
applications in the transportation sector will also promote the other downstream
applications of hydrogen energy.
1.3.2 The Rapid Growth of Renewable Energy Supply Will Boost Hydrogen Consump-
tion in China
The rapid growth of the renewable energy supply such as wind and solar power in China
will push the development of hydrogen as an effective way of renewable energy accom-
modation and consumption.
From 2011 to 2021, the installed capacity of wind and solar power in China increased
from 48 gigawatts to 635 gigawatts at a compound annual growth rate (CAGR) of 29%,
accounting for 27% of the country’s total installed capacity in 20218. By contrast, only 12%
of electricity was generated from wind and solar power in the same year9. Such imparity
is due to the electricity supply and demand mismatch for the volatile and intermittent
nature of these renewables. Lacking adjustment measures poses challenges for renewable
energy transmission and consumption, resulting in high curtailment. In some parts of
northern and western China, the annual wind and solar curtailment rate could be as high
as 30%.
If the fluctuating renewable energy sources cannot be properly utilized, China’s goal of
energy structure transformation will be challenged. Therefore, further development and
construction of renewable energy power generation is imperative. With the installed
capacity of renewable energy ramping up, the mismatch between the supply and the load
side will continue to increase, urging the industry to seek solutions for the effective utiliza-
8 China’s National Energy Administration http://www.nea.gov.cn/2022-01/26/c_1310441589.htm.

9 China Electricity Council, 2021 Economic Operation Report of China Electric Power Industry http://lwzb.stats.gov.cn/
pub/lwzb/tzgg/202205/W020220511403033990320.pdf.

tion of renewable energy and break through the development bottlenecks.
Hydrogen can be a promising option. The power-to-hydrogen-to-power conversion better

connects the power supply and consumption sides by overcoming the constraints of re-
newable energy. Meanwhile, hydrogen energy can be directly utilized in various use cases,
such as hydrogen transportation, industrial decarbonization, large-scale energy storage
and transmission.
In China, with the booming downstream hydrogen consumption and rapid expansion of
hydrogen applications, the upstream renewable energy players are also investing in the
hydrogen industry to capture this huge opportunity, promoting the development of the
entire hydrogen industry chain.
1.3.3 Northwest China Enjoys Unique Advantages in Green Hydrogen Development
The development of the green hydrogen industry relies on local renewable energy re-
sources. In China, wind and solar resources are concentrated in the region between Inner
Mongolia in the north and Xinjiang in the northwest, as well as the southeast coastal
areas. The Gobi Desert extending from Inner Mongolia to Xinjiang enjoys abundant
sunshine and strong winds throughout the year, which is superior for renewable energy
development. For example, Inner Mongolia can get 1,500 hours to 1,800 hours of annual
effective sunshine, ranking first in China. Abundant renewable resources will reduce the
cost of local renewable electricity, thereby promoting the development of the green hydro-
gen industry.
The development of the green hydrogen industry requires adequate water resources.
As the raw material for electrolysis, water determines the availability and cost of green
hydrogen. In Ordos, Inner Mongolia, the Yellow River flows through and forms a bay,
which provides an abundant water supply for the development of the local green hydrogen
industry.
The development of the green hydrogen industry benefits from policy support. In 2022,
over 70% of the planned green hydrogen projects landed in Inner Mongolia, of which
Ordos is a key demonstration area. The local government has promoted the green hydrogen
industry through R&D facilitation, comprehensive policy guidance, and large-scale invest-
ment and investment invitation plans, aiming to build a national-leading green hydrogen
industry in terms of technology research and development, project landing, and industry
chain maturation.

2. End Uses of Hydrogen

Major uses of hydrogen include transportation, energy, and industrial sectors. (See Exhibit 6.)
Exhibit 6 | Use cases of hydrogen—transportation, energy and industrial
Use case Stage of development Positioning

• A key path to zero-carbon
• As a power source • An emerging application, transportation alternative to
• Mostly used in fuel cell electric with >50,000 units of FCEVs electrification
vehicles; rail, shipping and aviation stock globally, accounting
for ~0.03% of total • Drive the whole hydrogen value chain
sectors are also exploring hydrogen or
hydrogen consumption development as the “leading use
hydrogen-based fuel
Transportation case” of the green hydrogen industry
• As a clean energy source

• The energy utilization of hydrogen
• Explored in the energy sector as a • At an early stage, very
lays the foundation for renewable
clean carrier for energy storage (via small share of current
grids, facilitates the adoption of clean
energy conversion between electricity hydrogen demand, while
energy, and promotes the
and hydrogen) to generate power or pilot projects are landing
transformation of a green energy
Energy transported and consumed for and expanding globally
system
other use cases
• As an industrial feedstock • Largest and the most

• Widely used in refining, chemical mature application, >99% • Replace the current gray hydrogen
(production of ammonia and of total hydrogen demand, with green hydrogen to decarbonize
methanol), iron and steel (DRI1 yet currently dominated by the mature industry
Industrial production) sectors, etc. gray hydrogen
Source: IEA; BCG analysis.

1
DRI = direct reduced iron.
In the transportation sector, hydrogen directly used as a power resource can be one of
the important components and key technology pathways of zero-emission transportation.
This usage is emerging, especially fuel cell electric vehicles (FCEVs) for heavy-duty long-
haul road transportation, driven by the advancement of fuel cell technology, expansion of
hydrogen infrastructures, and accelerations from policies. More importantly, hydrogen-fueled
transportation serves as the pioneering application of green hydrogen by connecting the
processes in the hydrogen value chain and boosting the development of the whole hydro-
gen ecosystem. Once the economic viability is proven, FCEVs are expected to become the
growth engine for hydrogen demand in the short to medium term.
The most promising use of hydrogen is believed as a carrier for energy storage and
power generation. Hydrogen is an ideal long-term energy storage solution for renewable
power grids, as well as a clean energy source for flexible power generation. Nowadays,
there have been various explorations and practices, including hydrogen-fueled gas tur-
bines, hydrogen or ammonia blending in boilers, and fuel cells for combined heat and
power (CHP). Despite the challenges in technologies and cost, the energy applications of
hydrogen are rapidly expanding and driving massive growth in the industry.

Investment and Financing of the Hydrogen Energy Industry in China
Hydrogen-fueled transportation and fuel cells Statistics show that in 2021, 70% of the disclosed
have been the most active areas of investment financing deals in China’s hydrogen industry
and financing in the hydrogen industry chain were related to fuel cells and hydrogen-fueled
in the past, fully reflecting the leading position transportation, including the fuel cell and its
of transportation uses of hydrogen. Meanwhile, key component manufacturing and vehicle
with the transportation sector driving the manufacturing. The rest focused on the key
commercialization of the entire industry chain, steps of the hydrogen industry chain, such as
other applications and upstream industries electrolyzers, storage and transportation. In 2022,
have also begun to attract more financing although half of the investment deals still went
and investment, indicating that China’s to fuel cells and hydrogen-fueled transportation,
hydrogen industry has entered a full-blown deals in upstream sectors increased rapidly,
stage of development. In this context, many indicating that both strategic and financial
new companies are emerging, and those who investors started to pay more attention to the
excel in technology, supply chain integration, upstream key processes and other use cases—
and commercial resources will gain first- from core materials to electrolyzers, from
mover advantages and are expected to grow hydrogen storage to hydrogen consumption.
into global leaders in the hydrogen industry.
Disclosed investment of hydrogen industry in China, 2021–2022

# of deals
Fuel cells and hydrogen-fueled transportation Other sectors
26 26
2 Bipolar plates
Fuel cell Hydrogen equipment
1 Membrane 5
compo- components2
2 Others1
nents
18 5 Fuel cell stack 6 Electrolyzer
4
0
Storage and
5
5 transporation
12 Fuel cell system 8
1 4 Hydrogen refueling
2 1
2 1 Hydrogen gas turbine
1
6 Transportation 2 5 Energy operation
4 0
equipment 2
2021 2022 2021 2022
Source: China Renaissance; BCG analysis.

Note: Only the number of deals is available; the total funding raised is not disclosed.
1
Gas-liquid separators, compressors, electrical equipment, etc.
2
Components of hydrogen production, storage, transportation and refueling equipment, such as mechanical and electrical
equipment/gas-liquid separation equipment.

Hydrogen is not new to industrial applications, as it has been widely used as an indus-
trial feedstock of various sectors for decades. In recent years, decarbonization has started
driving the development of green hydrogen as the replacement for gray hydrogen. The
existing infrastructures for hydrogen transmission, storage, and utilization will effectively
promote the rapid implementation of green hydrogen adoption in the industrial sector.
To realize the large-scale replacement of gray hydrogen, the cost competitiveness of green
hydrogen is crucial.
2.1 Transportation
2.1.1 The Role of Hydrogen in the Transportation Sector
Transportation has been an emerging sector for hydrogen usage. During the past
decades, the transportation sector has witnessed huge efforts and notable progress in
decarbonization through electrification. While in those hard-to-electrify segments (e.g.,
long-haul heavy-duty trucking, shipping, and aviation), hydrogen-based fuels become
another pathway. Despite the limited demand today, hydrogen-powered transportation
is meaningful to the energy structure evolvement, as it marks an expansion of hydrogen
application from an industrial feedstock to a power source. Beyond the end application in
transportation itself, the hydrogen application demonstration in transportation will also
drive the whole hydrogen industry chain (including hydrogen production, storage and
transportation, and fuel cell components) to scale up and prosper.
Among the transportation modes, road transportation represented by fuel cell electric
vehicles (FCEVs) is the major source of hydrogen demand and the most significant appli-
cation of hydrogen energy in the transportation sector. Demonstrations of hydrogen fuels
in rail and shipping are ongoing as well. For example, 2022 saw the world’s first hydrogen-
powered train fleet in Germany10 and the world’s first liquid hydrogen-powered ferry
in Norway11. Regarding aviation, Airbus has set a target to launch the hydrogen-fueled
ZEROe aircraft by 203512; however, so far there is no available commercial application.
In the following part we will focus on FCEVs, the most discussed hydrogen transportation
end use.
10 France24, “Whistle blows in Germany for world’s first hydrogen train fleet” https://www.france24.com/en/live-
news/20220824-whistle-blows-in-germany-for-world-s-first-hydrogen-train-fleet.
11 Offshore Energy, “Ballard fuel cells for the world’s largest LH2-powered ferry” https://www.offshore-energy.biz/bal-
lard-fuel-cells-for-worlds-largest-lh2-powered-ferry/.
12 Airbus official website https://www.airbus.com/en/innovation/zero-emission-journey/hydrogen.

2.1.2 Hydrogen-Powered Vehicles
Hydrogen-powered vehicles mainly refer to fuel cell electric vehicles (FCEVs), which use
a fuel cell that generates electricity using oxygen from the air and compressed hydrogen—
in combination with a small battery, or supercapacitor—to power the motor.
Another technical route is hydrogen internal combustion engine (H2-ICE) vehicles that
burn hydrogen instead of gasoline or diesel in a modified internal combustion engine to
power vehicles. Although H2-ICE technology is even at an earlier stage of development
compared with fuel cells, it is also being pursued by some automakers like Cummins,
Toyota, Weichai, and BAIC, for potential cost advantages by leveraging existing ICE tech-
nologies, and better performance competitiveness under high loads and harsh working
conditions13.
Along with the rapid rise in zero-emission vehicle adoption, the global FCEV market wit-
nessed strong growth. With more than 17,000 FCEVs sold in 2021 (over 70% year-over-year
growth), global fuel cell vehicle stock exceeded 50,000 units by the end of 2021. Passenger
vehicles dominate the global FCEV stock by 2021, partially because automakers in Japan
and South Korea are early starters in FCEV development with passenger vehicle models
already sold globally, represented by Hyundai Nexo and Toyota Mirai. Meanwhile, the
mainstream FCEV market in China is commercial vehicles and buses, and Chinese OEMs’
efforts are focused on developing fuel cell commercial vehicle models. (See Exhibit 7.)
Four key drivers of FCEV development are listed below.
• Fuel cell technology development. R&D efforts on precious metal catalyst reduction
or replacement, together with the scale-up of the fuel cell component value chain, are
driving fuel cell systems to be more efficient, durable, and cost-effective. The fuel cell
system cost has rapidly declined to USD 700 per kilowatt (RMB 5,000 per kilowatt)
in China in 202114. The Energy-Saving Vehicle and New Energy Vehicle Technical Roadmap
2.015 further targets fuel cell system cost to be USD 300 per kilowatt (RMB 2,000 per
kilowatt) in 2025 and USD 85 per kilowatt (RMB 600 per kilowatt) in 2030 to 2035,
which is also in line with the US target of USD 80 per kilowatt16 around 2030.
13 Cummins official website https://www.cummins.com/news/2022/01/27/hydrogen-internal-combustion-engines-

and-hydrogen-fuel-cells.
14 WANG Hewu, OUYANG Minggao, LI Jianqiu, & YANG Fuyuan. (2022). “Hydrogen Fuel Cell Vehicle Technology
Roadmap and Progress In China.” Journal of Automotive Safety and Energy, 13(2), 211.
15 China Society of Automotive Engineers (SAE), Energy-Saving and New Energy Vehicle Technology Roadmap 2.0.
16 US Department of Energy, Fuel Cell Technologies Overview (2021) https://www.hydrogen.energy.gov/pdfs/review21/
plenary8_papageorgopoulos_2021_o.pdf.

Exhibit 7 | Global fuel cell vehicle stock exceeded 50,000 units by 2021
Fuel cell electric vehicle stock by segment, Fuel cell electric vehicle stock by region,
2017–2021 2017–2021
k unit k unit
60 60
52
52
50 0
4 4
5 7
40 40 +64% 35
+64% 35
8
3 3 <1
25 6 30 25 4
2 2 <1 12
8
20 4 42 20 4
13 13 6 9
26 1
7 19 10 7 3 8 20
1 2
2 <1 6 1 10
4 5
0 0
2017 2018 2019 2020 2021
2017 2018 2019 2020 2021
Cars Buses Commercial vehicles South Korea US China Japan Europe RoW

Note: Because of rounding, there may be instances where the sum of the sub-items does not equal the total.
• Supporting infrastructure development. The hydrogen infrastructure for FCEVs

spans across hydrogen production, storage and transportation, and distribution, in
which hydrogen refueling stations (HRSs) are currently the major bottleneck of FCEV
development. Therefore, players in the public and private sectors are encouraged to
invest in HRS networks in order to pave the way for FCEV adoption. With the contin-
uous push for HRS construction, nearly 1,000 HRSs have built globally by the middle
of 2022. (See Exhibit 8.) The HRS operation relies on a stable and economical hydro-
gen supply either from a centralized production facility or a distributed onsite hydro-
gen production system at the HRS. Some believe that the onsite hydrogen production
at HRS can be a promising solution, as it avoids fuel storage and transportation from
the production site to the HRS, which can be costly and inefficient17.
• Hydrogen fuel cost reduction. Fuel costs account for more than half of the TCO for
a Class 8 fuel cell truck, hence expensive hydrogen price has been another constraint
on FCEV adoption. Currently, typical hydrogen pump prices exceed USD 10 per kilo-
gram in Japan, the EU and the US, and range around RMB 40 to RMB 70 per kilogram
17 International Council on Clean Transportation (ICCT), Cost of Renewable Hydrogen Produced Onsite at Hydrogen Refuel-
ing Stations in Europe (2022) https://theicct.org/publication/fuels-eu-onsite-hydro-cost-feb22/.

Exhibit 8 | The ramping up of hydrogen refueling stations is paving the way for FCEV
development
Number of hydrogen refueling stations by region

981
777
581
470
396
343
2017 2018 2019 2020 2021 2022H1
China Europe Japan South Korea US RoW
(about USD 6 to USD 11 per kilogram, excluding government subsidy) in China, both
of which are still significantly higher compared with diesel and petroleum costs18, 19.
Going forward, owing to the increased green hydrogen supply, lower HRS capital
expenditures (CapEx) as well as rising HRS utilization, the hydrogen fuel cost at the
pump is expected to fall below RMB 35 per kilogram (about USD 5 per kilogram) in
China before 2030, thereby achieving TCO parity with diesel trucks.
• Policy support. Before the cost parity of FCEVs with ICE vehicles, there is still a
major need for policy initiatives and framework to guide the market development.
More government targets for FCEVs are seen (or included in zero-emission vehicles).
For example, China targets 50,000 FCEVs on the road by 2025 and 1 million FCEVs by
2035; Japan targets 800,000 FCEVs on the road by 2030; South Korea plans for cumu-
lative 6.2 million FCEVs produced by 2040. To achieve these targets, subsidies and tax
benefit schemes are also provided by these governments. For instance, the Chinese
18 S&P Global Platts Analytics https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/electric-

power/090221-platts-launches-hydrogen-pump-prices-in-germany-japan-and-california.
19 S&P Global Platts Analytics https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/energy-
transition/110921-chinas-hydrogen-fuel-price-to-be-competitive-against-petroleum-by-2030-sinopec-marketing.

government launched the FCEV pilots in five city clusters with incentives covering the
full FCEV value chain—including steps like FCEV demonstration application, FCEV
core components, and hydrogen supply. Before the market-driven demand rises,
policy support will still be the primary near-term driver for FCEV uptake and industry
development.
We believe the greatest potential of FCEVs lies in heavy-duty long-haul transportation.

This is owing to FCEVs’ faster refueling time, lower weight, and higher energy density
when compared with battery electric heavy-duty trucks (HDTs). The TCO of FCEVs is
expected to significantly improve, driven by the decreasing hydrogen fuel price combined
with the cost optimization of fuel cell systems. Our analysis suggests that fuel cell HDTs
will become economically viable versus diesel HDTs towards the end of the decade. (See
Exhibit 9.)
Exhibit 9 | Fuel cell HDTs likely to reach TCO parity vs. diesel HDTs before 2030 in all
major markets
TCO (total cost of ownership) for long-haul HDTs 1, 2, 3 , USD/km
China US EU
2.4 2.4 2.4

Parity for FCEV likely Parity for FCEV likely Parity for FCEV likely
2.2 2.2 2.2
around 2027–2028 around 2026–2027 around 2027–2028
2.0 2.0 2.0
1.8 1.8 1.8
1.6 1.6 1.6
1.4 1.4 1.4
1.2 1.2 1.2
1.0 1.0 1.0
0.8 0.8 0.8

2025 2030 2035 2025 2030 2035 2025 2030 2035
BEV Diesel FCEV xNG H2-ICE
Source: BCG analysis.

1
HDTs classified as >15t GVW, assumed annual driving distance of 100,000 km to 160,000 km (depending on jurisdiction).
2
Including vehicle purchasing subsidies (until 2030) and toll waiver (until 2030), if applicable.
3
Energy costs assumptions: 2023 actuals; from 2025 to 2028, return to pre-crisis levels by extrapolating historical growth rates with 2019 as
the starting point.

Case Study 1: Hydrogen-Fueled Transportation in the 2022 Beijing Winter Olympics
The 2022 Beijing Winter Olympics has been During the event, more than 1,000 hydrogen
the first Olympic event that achieved carbon vehicles were in operation demonstration
neutrality. It also marked the world’s largest with 11 hydrogen production sites, over 30
demonstration of the FCEV application and its hydrogen refueling stations, and a data center
infrastructure, where China’s commitment to which oversaw the operation of the full chain.
developing the FCEV value chain was showcased.
2022 Beijing Winter Olympics: world’s largest demonstration of fuel cell vehicles
• 11 hydrogen production sites
• 1,000+ FCEVs, including • The Shell-Zhangjiakou City Transport

800+ buses, ~140 production facility with a 20-MW
passenger vehicles, Hydrogen capacity of green hydrogen production,
some trucks and production being one of the largest green hydrogen
catering vans electrolyzers in the world
• Vehicles from
automakers including • 30+ hydrogen refueling stations for
Beiqi Foton, Geely, demonstration with a daily refueling
Yutong and Toyota; and capacity of 23.5t
fuel cell systems from FCEVs Transportation • Most of the stations constructed by
SinoHytec and Toyota and distribution Sinopec and PetroChina
• FCEVs tested in
Zhangjiakou’s wintry • Combined data for hydrogen
climates, where production, transportation and
temperatures during vehicle operation in order to ensure
competitions have safety during production and operation
plummeted to -17°C Data center for • Scientists to analyze the effects of
hydrogen energy carbon emission reduction based on
and FCEVs the data
Source: Literature research; BCG analysis.

Case Study 2: Advanced Onsite Hydrogen Production and Refueling Station in

Xiong’an
Xiong’an New Area is China’s national strategic in Xiong’an, sponsored by the Ministry of
development zone announced in 2017. Based on Science and Technology of China. The onsite
the guiding principle of “prioritizing ecological hydrogen production and refueling model will
conservation and boosting green development”, reduce about 30% of the total station cost and
Xiong’an has set a target to become “the realize around 20% economic promotion of the
highland of hydrogen industry research and hydrogen produced. This national lighthouse
innovation”. In 2022, China Sinopec Group project will also witness innovations like
announced to build the first advanced onsite hydrogen production systems, hydrogen safety
hydrogen production and refueling station management, and intelligent management.
Xiong’an, China: Intelligent onsite hydrogen production and refueling station
A national lighthouse project sponsored by the Ministry of Science and Technology of China
Onsite hydrogen production model to reduce

cost
• Reduce hydrogen cost by 20% via onsite
Economical hydrogen production and eliminating
transportation process
Electrolyzer system innovation to enhance

efficiency
• Innovative cartridge stack design to realize onsite
cell replacement and upgrade
Innovative • World’s first pressurized and standardized
alkaline stack to realize >80% electrolysis
efficiency level
• First intelligent onsite hydrogen
production and refueling station of Smart and safety system to achieve digital
Sinopec in Xiong'an New Area management
• Expected start of operation in 2025 • Hydrogen leak detection for the whole hydrogen
filling station
Safe and
intelligent • Digital management and predictive maintenance
for key equipment in the station
Source: Ministry of Science and Technology of China; China Sinopec Group; BCG analysis.

2.2 Energy Storage
2.2.1 The Role of Hydrogen in Energy Storage
The intermittent nature of renewable energies brings new challenges to the conventional
power grid system. To accommodate the variability, the power grid requires an energy
storage solution capable of absorbing the surplus renewable electricity produced during
off-peak hours, and storing the energy for a longer duration at scale to smooth out the
seasonality issue. Also, it must be green. (See Exhibit 10.)
Exhibit 10 | The intermittency of renewable energy
Normalized electricity generation and demand
1.5
1.4
1.3
Seasonal energy storage
1.2
Load (demand)
1.1
1.0 Excess
0.9 Shortage
0.8
0.7 Solar generation

0.6
0.5
Jan Apr Jul Oct Dec
Month
Source: Gabrielli, P., Poluzzi, A., Kramer, G. J., Spiers, C., Mazzotti, M., & Gazzani, M. (2020). “Seasonal energy storage for zero-emissions
multi-energy systems via underground hydrogen storage.” Renewable and Sustainable Energy Reviews, 121, 109629.
Hydrogen energy storage system (HESS) hereby attracts attention for its huge potential in
renewable energy intensive power grids because of its big capacity, long period, and clean
and efficient nature. (See Exhibit 11.) Hydrogen is an efficient and clean energy carrier
as it is energy-dense and carbon-free. As a form of chemical energy storage, HESS can
preserve energy over long periods (months or seasons) and can be scaled up without geo-
graphical limitations (unlike pumped storage hydropower). Its energy storage capacity can
be expanded independently from the power and hydrogen production rates by increasing

Exhibit 11 | Size and discharge durations by energy storage technology
Discharge duration
Months
Hydrogen Pumped hydro
Weeks
Compressed air
Days energy storage
Sodium-sulfur batteries/
Hours Flow batteries
Lithium-ion
Minutes Flywheels batteries
Seconds Supercapacitor
System
1kW 10kW 100kW 1MW 10MW 100MW 1,000MW capacity
Electrical Mechanical Electrochemical Hydrogen-related
Source: BloombergNEF.
Note: System capacity and discharge duration are based on general use, rather than technical limitations.
the size of the tanks or reservoirs with low marginal costs. Additionally, hydrogen can be
easily transported across regions (which is almost impossible for stationary batteries) and
utilized as a commodity in versatile end uses. All these advantages make HESS a promis-
ing solution in an era of decarbonization, with demonstrations ongoing around the world.
Looking ahead, we will see diversified technologies emerging in the energy storage market
as energy structure shifts and various forms of energy storage systems are expected to
supplement each other. By the end of 2021, global energy storage capacity exceeded 200
gigawatts, in which pumped storage hydropower was still the most widely used technology
(86%) for long-term and large-scale energy storage, followed by lithium-ion batteries (11%)
for short-term and distributed renewable energy storage20. With the growing penetration
of renewable energy, HESS is expected to play an increasingly important role in the large-
scale seasonal storage of renewable energy on the generation side, especially in regions
with abundant solar and wind resources such as Northwest China.
20 China Energy Storage Alliance (CNESA), Energy Storage Industry White Paper 2022.

2.2.2 Applications of Hydrogen Energy Storage in Renewable Energy Power Grids
A hydrogen-based chemical energy storage system encompasses hydrogen production,

hydrogen storage and transportation, and power production using hydrogen as a fuel
input21. (See Exhibit 12.) The application of HESS centers around the energy conversion
between hydrogen and other power sources, especially electricity. In a bidirectional
“power-to-gas-to-power (P2G2P)” process, hydrogen is produced from water with
electrolyzers powered by surplus renewable electricity, then stored and fed back for
generating electricity with gas turbines or fuel cells while giving off only water and heat
as by-products with no carbon emissions. Alternatively, in the one-way “power-to-gas
(P2G)” process, the stored hydrogen can be transported and consumed as a commodity
for various end uses, such as industrial and transportation sectors22.
Exhibit 12 | The applications of hydrogen energy storage system (HESS) in renewable energy
power grids
Generation Transmission & distribution Consumption
P2G1: Distributed generation /

Renewables: Curtailment Power grids
Solar PV/wind CHP / backup power3
reduction
Peak shaving
Load leveling Refueling stations

Local generation
using fuel cells/ (potentially with onsite H2 production)
Electrolyzer
engines/turbines
G2P2:
Capacity firming Industrial
and fluctuation Hydrogen energy storage power stations
Hydrogen storage mitigation
Direct utilization in end uses
Hydrogen transportation
Hydrogen Electricity
1
P2G = power-to-gas.
2
G2P = gas-to-power.
3
Household use included.
21 MIT, The Future of Energy Storage (2022) https://energy.mit.edu/research/future-of-energy-storage/.

22 US Department of Energy, Energy Storage Grand Challenge Roadmap (2020) https://www.energy.gov/energy-storage-
grand-challenge/articles/energy-storage-grand-challenge-roadmap.

HESS may enhance and optimize the system flexibility and capacity of the energy power
grids when deployed across generation, transmission and distribution (T&D), and con-
sumption. On the generation side, with hydrogen’s participation in flexible power genera-
tion, the P2G2P process with HESS reduces renewable curtailment and addresses capacity
firming, which smoothes out the power output and controls the ramp rate. HESS can also
serve for load leveling of the transmission grid, as well as peak shaving or peak-valley
spread arbitrage on the demand side as a buffer, backup power, and off-grid power supply.
2.2.3 Progress and Challenges in Hydrogen Energy Storage
HESS is in the process of being demonstrated in completion, with multi-megawatt scale

integrated systems operating under real-world, grid-relevant operating conditions23. Ambi-
tious project plans have been observed across countries.
• In China, HESS pilot projects are expected to soar for over 200 megawatts in the
pipeline in the following three years. For example, in December 2021, megawatt-scale
proton exchange membrane (PEM) electrolysis hydrogen production, hydrogen
energy storage and fuel-cell power generation systems were put into operation in
Lu’an, Anhui province, by a subsidiary of State Grid Corporation of China in collabo-
ration with the Dalian Institute of Chemical Physics. The project has a hydrogen
production capacity of 220 m3/h, equipped with a 200-kilogram storage container (20
MPa) and six sets of 200-kilowatt fuel cell power generation systems, marking the
first megawatt-scale hydrogen energy storage power station in China24. Besides that,
a series of projects, such as the “Renewable electricity—hydrogen—electricity and
heat” demonstration in the Tibet Autonomous Region by the State Power Investment
Corporation25 and the first HESS demonstration in Shanxi province by China Datang
Corporation26, will also be put into operation in the next three years.
As the demand for flexibility in the electricity grid increases, with ongoing upgrades
of power plants, HESS is likely to see scalable applications in China in this decade. (See
Exhibit 13.) While power generation by hydrogen-fueled gas turbines is more appli-
cable to regions rich in natural gas, a special case for China is that ammonia co-firing
in coal power plants with minor equipment modifications can be more plausible, as
China still relies heavily on coal for power generation and has a large base of coal-fire
23 US Department of Energy, Energy Storage Grand Challenge Roadmap (2020) https://www.energy.gov/energy-storage-

grand-challenge/articles/energy-storage-grand-challenge-roadmap.
24 People.com http://ah.people.com.cn/n2/2021/1230/c227767-35075113.html.
25 Bjx.com.cn https://guangfu.bjx.com.cn/news/20211118/1188657.shtml.
26 Datong Government http://www.dt.gov.cn/dtszf/jyjbmdth/202001/a707f2a92d194bb19af25fd98873f848.shtml.

Exhibit 13 | Electricity grid based on energy storage systems: a viable path for China
Cross-regional Intra-regional
UHV transmission
Generation
Northwest China: Power generation
Solar PV and wind power + • Flexibility upgrades of coal
hydrogen energy storage power plants supplemented
by energy storage
• Power generation with gas
and hydrogen
• Distributed PV
East China:
Demand of load +
Demand
distributed energy
• Load optimization and
storage
demand response
• Microgrid based on backup
power
Southwest China: • V2G—distributed energy
Hydroelectric power + storage by battery
pumped storage hydropower
facilities. Clean ammonia converted from green hydrogen can be blended into coal
to decarbonize conventional coal power plants, which was already demonstrated by
China Energy Investment Corporation on a 40-megawatt coal-fire generator set with a
35% blending rate of ammonia27.
• In France, Smurfit Kappa Group has successfully completed the testing phase of an
innovative hydrogen P2G2P project, Hyflexpower, in 2022, marking the first industrial-
scale facility in the world to introduce an integrated hydrogen gas turbine demonstra-
tor28. In this project, hydrogen was produced by the electrolyzers and used in a gas
turbine with a mix of 30% hydrogen and 70% natural gas for power generation.
• In the US, the most representative project, the Advanced Clean Energy Storage
(ACES) project in Utah, aims to develop one of the world’s largest HESS facilities.
The storage facility will provide long-term seasonal energy storage to Intermountain
Power Plant (IPP) near Delta, Utah, a coal-fired plant that is slated to be repowered
27 People.com http://finance.people.com.cn/n1/2022/0125/c1004-32339151.html.
28 Smurfit Kappa official website https://www.smurfitkappa.com/newsroom/2022/world-first-as-hydrogen-successfully-
trialled-at-smurfit-kappa-plant-with-hyflexpower-demonstrator.

as an 840-megawatt combined cycle power plant combusting up to 30% hydrogen by

2025, and 100% hydrogen by 204529.
• In Japan, the “Energy Carriers” project of Strategic Innovation Promotion Program

(SIP)30 initialized by over 70 related parties has been dedicated to developing and
commercializing ammonia used as a zero-carbon fuel and an energy carrier of hydro-
gen since 2014. The program has made significant progress in ammonia blending in
gas turbines and coal-firing in boilers.
Meanwhile, challenges exist for this rising application. The current economics of HESS is
not satisfactory due to low round-trip efficiency and premature infrastructure. There is
still much to improve in both technologies and commercialization.
Constrained by the current technology and limited scale, HESS is far from economically
competitive compared with other energy storage systems. Studies show today’s initial
investment for HESS is as high as RMB 13,000 per kilowatt, whereas pumped storage
hydropower only costs RMB 7,000 per kilowatt and battery energy storage at RMB 2,000
per kilowatt. The largest cost component of HESS is the stationary fuel cell system, which
accounts for nearly 70% of the total investment. For wider adoption, HESS, especially
the fuel cell system, is still in need of R&D to improve performance and reduce costs to a
commercially competitive level.
To address the concerns over efficiency, gas turbine, boiler and fuel cell manufacturers are
advancing their technologies and improving commercial viability through demonstrations.
For example, the hydrogen-fueled combined heat and power (CHP) application is being
explored for its higher energy efficiency potential (thermal efficiency included). New tech-
nologies are being explored as well, such as high-temperature reversible fuel cells (RFC).
Additionally, efforts have been made around the direct usage of stored hydrogen in down-
stream applications, such as hydrogen refueling stations for FCEVs, which may alleviate
the limitations of round-trip efficiency and create additional revenue streams. An MIT
study31 concludes that hydrogen could be more valuable for end uses compared with elec-
tricity generation in the short term, as long as the cheap electricity remains on the grid.
29 Power Magazine, “ACES Delta’s Giant Utah Salt Cavern Hydrogen Storage Project Gets $504M Conditional DOE
Loan Guarantee” https://www.powermag.com/aces-deltas-giant-utah-salt-cavern-hydrogen-storage-project-gets-
504m-conditional-doe-loan-guarantee/.
30 Japan Science and Technology Agency https://www.jst.go.jp/sip/pdf/SIP_energycarriers2015_en.pdf.
31 MIT, The Future of Energy Storage (2022) https://energy.mit.edu/research/future-of-energy-storage/.

Take a green hydrogen demonstration project in Northwest China that is about to be

put into operation as an example. In this project, green hydrogen will be produced in an
electrolysis system of 50,000 Nm3/h capacity, powered by upstream green electricity from
a nearby solar power plant, and then directly utilized in refining factories to realize large-
scale hydrogen energy storage and comprehensive utilization of hydrogen energy. The
cost of green hydrogen in this project is on par with gray hydrogen, and sometimes even
cheaper, owing to the abundant renewable energy locally.
Hydrogen storage and transportation infrastructure are also vital for the mass adoption
of HESS. Today’s various storage and transportation technologies are at different levels
of maturity and cost, which will be discussed in section 3.2 of this report. To facilitate the
broader application of HESS, it is necessary to seek the optimal combination of hydrogen
storage and transportation methods, and most importantly, to build the hydrogen infra-
structure at scale. Both top-level planning and implementation incentives are required for
hydrogen infrastructure construction.
2.3 Industrial Applications
2.3.1 Applications of Hydrogen in the Industrial Sector
Hydrogen is widely used in the industrial sector. In 2021, global hydrogen demand
reached more than 94 million tons, over 99% of which comes from the industrial sector32.
(See Exhibit 14.)
Refining is currently the largest application of hydrogen, consuming over 40 million tons
hydrogen per year globally, which is 42% of the total demand. Other uses of hydrogen in
the industrial sector include ammonia, methanol, and direct reduced iron (DRI) produc-
tion, where hydrogen is widely used either as a raw material or a reducing agent. (See
Exhibit 15.)
32 International Energy Agency (IEA), Global Hydrogen Review 2022 https://www.iea.org/events/global-hydrogen-review-

2022.

Exhibit 14 | Over 99% global hydrogen demand comes from the industrial sector
Global hydrogen demand by application, 2019–2021 (Mt H2)
94
91 90 1 Others
(1%) 5
5 1 5 1 (6%) DRI
(5%) (1%) (5%) (1%)
14 15 Methanol
13 (15%) production
(15%) (15%)
32 34
>99%
33 (36%) Ammonia
(36%) (37%) production
of the global
hydrogen demand
comes from
the industrial sector
40 38 40
(43%) (42%) (42%) Refining
2019 2020 2021

Note: Because of rounding, there may be instances where the sum of the sub-items does not equal the total.
Exhibit 15 | Hydrogen applications in the industrial sector
Hydrogen-related steps
Hydrogen production Hydrogen usage End applications
Refining Auto manufacturing

Gray hydrogen Oil, industry
(fossil fuels) ammonia,
Hydrogen
methanol,
Ammonia production etc. Fertilizer industry
Blue hydrogen
(fossil fuels with CCUS1)
Methanol production Chemical industry
Green hydrogen
(water electrolysis) DRI production …
Huge potential for Relatively mature Wide downstream

green hydrogen to processes by using applications
replace gray hydrogen hydrogen as feedstock

1
CCUS = carbon capture, utilization and storage.

2.3.2 The Shift to Green Hydrogen
The future development of hydrogen in the industrial sector is expected from the
upstream hydrogen production process. Almost all hydrogen used in the industrial sector
today comes from fossil fuels (also known as gray hydrogen), resulting in more than 830
million tons of CO2 emissions in 202133. The current emissions footprint, if sustained,
is incompatible with the climate goals. Therefore, the industry is expected to gradually
replace gray hydrogen with green hydrogen, i.e., more hydrogen will be produced by water
electrolysis using power from renewable sources.
The trend is clear, and the shift has started. The total installed capacity of electrolyzers has
increased by 70% in 2021 and reached 510 megawatts34, but the penetration of green
hydrogen is still low. The bottleneck of green hydrogen today is its economics. Currently,
the levelized cost of hydrogen (LCOH) is much higher in green hydrogen than in gray
hydrogen. A study by International Energy Agency (IEA) shows that the global LCOH of
green hydrogen and gray hydrogen (coal to hydrogen) is expected to converge in 2030 at
around USD 1.5 to USD 4.0 per kilogram of hydrogen to meet the net zero emissions
scenario in 2050, which calls for further technology and commercial breakthroughs of
green hydrogen production. (See Exhibit 16.)
Exhibit 16 | LCOH of green hydrogen and gray hydrogen in 2020 and 2030 (under 2050 net
zero emissions scenario)
LCOH (levelized cost of hydrogen)

USD/kg H2
6
To meet the net zero
emission scenario in
4
2050, global LCOH of
green hydrogen and
gray hydrogen (coal to
2 hydrogen) is expected
to converge in 2030 at
USD 1.5–4.0/kg H2
0
Gray hydrogen Green hydrogen Gray hydrogen Green hydrogen
2020 2020 2030 2030
Source: IEA 2021 report; BCG analysis.

2022.
2022.

The price gap between green hydrogen and gray hydrogen is expected to be narrowed
driven by four factors. (See Exhibit 17.)
Exhibit 17 | Cost structure of hydrogen production and major factors of future cost changes
Cost items1 Major factors Trends
Fixed cost (~10%) Cost of electrolyzer The price gap

expected to narrow in
the future
Cost of
green Cost of electricity (80%–85%) Power consumption • The cost of green
hydrogen hydrogen will decrease
due to cheaper
Others (5%–10%) Renewable electricity price2 electrolyzers, lower
power consumption,
and lower renewable
electricity prices
Fixed cost (~20%)
• The cost of gray
Coal price hydrogen will increase
Cost of gray once the carbon tax is
Cost of coal (45%–55%) introduced, assuming
hydrogen3
Carbon tax a relatively stable coal
price
Others (~30%)
Source: IEA 2021 report; literature research; BCG analysis.

1
Renewable electricity and coal prices are based on actual prices in China in 2021.
2
Final price after subsidy.
3
Coal to hydrogen as an example.
• Cost reduction of electrolyzers
Alkaline electrolysis cells (AECs) are the earliest and currently the most mature type
of electrolyzer. Other technologies, such as proton exchange membrane (PEM) elec-
trolyzers, are less mature in commercialization with higher costs.
The levelized cost will be lower in the future owing to economies of scale brought by
the larger installed capacity of electrolyzers. The equipment price will fall once there
are technological breakthroughs in process and materials as well.
• Price decrease of renewable electricity
About 80% to 85% of green hydrogen production cost comes from electricity, making
the LCOH highly sensitive to the price of renewable electricity. Assuming that the coal
price is RMB 800 per ton with no carbon tax charged, the LCOH of green hydrogen
and gray hydrogen (coal to hydrogen) is expected to break even when the renewable
electricity price reaches around RMB 0.16 per kWh. (See Exhibit 18.)

Some green hydrogen projects have already signed agreements with renewable elec-
tricity suppliers to ensure low electricity prices, and the prices will continue to drop as
the installed capacity increases.
• Power consumption optimization
Power consumption level is another factor affecting the total cost of electricity.
Currently, the power consumption of the whole electrolysis system to produce green
hydrogen using AEC is 5.1 to 5.2 kWh/Nm3 for most players. With the technological
improvement in the future, it is expected to reach 4.3 to 4.5 kWh/Nm3 around 2030
and will contribute to about 7% of LCOH decrease.
• The upcoming carbon tax/pricing
Most countries have yet to impose carbon tax/pricing, but carbon taxes can be ex-
pected given the net zero emission ambition. Taxing hydrogen from fossil fuels could
further narrow the price gap between green and gray hydrogen. For example, the
carbon price of RMB 700 per ton of CO2 corresponds to the cost increase of RMB 14
per kilogram of hydrogen for gray hydrogen (coal to hydrogen) production without
any measure of carbon capture, utilization and storage (CCUS)35. Assuming that the
coal price is RMB 800 per ton with a carbon tax of RMB 2000 per ton of coal (about
RMB 700 per ton of CO2), the LCOH of green hydrogen and gray hydrogen (coal to
hydrogen) can break even when the renewable electricity price reaches RMB 0.4 per
kWh. (See Exhibit 18.)

2021.

Exhibit 18 | Cost parity of green hydrogen and gray hydrogen production in China
LCOH LCOH of gray hydrogen

RMB/kg H2 (coal to hydrogen)
LCOH of green hydrogen
49
~RMB 0.16/kWh ~RMB 0.4/kWh
42
35
28
21
14
• Coal price: assume RMB 800/ton

7
• Carbon tax: assume RMB 0–2,000/ton of coal
0
0.14 0.21 0.28 0.35 0.42 0.49 0.56 0.63 0.70
RMB/kWh
Renewable electricity price

Note: Assuming the exchange rate is 1 USD = 7 RMB.

3. Key Technologies Along the hydrogen Industry Chain

Hydrogen technology innovation is the ultimate driving force of the industry. The hydro-
gen industry is still facing cost issues, energy efficiency bottlenecks, incomplete safety
management and a low level of digitalization, calling for continuous technology innova-
tion to power the hydrogen industry.
• For hydrogen production, although alkaline electrolysis cells (AECs) and proton
exchange membrane (PEMEC) are considered mature products, all the electrolyzer
products on market are not designed for the green hydrogen scenario. The existing
products are designed for the demands from the chlor-alkali industry, the marine
industry, and the vehicle industry. Therefore, improvements and technical innovations
are required for the electrolyzer products for all technical routes.
• For hydrogen storage and transportation, compressed gaseous hydrogen is expected

to dominate the Chinese market in the near term, with ongoing R&D efforts on in-
creasing the working pressure while ensuring safety; liquefied hydrogen storage and
transportation have been commercialized at scale overseas; other hydrogen carriers
are also being explored in commercial applications.
• Hydrogen-to-power conversion is essential to hydrogen utilization. Among the

technology routes, fuel cells are theoretically more suited for distributed power,
whereas gas turbines and boilers perform better in larger-scale power plants. All
three technologies have respective development routes and demonstration scenarios,
and commercial products can be expected before 2030.
• Hydrogen safety management has become an emerging field in recent years. The
large-scale hydrogen adoption poses new challenges to safety management, hence
requiring systematic safety management of all processes combined with digital tools
in terms of intrinsic safety, active safety, and passive safety.
3.1 Hydrogen Production Innovation
3.1.1 Hydrogen Production Technologies
Ten years ago, hydrogen energy was only applied in transportation as a clean alternative
fuel. Nowadays, in the context of carbon neutrality, hydrogen is increasingly considered as
the key lever to decarbonize transportation, energy, chemical, and other areas, so its uses
are expanding to wider applications.

Electrolyzer products shall be defined by the use cases. The green hydrogen industry is
a new scenario bred by the carbon neutrality trend and requires new demands for the
electrolyzer:
• Scalable and able to be applied in gigawatt-level green hydrogen plants
• Directly connectable to green electricity and fit for the fluctuated green electricity
• Highly efficient and stable
• Easy to maintain
There are four major technology routes for hydrogen production: alkaline electrolysis cells
(AECs) and proton exchange membrane (PEMEC) are already in commercialization, while
anion exchange membrane (AEMEC) and solid oxide electrolysis cells (SOECs) are still in
the laboratory/trial stage.
The four technology routes essentially correspond to three kinds of water electrolysis tech-
nology systems—acidic, alkaline, and solid. All three systems originally came from other
applications and were not specifically designed for large-scale green electricity hydrogen
production, hence they all have the potential for technological innovations.
• Acidic electrolyzer system: PEMEC is the major technology under this category. Due
to the manufacturing technique limitation of bipolar plate and membrane, it is very
difficult to expand the scale of a single stack of acidic electrolyzers. Meanwhile, the
use of rare metals (e.g., platinum) restricts PEMEC’s scale effect, making the acidic
electrolyzer system more suitable for small-scale and distributed scenarios so far.
• Alkaline electrolyzer system: Alkaline system includes AEC and AEMEC technolo-
gies. For AEC technology, the manufacturing process of key components is relatively
mature, and its cost reduction is ongoing driven by the scale effect contributed by
mature manufacturing techniques and well-built supply chains. Therefore, alkaline
technologies show higher potential for large-scale and centralized green hydrogen
production. There is indeed room for improvement in terms of adaptability to renew-
able electricity fluctuations and easy maintenance of alkaline electrolyzer products.
• Solid oxide electrolysis cells: SOEC technology, currently at early stage of R&D.
In China, alkaline electrolyzers currently dominate the market. In the past two years, most
large-scale green hydrogen production projects chose AEC, while small-scale distributed
projects preferred PEMEC technology. (See Exhibit 19.) In the medium term, for green

hydrogen scenarios at different scales worldwide, it is expected that AEC will remain the
most viable mainstream technology route.
Exhibit 19 | Technology preference between AEC and PEMEC in China
China green hydrogen production projects and China green hydrogen production technology by
capacity by technology, 2021–2022 project capacity, 2021–2022
(Excl. projects in plan)
158 26,409
86
AEC
(44%) 21,031
(80%) 47
13
PEMEC
(8%)
59 77 4
In plan 5,301 (0%) 10 17
(37%) 10 7
(39%) 2 1
# of projects Installed/planned capacity (MW) <4MW 4–10MW 10–50MW 50–100MW ≥100MW
• AEC dominates the confirmed projects in terms of both the

number of projects and capacity • AEC dominates projects >10MW
• Projects in plan are more likely to choose AEC because • PEMEC is preferred in small and trial projects <4MW
these projects are of larger capacity

Note: Analysis based on 158 projects publicly disclosed in China (including trial projects). Because of rounding, not all bar segment totals
add up to 100%.
Generally, AEC is likely to remain the most widely used method for green hydrogen pro-
duction, but its competitiveness will depend on technological innovations and adaptability
to specific applications.
3.1.2 Development Potential of AEC
The first commercialized water electrolysis system was based on the principles of alkaline
water electrolysis, and alkaline-based systems remain the most ubiquitously utilized water
electrolysis systems36. Its advantages include lower cost in the electrolyzer investment,
longer lifetime, and high scalability. Although AEC technology is relatively mature after
more than a century of application, there is still much room for improvement regarding
large-scale hydrogen production in the future.
36 Ursua A, Gandia LM, Sanchis P., “Hydrogen production from water electrolysis: current status and future trends”.
Proceedings of the IEEE 2012; 100: 410–426.

AEC systems can be classified into two dimensions. (See Exhibit 20.) One is the product
standardization level, which measures the manufacturing cost reduction potential in
massive production. The other dimension is whether the hydrogen is pressurized, which
determines the competitiveness in downstream applications because most use cases
require pressurized hydrogen, which reduces the cost of compressors.
Exhibit 20 | Technology routes of AEC
Higher hydrogen pressure will

benefit downstream applications
to directly use, without additional
Hydrogen compressors
pressure
Pressurized
Technology route Next-generation
of most Chinese alkaline electrolyzer
companies technology
Standardized and
scalable product
design will benefit
massive production
Atmosphere
and manufacturing
Technology route of Technology route of
cost reduction
traditional European chlor-alkali industry
companies companies
Customized Standardized Product standard level
On the hydrogen pressure dimension, the current technology routes of major manufacturers
in China and Europe fall in the customized product design category, in which European
manufacturers prefer atmospheric pressure, while Chinese manufacturers opt for pres-
surized products. On the other dimension, manufacturers from the chlor-alkali industry
outperform in production standardization and hence enjoy cost advantages. Future AEC
products will improve towards the standardized and pressurized direction.
AEC systems are developing towards higher efficiency. Through technological innova-
tions in terms of current density, power consumption, flexibility, operating pressure and
maintenance convenience, the potential of AEC systems can be unlocked, so as to be more
adaptable for large-scale green hydrogen production. Theoretically, an AEC system faces
trade-offs in these areas, hence requiring comprehensive innovation to balance and opti-
mize various parameters at the cell, stack, and system levels. (See Exhibit 21.)
• Increase current density: By increasing the current density, the amount of hydrogen
produced per unit of time will be increased, thereby improving the system efficiency
of AEC systems.

Exhibit 21 | Improvement areas and future R&D directions of AEC electrolyzers and
peripheral systems
Improvement areas Future R&D directions

Current Power Operating Maintenance
density consumption Flexibility pressure convenience
• To reduce impedance and

Electrode /
performance degradation by
catalyst
optimizing the choice of materials
• To improve airtightness and reduce

Cell Membrane impedance with better membrane
design and material
• To redesign the shape of flow field

Flow field and channels for better electrolyte
distribution and higher efficiency
• To optimize the stack with modular

Stack
design and innovative structures
• To tailor the system for different

System
applications
• Reduce power consumption: Under constant current density, the lower the power
consumed to produce a certain amount of hydrogen, the higher the system efficiency
of AEC systems.
• Enhance operating flexibility: In order to be adaptive to the unpredictable power

supply from renewable energy, AEC systems should enhance the operating flexibility
in four aspects—load range, cold start time, power following speed, and shutdown
control.
• Increase operating pressure: Given the growing downstream demand for pressur-
ized hydrogen, AEC systems should be able to work in a high-pressure environment
and produce pressurized hydrogen.
• Optimize maintenance convenience: Once a traditional AEC system fails, it typical-

ly needs to be returned to the factory for fault screening and system repair, consum-
ing one to three months every time. There is room for improvement in the mainte-
nance convenience.
The safety management of hydrogen production systems is a key boundary condition.

With the scale of hydrogen production expanding from megawatt-scale to gigawatt-scale
and the growing productivity of electrolyzers, safety becomes more critical in all aspects.
The AEC systems have to be designed based on intrinsic safety concepts. Hydrogen safety
management will be discussed in section 3.4 of this report.

Another trend is the digitalization and intelligent management of electrolyzer systems. Le-
veraging the Industrial Internet of Things (IIoT) and digital technologies, the AEC systems
can realize intelligent upgrades, safety status online monitoring, predictive maintenance,
and end-to-end data-driven R&D, manufacturing, and operation.
Case Study: Intelligent Carbon-Zero Green Hydrogen Demonstration in Ordos
In August 2022, the Ordos Institute of Carbon HydoTech, a Chinese innovative tech company
Neutrality launched the first “Intelligent carbon- focusing on green hydrogen production,
zero green hydrogen” demonstration project. hydrogen energy storage, and hydrogen safety.
Located in central Inner Mongolia, Ordos city The advanced intelligent AEC system—
enjoys abundant solar and wind resources, Hydolyser—re-invented the key components,
and the local government has announced its mechanical design, electrolysis stack, control
ambition to develop the green hydrogen industry. system, etc., its technical specifications
The advanced intelligent AEC system in the reaching a global leading level. Through
demonstration project is directly connected digitalization, Hydolyser can be monitored and
to onsite solar power generation to produce managed remotely on a digital platform.
green hydrogen. The system was developed by
Ordos, China: advanced hydrogen production electrolyzer demonstration project
World's first cartridge stack with standardized cell, achieving “safe, efficient and intelligent”
• Features “intrinsic safety” system design and “active

safety” hydrogen leak detection to realize system-level
safety status monitoring
Safe
• Innovation from cell design to system optimization,

achieving world leading high efficiency (3.98 kWh/Nm3)
• Standardized cartridge cell design to achieve scalable
Efficient single stack size by adding cells (from 250 kW to 20 MW),
while easy to maintain
• The intelligent carbon-zero green hydrogen

production system launched in August 2022
in Ordos, China • By applying IoT and cloud technology, achieving cell-level
status monitoring, smart diagnosis, and predictive
• Project is located at the Ordos Institute of
maintenance
Carbon Neutrality Intelligent

3.2 Hydrogen Storage and Transportation
The storage and transportation of hydrogen is challenging because hydrogen is extremely

high in energy density per unit mass but low density per unit volume. It is highly flammable
and explosive and escapes easily. Therefore, compression, liquefication or conversion
of hydrogen is needed for its scalable, safe, and economical storage and transportation.
Exhibit 22 lists the major hydrogen conditioning pathways and their pros and cons respec-
tively.
Exhibit 22 | Key hydrogen conditioning pathways
Volumetric
Energy requirement density
Hydrogen conditioning Process description Maturity Pros Cons
kWh/kg H2 LHV1 kg H2/m3
Gas @15MPa ~1 >90% 11 Lower efficiency;

Relatively efficient,
Compression of hydrogen gas is
mature technology
hydrogen gas to flammable and more
Gas @30MPa ~4 >85% 23 occurring at
desired pressure to challenging to
ambient
increase density handle at high
temperature
Gas @70MPa ~6 80% 38 pressures
Physical
High energy
Cooling at -253°C
Higher efficiency requirement and
through cryo-compres-
Liquified and scalability; cost for liquefaction;
sion and transported by ~9 65%–75% 71
hydrogen could unlock global challenges of
ultra-low temperature
trade potential evaporation loss and
containers
safety
High energy
Form methanol or May leverage existing
Ammonia: Ammonia: requirement (and
ammonia for infrastructure for
Ammonia (NH3) / ~3 for 82%–93% for therefore lower
transportation and Ammonia: more efficient
Methanol conversion conversion efficiency) for
reconversion back to 121 transportation; could
(MeOH) and ~8 for and ~80% for reconversion; toxicity
hydrogen through also be utilized
reconversion reconversion and air pollution of
reduction reaction directly as feedstock
ammonia
Chemical reaction to Low efficiency at

Chemical Conversion
Liquid organic form LOHC (such as Conversion process reconversion with
exothermic, ~65% for
hydrogen MCH) for transportation, 110 is exothermic; impurity gases;
~12 for reconversion
carriers (LOHC) then convert back to easier to transport toxicity and
reconversion
hydrogen flammability of LOHC
Chemical bonding Low density per unit

Higher efficiency
with metals and then mass; low charging
Metal hydrides ~4 88% 80–100 potential than
reheating back to and discharging
most alternatives
hydrogen efficiency
Source: Goldman Sachs Research; IEA; BCG analysis.

1
Lower heating value.
Appropriate storage and transportation methods can be applied based on the different
conditions of hydrogen.
• Hydrogen storage and transportation in compressed gaseous form is the most

widely applied and mature technology for now. Various storage options are available
for gaseous hydrogen ranging from small volume to bulk storage, including cylinders,
vessels, and caverns. Its transportation via compressed gaseous hydrogen (CGH2) tube

trailers is flexible and convenient, but it is more suitable for short-distance transpor-
tation due to the limited hydrogen carrying capacity. For long distance, pipelines are
the most cost-effective solution for hydrogen bulk transportation, despite the higher
capital expenditure (CapEx) involved in building new dedicated hydrogen pipelines;
blending hydrogen into the existing compressed natural gas (CNG) pipelines can be a
cost-attractive alternative.
• Liquid hydrogen is believed to be a promising route for larger-scale deployment

in the future owing to its higher volume energy density, despite the technology and
equipment being less mature than that of gaseous hydrogen. Liquid hydrogen (LH2)
can be stored in LH2 vessels/tanks on a medium scale and transported with LH2
tanker trucks on roads and vessels that enable international long-haul for global trade
of hydrogen. The major challenge of liquid hydrogen is that the cryo-compression
process for the liquefaction of hydrogen is energy intensive and leads to additional
costs in energy loss. Furthermore, efforts are needed to address the hydrogen boil-off
and safety issues.
• Other non-hydrogen liquids, such as ammonia, methanol and LOHCs, can also be
hydrogen carriers through chemical conversion. Conversion to ammonia or methanol
allows hydrogen to be stored and transported leveraging the existing mature infra-
structure. Ammonia and methanol can be directly utilized as fuel or feedstock as well,
thereby it is believed to be one of the most promising directions of hydrogen storage
and transportation. However, compared to physical processes, chemical conversion
and re-conversion lead to extra costs and energy loss, and the technology (especially
re-conversion technology) is yet to be proven.
Exhibit 23 compares the different options for hydrogen storage. Exhibit 24 presents the
common hydrogen transportation methods. Each of the options has advantages and dis-
advantages; so far there is no one-size-fits-all solution. The optimal solution will depend
on various factors, e.g., geographical features, transportation distances, volumes, and end
uses.
In China, compressed gaseous hydrogen is the major hydrogen storage and transpor-
tation method with low cost, flexible storage conditions, and mature technology and
infrastructure. Currently, the hydrogen transportation demand is regionally concentrated
(mostly stay within pilot city clusters), so compressed gaseous hydrogen is still expected
to be the mainstream in the near term. R&D efforts have been put into increasing the
working pressure of the gas cylinder leveraging composite materials such as carbon fiber:
from 35 MPa cylinders (most common in China) to 50 MPa cylinders (more common over-
seas). Transportation efficiency is significantly increased.

Exhibit 23 | Options of hydrogen storage
Gaseous state Liquid state Solid state
Depleted Rock Pressurized Liquid Metal

Storage option Salt caverns Ammonia LOHCs
gas fields caverns containers hydrogen hydrides
Volume
Small–medium
Large volume Large volume Medium volume Small volume Large volume Large volume Small volume
volume
Main
usage
Cycling Weeks to Weeks to

Weeks to months Seasonal Weeks to months Daily Days to weeks Days to weeks
months months
Geographical
Limited Limited Limited Not limited Not limited Not limited Not limited Not limited
availability
4.57 4.50
LCOS (levelized cost of storage)
(USD/kg) 2.83 N/A
1.90 1.86
Benchmark LCOS 0.23 1.07 0.19
0.71 0.95 0.87
Possible future LCOS 0.11 0.23 0.17
Source: BloombergNEF, Hydrogen Economy Outlook (2020).
Exhibit 24 | Common hydrogen transportation methods
CGH2 tube trailers Tanker trucks Pipelines Ships

Description On-road delivery of On-road delivery of Bulk delivery in existing Delivery as LH2,
compressed H2 typically cryogenic LH2, natural gas pipelines, ammonia, methanol or
ranging from 20–50 MPa ammonia, methanol dedicated H2 pipelines or LOHC by LH2 ships or
or LOHC ammonia pipelines modified LPG ships
Conditioning of Gaseous H2 Gaseous H2 Gaseous H2 Gaseous H2

hydrogen Liquefied H2 Liquefied H2 Liquefied H2 Liquefied H2
Ammonia/MeOH Ammonia/MeOH Ammonia/MeOH Ammonia/MeOH
LOHC LOHC LOHC LOHC
Economically Regional transportation Inter-regional Both long-distance and International long-haul

feasible and distribution within transportation >200 km regional transportation,
distance 200 km (cost-sensitive to (LH2 is less cost-sensitive to within 1,500 km (high
distance) distance than CGH2) CapEx1, low OpEx)
Transportation
Small Medium Bulk transportation Bulk transportation
capacity
Source: IEA, The Future of Hydrogen (2019); literature research; BCG analysis.
1
Only true for new pipelines; re-purposed pipelines or hydrogen blending could cost lower.

While the storage and transportation of liquefied hydrogen have been commercialized at
scale in leading markets such as the US, Europe and Japan, its civil use in China is still in
the demonstration phase. For domestic players, obstacles exist especially in hydrogen lique-
faction technology, equipment, and materials. Core technologies such as turbo-expanders
and cryogenic valves still rely on imports. Liquid hydrogen cylinder manufacturing
techniques lag as well. Therefore, developing domestic technology and localizing the core
equipment are needed before the large-scale deployment of liquid hydrogen in China.
We expect that in the medium to long term, as the demand for high-efficiency hydrogen
transportation increases across regions, liquefied hydrogen will be deployed at scale.
3.3 Hydrogen-to-Power Conversion
The efficient utilization of hydrogen energy involves hydrogen-to-power conversion, which

is essential to the green hydrogen industry development and clean energy transformation.
The economics of this process highly relies on the breakthrough in upstream production
and midstream transportation, and hence its large-scale deployment is expected to
happen in the next five to ten years. Albeit challenging, pioneers are actively validating
and demonstrating hydrogen-to-power applications to explore the route to the promising
hydrogen future.
Hydrogen-to-power conversion relies on energy conversion devices—mainly gas turbines,

boilers, and fuel cells. Comparing the three routes, fuel cells are theoretically more suited
for distributed power, whereas gas turbines and boilers perform better in larger-scale
power plants. (See Exhibit 25.) According to International Energy Agency (IEA), the capacity
of all planned or ongoing hydrogen and ammonia power generation projects will reach 3.5
gigawatts by 2030. About 85% of the installed capacity is focused on hydrogen- or ammonia-
fueled gas turbines and boilers, while the use of hydrogen in fuel cells and the co-firing of
ammonia in coal-fired power plants account for around 10% and 6% respectively37.
3.3.1 Hydrogen-Fueled Gas Turbines
Combustion of hydrogen (or ammonia) fuel in gas turbines is a high-potential pathway

to decarbonize the gas turbines fueled by natural gas in the current power generation
system: by blending in 30% hydrogen by volume, it is possible to reduce a gas turbine’s
carbon emission by around 10%38. As gas turbines are already widely deployed in power

2022.
38 MHI official website https://solutions.mhi.com/power/decarbonization-technology/hydrogen-gas-turbine/.

Exhibit 25 | Power output and efficiency of fuel cells and combustion engines
Fuel cells: Combustion engines/boilers:

Suitable for distributed power Suitable for large-scale power generation
70
Combined
60 SOFC cycle power
Electrical efficiency (%)
plant (CCPP)
50
Coal-fired boiler
PEMFC
40
Steam turbine
30
Gas turbine
20
Fuel cells
10
Combustion engines
0
10kW 100kW 1MW 10MW 100MW 1GW
Power output
generation globally, there is potential to convert the existing fleets to hydrogen or

ammonia co-firing only with minimal upgrades and modifications. In the longer term,
technology development is also expected to prepare new gas turbine power sets for 100%
hydrogen firing.
Originally designed to operate on natural gas instead of hydrogen, gas turbines are already
mature power generation devices. Although conventional gas turbines do have a certain
level of flexibility in fuel, as hydrogen and natural gas have very different combustion
properties, the blend-in of hydrogen would hence affect the combustion chemistry and
flame stability, leading to operability, cost, and pollution issues. Therefore, burning hydrogen-
enriched fuels in gas turbines is still challenging in technology and requires modifications
in fuel handling systems, valves and piping, and combustor hardware. Ongoing R&D
mainly focuses on addressing the key issues listed below39, 40, 41.
39 Power Engineering, Hydrogen substitution for natural gas in turbines: Opportunities, issues, and challenges https://www.
power-eng.com/gas/hydrogen-substitution-for-natural-gas-in-turbines-opportunities-issues-and-challenges/.
40 Beita, J., Talibi, M., Sadasivuni, S., & Balachandran, R. (2021). “Thermoacoustic instability considerations for high
hydrogen combustion in lean premixed gas turbine combustors: A review”. Hydrogen, 2(1), 33-57.
41 European Turbine Network (ETN Global), The Path Towards a Zero-Carbon Gas Turbine https://etn.global/wp-content/
uploads/2020/02/ETN-Hydrogen-Gas-Turbines-report.pdf.

• Flashback: The combustion speed of hydrogen is significantly higher than that of

natural gas, which means the rapid flame of hydrogen can shoot back up the incoming
fuel nozzle and the high temperature will damage the hardware of gas turbines.
OEMs are developing methods of detecting and avoiding flashbacks.
• Autoignition: High reactivity of hydrogen would increase the autoignition risk in

the premixing section, which requires a more delicate design of the combustors (e.g.,
multi-nozzle arrangements) to protect the burners and nozzles from being overheated
or damaged.
• Thermoacoustic instabilities: Oscillations due to thermoacoustic instabilities of

hydrogen flames can trigger component vibrations, flame blow-off, and flashback.
These will hamper the gas turbine operation and must be avoided by improved system
design and more reliable monitoring and control systems.
• NOX emission: Although hydrogen is a carbon-free fuel, its combustion through gas
turbines still produces NOX emissions due to its higher adiabatic flame temperature
relative to natural gas. To reduce NOX emission, lean premixed (LPM) combustors are
developed as the current state-of-the-art for low NOX operation.
Power generation projects of hydrogen-fueled gas turbines are in commercial demonstra-

tion now. Most demonstrations start from a blending rate of 15% to 30% (volumetric basis)
of hydrogen and target higher blending rates going forward. This is because a 30% hydro-
gen blend is typically viewed as the threshold requiring critical modifications of the com-
bustor and fuel handling system, etc. As of today, Siemens Energy has been ready to burn
up to 75% of hydrogen in the fuel mix, and the 100% hydrogen-fired gas turbine is also
under development, targeted to release in 203042. In China, the State Power Investment
Corporation (SPIC) demonstrated 30% hydrogen blending on a gas turbine in commercial
operation in September 202243. SPIC’s 100% hydrogen-fired gas turbine demonstration in
China was also approved in October 2022, a set of 1.7-megawatt gas turbines aiming to
start operation by the end of 202344.
Meanwhile, ammonia-fired gas turbines, despite being niche, have also attracted attention
in countries such as Japan. For example, in responding to the country’s Road Map for Fuel
Ammonia, the IHI Group demonstrated the world’s first gas turbine (2 megawatts) using
42 Siemens Energy official website https://www.siemens-energy.com/global/en/priorities/future-technologies/hydrogen/

zehtc.html.
43 PR Newswire https://www.prnasia.com/story/383985-1.shtml.
44 GGFC https://www.gg-fc.com/art-44081.html.

100% liquid ammonia in June 202245, and Mitsubishi Power targets the world’s first
ammonia-fired 40-megawatt gas turbine system by 202546.
3.3.2 Hydrogen- and Ammonia-Fueled Boilers
Blending ammonia or hydrogen in a coal-fired power plant can effectively reduce carbon
emissions. In China, as coal accounts for a large proportion of the country’s energy
structure and coal-fired boilers are already widely deployed, it is imperative to explore
hydrogen- and ammonia-fueled boilers as an option for energy transformation and decar-
bonization.
When hydrogen or ammonia is blended into coal-fired boilers, the combustion speed of
hydrogen and ammonia gas is much higher than that of pulverized coal, hence the main
challenges are the modification of burners and the control of NOX emissions. To address
the issues, recent studies across the globe have been focusing on multi-combustor design,
gas injection control strategy, etc. These technologies are also applied in demonstration
projects in China. For example, China Energy Investment Corporation realized 35%
ammonia co-firing in a 40-megawatt boiler in 202247; Anhui Province Energy Group
announced the successful implementation of 10% to 35% ammonia co-firing in existing
100–300 megawatt coal-fired power plants under various working conditions in 202348.
3.3.3 Stationary Fuel Cells
Compared with gas turbines and boilers, fuel cell technologies are capable of converting
hydrogen to power with higher flexibility (with quicker start-up and smaller power
output), less pollution (no NOx emissions with hydrogen fuel), and less noise.
Stationary fuel cells are generally used for distributed power typically ranging from 0.5
kilowatts to 2 megawatts, such as residential and commercial micro-CHP systems, uninter-
ruptible power supplies (UPS), and power generation units of power companies.
By the end of 2021, South Korea, North America, and Japan are the leading markets in
stationary fuel cell adoption. (See Exhibit 26.) Due to the differences in the strategic plan-
ning and policies across countries, the technology routes and use cases can also differ49.
45 IHI official website https://www.ihi.co.jp/en/all_news/2022/resources_energy_environment/1197938_3488.html.

46 MHI official website https://power.mhi.com/news/20210301.html.
47 People.com http://finance.people.com.cn/n1/2022/0125/c1004-32339627.html.
48 ThePaper.cn https://www.thepaper.cn/newsDetail_forward_22626280.
49 E4tech, Fuel Cell Industry Review 2021 https://www.e4tech.com/resources/249-fuel-cell-industry-review-2021.php.

Exhibit 26 | Stationary fuel cell capacity
Global new stationary fuel cell capacity Capacity by region

(unit: MW)
348 4%
325 2021 44% 44% 7% 100%
1%
+11.3%
274
South Korea Japan RoW
222 220 North America Europe
209
183
Capacity by technology route
3%
2021 60% 28% 10% 100%
2015 2016 2017 2018 2019 2020 2021 SOFC PAFC PEMFC MCFC
Source: E4tech; IEA; BCG analysis.

Note: Not all fuel cells are fueled by hydrogen, for example, most of the SOFCs are fired on natural gas by far. Because of rounding, not all
bar segment totals add up to 100%.
• South Korea and the US have been the leaders in the deployment of stationary
fuel cell systems at industrial and grid levels, with solid oxide fuel cells (SOFCs) and
phosphoric acid fuel cells (PAFCs) as the main technology routes. In October 2021,
a 79-megawatt PAFC power plant was built in South Korea by POSCO Energy and
Doosan Fuel Cell, recording the world’s largest fuel cell power plant50. In the US, fuel
cells are primarily leveraged by institutions and corporations for self-generation in
order to reduce grid dependency or to fulfill green targets. These projects are typically
done by commercial units of hundreds of kilowatts and low megawatts, represented
by Bloom Energy (SOFC technology route).
• Japan is the initiator and leader in residential micro-CHP applications, represented

by its Ene-Farm program since 2009, with a fleet now of more than 400,000 domestic
CHP units (typically less than 1 kilowatt each), utilizing both proton exchange mem-
brane fuel cells (PEMFCs) and SOFC technology. Government incentives played a vital
role in this program, supported by R&D efforts of local gas companies (Osaka Gas and
Tokyo Gas) and fuel cell suppliers (Panasonic, Aisin Seiki, etc.).
50 Hydrogen Central, “World largest hydrogen fuel cell power plant was built in Korea by Kospo – 78 MW” https://
hydrogen-central.com/largest-hydrogen-fuel-cell-power-plant-korea-kospo/.

Exhibit 27 | Comparison of stationary fuel cell technologies
PEMFC SOFC PAFC MCFC

(proton exchange
membrane fuel cell) (solid oxide fuel cell) (phosphoric acid fuel cell) (molten carbonate fuel cell)
Natural gas, biogas, Natural gas, biogas,

Fuel H2 only Natural gas, H2, etc.
coal gas, H2, etc. coal gas, H2, etc.
Electrodes Platinum Ceramic Platinum Nickel oxide
Proton exchange Yttria-stabilized

Electrolyte Phosphoric acid Alkaline metal carbonate
membrane zirconia (YSZ)
Operating
80°C–100°C 800°C–1,000°C 150°C–200°C 650°C–700°C
temperature
Electrical
40%–50% 50%–65% 40%–45% 60%–65%
efficiency
Heat
Minor +20%–25% in CHP +30%–35% in CHP +10%–20% in CHP
extraction
Start-up time <1 minute >60 minutes >60 minutes >60 minutes
Each stationary fuel cell technology has its advantages and limitations51, 52. (See Exhibit 27.)
Globally, solid oxide fuel cells (SOFCs) and phosphoric acid fuel cells (PAFCs) have larger
installment base so far. Proton exchange membrane fuel cells (PEMFCs) are expected to
grow rapidly, while molten carbonate fuel cells (MCFCs) are relatively niche. PAFCs and
SOFCs are commonly adopted in distributed commercial projects, in which PAFCs are the
most mature and earliest commercialized, while SOFCs recorded faster growth in recent
years for higher efficiency, longer lifetime, and free of precious metal catalysts. PEMFCs
are the mostly applied in kilowatt-level decentralized residential applications as of now
due to shorter start times, with the potential to further expand to megawatt-level projects
in the future, especially for the Chinese market.
In China, PEMFC technology is in the dominant position with multiple demonstrations

planned, such as the aforementioned Lu’an project in section 2.2, while SOFC technology
is not a mainstream technology route for power generation. It is believed that, in China,
51 US Department of Energy, Comparison of Fuel Cell Technologies https://www.energy.gov/eere/fuelcells/comparison-

fuel-cell-technologies.
52 IEA Technology Collaboration Programme – Advanced Fuel Fells, Stationary Fuel Cell Applications: Current and Future
Technologies 2021 https://www.ieafuelcell.com/fileadmin/publications/2021/2021_AFCTCP_Stationary_Application_
Performance.pdf.

stationary PEMFC is relatively mature compared with other technologies, and its cost
reduction path is clear. The technology will also benefit from the rapid development of
FCEVs and will expand its applications in power generation.
3.4 Hydrogen Safety
Hydrogen safety spans the entire process of hydrogen production, storage, transportation,
and utilization. Hydrogen safety management cannot be ignored for the development of
hydrogen as a clean energy carrier.
3.4.1 The Importance of Hydrogen Safety Management
Hydrogen safety had attracted little attention in the past because the hydrogen consump-
tion volume was small, the distribution of hydrogen-related facilities was scattered, and
the overall risk was thus controllable. Recently, with the rapid development of green
hydrogen globally, large-scale hydrogen consumption uses began to emerge, calling for the
industry’s attention to hydrogen safety management. Also, several hydrogen safety acci-
dents in South Korea53, Norway54, and the US55 have emphasized the criticality of hydrogen
safety.
Establishing a systematic hydrogen safety management system to minimize the risk of

hydrogen safety accidents is critical to protecting the public’s confidence in hydrogen
energy and safeguarding the development of hydrogen energy.
3.4.2 Hydrogen Safety Management System
The unique properties of hydrogen bring challenges to hydrogen safety management. (See
Exhibit 28.)
• Hydrogen is the least dense gas known in the world (only about 1/14 as dense as air).
It is highly buoyant and easy to escape and disperse. In the case of leakage in a con-
fined space, hydrogen will easily accumulate in the upper space.
53 American Institute of Chemical Engineers, Review: Hydrogen Tank Explosion in Gangneung, South Korea https://www.
aiche.org/chs/conferences/international-center-hydrogen-safety-conference/2019/proceeding/paper/review-hydro-
gen-tank-explosion-gangneung-south-korea.
54 Reuters, “Norway fines Nel units $3 million over 2019 blast at hydrogen fuel station” https://www.reuters.com/arti-
cle/us-nel-blast-idUSKBN2AG2N4.
55 H2tools, Report on the June 2019 Hydrogen Explosion and Fire Incident in Santa Clara, California https://h2tools.org/
sites/default/files/2021-06/AP_Santa_Clara_Incident_Review_Report_Rev1.pdf.

Exhibit 28 | Properties of hydrogen, natural gas and ammonia gas
Hydrogen Natural gas Ammonia
Color Colorless Colorless Colorless
CH4 is odorless; the

Odor Odorless Pungent odor
additive (mercaptan) stinks
Toxicity Non-toxic Non-toxic Toxic
Relative density
0.069 0.55 0.59
(Air=1)
Explosive limits1 4%–75% 5%–15% 16%–25%

(vol%)

1
The explosive limits refer to the concentration of a gas or vapor in the air which will result in an explosion, if an ignition source is present.
• Hydrogen is colorless and odorless, making it hard to be sensed quickly when leakage
occurs.
• Hydrogen is highly flammable and explosive, with a wide explosive limit between 4%
and 75% (volume concentration). The fire caused by explosions is usually ferocious.
Given the properties of hydrogen, it is necessary to adopt a systematic approach to

manage the safe use of hydrogen. The industry believes that the hydrogen safety system
includes three aspects: intrinsic safety (ex-ante), active safety (in-process), and passive
safety (ex-post). (See Exhibit 29.)
Indeed, as a whole system, every aspect matters. However, compared with remedial
actions on uncertain and uncontrollable results, preventive engagement beforehand and
actively intervening in the process deserves more attention.
• Intrinsic safety
Intrinsic safety is a preventive protection concept, which fully considers the properties
of hydrogen and fundamentally improves the safety level from the perspective of
design and manufacturing. Multiple measures can be applied, including product/

Exhibit 29 | Hydrogen safety system
Intrinsic safety (ex-ante) Active safety (in-process) Passive safety (ex-post)
• Certification of product/equipment • Quick detection of hydrogen leaks • Comply with the fire code
• Hazard and operability (HAZOP) • Risk prediction and warning • Be away of leak point
Measures
analysis • Safety procedures and training • Avoid oxidizing environment with
• Test and review of product/equipment dust and fume
• Material—prevent hydrogen • Prevent hydrogen leakage, hydrogen • Ensure that the damages will not
embrittlement accumulation in confined spaces, expand, and responsibilities are held
• Structure—avoid stress and ignition accountable
Purposes
concentration • Control the quality of the source of
• Technique—avoid manufacturing hydrogen, and apply rigorous process
defects management
Source: Research of Professor Fuyuan Yang, Tsinghua University; BCG analysis.
equipment certification, hazard and operability analysis (HAZOP), and product/equip-

ment tests/reviews. These measures aim to make sure that, materials are hydrogen
compatible to prevent hydrogen embrittlement (HE), structures are well designed to
avoid stress concentration, and techniques minimize manufacturing defects.
One of the biggest challenges of hydrogen safety is hydrogen embrittlement (HE).

Since hydrogen molecules are so small, they can easily permeate solid metals, causing
stress concentrations that lead to embrittlement or even metal cracking. From the
aspect of intrinsic safety, hydrogen storage equipment should use materials with
better hydrogen embrittlement resistance (such as 316L stainless steel), and its struc-
ture shall be optimized to prevent stress concentration.
• Active safety
Hydrogen energy players shall proactively establish active safety mechanisms, such
as rapid detection of hydrogen leaks, risk prediction and early warning, and safety
procedures and training. Active safety aims to prevent hydrogen leak, accumulation,
and ignition in confined spaces, and strictly control the quality of hydrogen source
and rigorously manage the due processes.

Case Study: Safety Design in the Hydrogen-Fueled Torch of the 2022 Beijing
Winter Olympics
The 2022 Beijing Winter Olympics marked the The “Hydrogen Mobility” research team at
first hydrogen-fueled handheld torch and the Tsinghua University has established a safety
first zero-carbon torch in the history of the monitoring system for hydrogen leaks based
Winter Olympics, highlighting the two themes on the active safety concept. The research
of this Olympic Games: technology and green. team independently developed a hydrogen
To ensure safe and stable burning of the leakage near-field detector, proposed a high-
torch and proper usage of hydrogen energy, sensitivity, low-cost hydrogen leakage near-
an expert team has conducted a thorough field detection method, and realized real-time
safety evaluation and risk analysis for the high- (100 milliseconds) monitoring of ppm-level tiny
pressure hydrogen supply system, hydrogen hydrogen leakage faults. A series of hydrogen
supply pipeline, and torch combustion system. safety measures have ensured zero accidents
of hydrogen usage during the 2002 Beijing
Winter Olympics and Winter Paralympics.
• Passive safety
In the unfortunate event of an accident, passive safety aims to take emergency mea-
sures immediately to ensure that the damages do not expand, and the responsibilities
can be held accountable. Factories and facilities shall comply with the fire codes, keep
away from the leak point, and avoid oxidizing environment with dust and fume, etc.
Furthermore, on the basis of systematic hydrogen safety management, digital tools

can be used to further improve the management, making the status more visualized,
the response faster, and the collaboration closer. The digitalization of hydrogen safety
management shall be integrated with products and systems, so as to realize real-time
performance monitoring and predictive maintenance functions in daily operation.

Conclusion
The world is experiencing the third energy revolution. In this revolution, hydrogen will
become an important new energy carrier, and play a vital role in the era of decarbonization.
From an energy transition perspective, hydrogen can be seen as “zero-carbon petroleum”,

replacing petroleum as both a power source and an industrial feedstock, and playing a
vital role in the global energy trading networks. As a secondary energy, hydrogen together
with electricity make the two sides of a coin, meaning that hydrogen is another storable
and transportable form of electricity: on the power generation side, large-scale green
hydrogen production facilities are comparable to wind and solar power plants; on the
transmission and distribution side, long-distance hydrogen pipelines are just like ultra-high
voltage transmission lines; on the power consumption side, distributed hydrogen power
storage systems and onsite hydrogen refueling stations can play as micro-grids.
Hydrogen transportation, hydrogen energy storage, and industrial applications—the

commercialization of hydrogen end uses will unveil huge business opportunities in the
coming decades. Translating the great strategic importance of hydrogen into substantial
commercial value requires systematic planning and development on the hydrogen value
chain, the industry chain, and the technologies.
In the hydrogen value chain, strategic key processes need to be identified and addressed.
Currently, the economics of green hydrogen from renewable electricity become pivotal
to the whole value chain. Countries across the globe are aiming for breakthroughs in the
most promising hydrogen uses through combined efforts of policy guidance, technology
innovation, and financial investment. By connecting the whole value chain, pilot projects
are successfully implemented in various hydrogen use cases, which will greatly promote
the development of the hydrogen industry.
In the hydrogen industry chain, the downstream pull is vital for the upstream develop-
ment. Some use cases such as fuel cell transportation with a stronger consumption base
have already founded a solid industry chain. Such “leading use cases” are capable of
driving the development of upstream hydrogen production, storage, and transportation,
thus facilitating hydrogen’s expansion into other uses.
Hydrogen technology innovation is the ultimate driving force of the industry, which
lays the foundation for the value chain and industry chain development. The hydrogen
industry is still facing cost issues, energy efficiency bottlenecks, unsystematic safety man-
agement, and a low level of digitalization, calling for continuous technology innovation to
power the hydrogen industry.

Most of the nascent industries (new energy vehicles, lithium-ion batteries, photovoltaic, etc.)
had faced the “Valley of Death” in their early life cycle, typically caught in a cycle of “poor
product performance—low client satisfaction—weak demand—lack of investment—
stagnated technology—difficulty in commercialization”. To overcome the “Valley of
Death”, the green hydrogen industry needs joint efforts on the value chain, industry chain,
and technology chain to form a virtuous circle of “good product performance—high client
satisfaction—strong demand—high willingness to invest—technology breakthrough—full
speed of commercialization”. Once the virtuous circle is established, the hydrogen industry
is expected to become the flagship of the global energy transition, create trillion-dollar
business opportunities, and ultimately underpin carbon neutrality in the coming decades.

About the Authors
BCG expert team:

Chen Yu, Nicholas Ge, Haixu Wang, Cecily Dai, Shaowen Wang, Bill Zhang
Academician Minggao Ouyang’s team:

Minggao Ouyang, Fuyuan Yang, Changsheng Yao, Junming Hu, Jiaen Du

About Boston Consulting Group

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important challenges and capture their greatest opportunities. BCG was the pioneer in busi-
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China Hydrogen Industry

A Joint Report by Boston Consulting Group and the Team of Academician

1. The Necessity of Developing Hydrogen Energy 4

2. End Uses of Hydrogen 12

3. Key Technologies Along the hydrogen Industry Chain 33

August 2023 Boston Consulting Group

Boston Consulting Group August 2023

August 2023 Boston Consulting Group

1. The Necessity of Developing Hydrogen Energy

1.1 Energy Crisis and Energy Structure Transformation

Exhibit 1 | Global primary energy consumption

Global primary energy consumption, 1800–2022 3

Boston Consulting Group August 2023

Exhibit 2 | Cumulative energy-related carbon emissions forecast

Cumulative energy-related carbon emissions, 2015–2050

1,500 CO2 budget is expected Reference case:

Source: IRENA; BCG analysis.

1 Our World in Data https://ourworldindata.org/grapher/global-primary-energy.

August 2023 Boston Consulting Group

• Hydrogen is a key pathway to achieve carbon neutrality, as the energy releasing

Exhibit 3 | Global final energy consumption

Global ﬁnal energy consumption by source: 2020, 2030 & 2050

<1% <5% 100%

Source: IEA; IRENA; BCG analysis.

1.2 Advantages of Hydrogen Energy

3 International Energy Agency (IEA), Global Hydrogen Review 2021 https://www.iea.org/reports/global-hydrogen-review-

Boston Consulting Group August 2023

Exhibit 4 | Hydrogen is a zero-emission and high-efficiency fuel

Carbon emission coeﬃcient Higher heating value

Hydrogen 0 Hydrogen 142

Natural gas 53 Natural gas 54

Black coal 104 Black coal 33

Brown coal 98 Brown coal 15 9x

Source: US Energy Information Administration; BCG analysis.

• Flexible conversion to electricity. Hydrogen and electricity share a coupled energy

• High availability. Hydrogen can be quickly produced through the electrolysis of

5 International Energy Agency (IEA), Global Hydrogen Review 2021 https://www.iea.org/reports/global-hydrogen-review-

August 2023 Boston Consulting Group

1.3 China’s Favorable Environment for the Development of Hydrogen Energy

In the Plan, the strategic position of hydrogen energy is defined as:

 An essential part of the national energy system.

Boston Consulting Group August 2023

Strategic position Goals

 By 2030, China aims for a well-established hydrogen technology innovation

 By 2035, China targets to form a comprehensive hydrogen industry with

August 2023 Boston Consulting Group

8 China’s National Energy Administration http://www.nea.gov.cn/2022-01/26/c_1310441589.htm.

Boston Consulting Group August 2023

tion of renewable energy and break through the development bottlenecks.

Hydrogen can be a promising option. The power-to-hydrogen-to-power conversion better

1.3.3 Northwest China Enjoys Unique Advantages in Green Hydrogen Development

August 2023 Boston Consulting Group

2. End Uses of Hydrogen

Exhibit 6 | Use cases of hydrogen—transportation, energy and industrial

Use case Stage of development Positioning

• As a clean energy source

• As an industrial feedstock • Largest and the most

Source: IEA; BCG analysis.

Boston Consulting Group August 2023

Investment and Financing of the Hydrogen Energy Industry in China

Disclosed investment of hydrogen industry in China, 2021–2022

Fuel cells and hydrogen-fueled transportation Other sectors

2021 2022 2021 2022

Source: China Renaissance; BCG analysis.