In recent months, there has been a notable resurgence in the hydrogen energy sector, which had remained largely quietNovember saw Guofu Hydrogen Energy achieve its initial public offering, becoming the third mainland hydrogen company to list on Hong Kong shares, following Yihua Tong and Guohong Hydrogen EnergyIn December, another company, Chongshu Energy, successfully entered the Hong Kong market with a fundraising of approximately $100 millionThis renewed interest in hydrogen energy may be signaling a shift in the industry, hinting at potential possibilities for growth and development.

The appeal of hydrogen energy lies primarily in its zero carbon emissions, high calorific value, and safetyWhen combustion or electrochemical reactions occur in fuel cells, hydrogen does not produce the pollutants or carbon dioxide associated with fossil fuelsFurthermore, its high calorific value indicates that it can provide more energy for the same quantity of fuel consumed, presenting itself as a viable alternative to traditional energy sources

As the world increasingly seeks out sustainable energy solutions, hydrogen seems to come to the forefront as a reliable option.

However, despite its advantages, hydrogen energy remains a fraction of the global energy market compared to familiar entities like new energy vehicles, lithium batteries, and photovoltaic productsThe market has a long way to grow, as research from Baizhesi Consulting suggests that by 2024, the global hydrogen production market could reach $120.6 billionChina alone accounts for about 30% of global hydrogen production, estimated around 35 million tons, but much of this is utilized in domestic industries and power sectors, with very little exportedThis stark contrast raises questions about the future of hydrogen energy and its role in the broader energy landscape.

Historically, hydrogen energy was hailed as the "ultimate energy source for humanity in the 21st century," yet the global development of green hydrogen has stagnated over the past few years

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There is a growing concern about the waning enthusiasm for hydrogen energy, leading to questions about what has caused this declineWhy has hydrogen energy, once considered a beacon of promise, seemingly fallen into obscurity?

Last month, Li Zhongguo, the president of Longi Green Energy, discussed the challenges of hydrogen energy development, indicating a need for the company to optimize and resize its green hydrogen operationsThis reflects a broader trend of caution within China's hydrogen energy sectorDifferent categories of hydrogen, such as grey, blue, and green hydrogen, have emerged based on their carbon emissions classifications, with grey hydrogen generated from fossil fuels, blue hydrogen being a mix, and green hydrogen produced via renewable energy sourcesUnfortunately, China predominantly produces grey hydrogen, with green hydrogen output barely reaching 200,000 tons per year, amidst a market still heavily reliant on high-emission coal-derived hydrogen.

In light of the "dual carbon" policies that China aims to implement, the transition from fossil-fuel-based grey hydrogen to green hydrogen is pivotal for the industry

However, the high production cost of green hydrogen remains a significant barrierLi Zhongguo candidly shared that the cost of green hydrogen production is currently two to three times higher than that of grey hydrogen, complicating its viability, especially for energy storage applications.

Although various technological approaches exist for producing green hydrogen, alkaline electrolysis is currently the most dominant method due to its maturity, lower costs, and high production capacityAs of the end of 2022, alkaline electrolyzers made up about 60% of global installed capacity, while proton exchange membrane electrolyzers accounted for around 30%. However, the performance of solid oxide electrolyzers is still relatively limited.

To illustrate the cost dynamics, Li Hui, chairman of Huahui Energy, commented that if the coal price is 800 yuan per ton, the cost of hydrogen produced from coal would be approximately 11 yuan per kilogram, while hydrogen from coke oven gas could range from 10 to 15 yuan per kilogram

In contrast, if the electricity price is set at 0.6 yuan per kilowatt-hour, the current cost of hydrogen produced through electrolysis exceeds 35 yuan per kilogramThe cost of electricity comprises approximately 60 to 70% of the total costs of electrolysis.

Aside from cost, hydrogen production efficiency also encounters obstaclesPhotovoltaic experts have noted that under the second law of thermodynamics, hydrogen production via water electrolysis is technically feasible, but the energy consumption is too high to make it economicalWith an efficiency of only 45% and the limited operational hours of photovoltaic systems (around 2,300 hours annually), achieving a sustainable "renewable cycle" for green hydrogen remains a significant challengeMoreover, hydrogen transport consumes eight times more energy compared to natural gas, making its use as a storage medium particularly problematic.

The recent COP29 negotiations aimed to increase the 2030 targets for global green hydrogen by threefold but indicated that substantial fossil fuel-derived hydrogen, estimated at around 96 million tons, will still dominate, replacing only a limited amount of the grey hydrogen currently in use

The overall goals for energy storage are also scaling up rapidly, implying that the growth trajectory for green hydrogen is significantly slower than anticipated.

As highlighted by the experts, China is currently awarding about 1 to 1.5 GW of capacity yearly for hydrogen production, while the existing capacity of electrolyzers is over 20 GW, suggesting a concerning overcapacity situation within the hydrogen production sector.

The lack of competitive pricing, economic feasibility, and a coherent commercial model are emerging as primary inhibitors to hydrogen energy developmentGlobally, what progress has been made in pursuing hydrogen energy?

In recent years, major global economies have started to prioritize hydrogen energy, incorporating it into national energy strategiesJapan serves as a pertinent example; with about 94% of its primary energy derived from overseas, and 98% of its oil consumption tied to the automotive industry, Japan has consistently sought to enhance energy efficiency to mitigate its reliance on foreign energy

As such, in 2017, it introduced a "Basic Hydrogen Strategy," envisioning a "hydrogen society" that encompasses the entire hydrogen lifecycle from production to storage, distribution, and utilization.

In 2019, Japan built the world's largest hydrogen plant in Fukushima, capable of producing, storing, and supplying up to 900 tons of hydrogen through a 10,000 kW facility powered primarily by renewable energy sources adjacent to the siteYet, despite these ambitious initiatives, challenges loom largeThe path forward still requires substantial investment and strategic direction to overcome inherent barriers, particularly concerning green hydrogen production.

By December 2020, Japan’s Ministry of Economy, Trade, and Industry unveiled their "Carbon Neutral Green Growth Strategy by 2050," reemphasizing the significance of hydrogen energy within Japan’s clean energy agenda, proposing to invest approximately $2.33 trillion, and aiming to import 3 million tons of hydrogen by 2030 while reducing costs significantly by 2050. Despite this, a recent report in 2023 questioned Japan's progress, citing a heavy reliance on grey and blue hydrogen while green hydrogen production lagged behind expectations.

In light of high prices, the report highlighted that the cost of hydrogen in 2023 was about 33% more than the target price for 2030, representing roughly twelve times the cost of fossil fuels

Japan produced only 2 million tons of hydrogen annually, much of which was consumed in refiningDespite aggressive investment and planning, the results of Japan's hydrogen strategies remain limited.

Experts suggest that Japan's struggles are multifaceted, with one primary factor being the underdeveloped green hydrogen marketWithin application contexts, the report advises prioritizing hydrogen for sectors lacking zero-carbon alternatives, while methods exist that can efficiently reduce carbon emissions elsewhere.

Yet, the overarching issue remains the costHydrogen vehicles are considerably more expensive both in terms of purchase price and operating costsFor instance, the Toyota Mirai exceeds 700,000 yen (around $6,000), while domestically available models like the Deep Blue SL03 hover at a similar price pointWhen considering refueling, the cost of one kilogram of hydrogen is approximately 1,100 yen ($8), with a full tank costing around 6,000 yen ($44) for a range of 650 kilometers, translating to an operational cost of roughly $0.06 per kilometer

In contrast, electric vehicles have charging costs closer to $0.02 per kilometerMoreover, a lack of hydrogen refueling stations and high maintenance costs compound the challenges faced in this sector.

Although Japan symbolizes hydrogen's potential transformation as a microcosm of broader global trends, it mirrors a widespread struggle wherein high costs hinder the advancement of hydrogen energy across nations.

As noted by industry experts, many regions, including the Middle East and Europe, have scaled back their commitments to green hydrogen, while the US market has recently faced substantial setbacksThis collective challenge raises eyebrows regarding the immediate outlook for green hydrogen development.

Nevertheless, resilience is encouragedThe temporary dilemmas plaguing hydrogen energy do not signify a long-term downturnLi Zhongguo asserts that the principal logic for hydrogen’s long-term growth remains intact, foreseeing an indispensable role for green hydrogen in the future energy landscape.

Forecasts from Guoxin Securities indicate that future advancements across various factors will likely drive down green hydrogen costs

On the technology front, the emergence of larger capacity alkaline electrolyzers and increasing production scale are poised to reduce unit investment costs considerably, consequently lowering overall production costs.

As for electricity pricing, with renewable energy costs expected to fall to 0.2 yuan per kilowatt-hour, the cost of hydrogen production through electrolysis could potentially align closer with that of fossil fuelsThis contrast highlights China's unique potential in hydrogen energy development, particularly as it captures a significant share of the global hydrogen production capacity.

While China has established a relatively complete hydrogen energy industry chain and is the leading producer of hydrogen gas globally, challenges remain, especially regarding advanced electrolysis technologiesCurrent practices indicate a reliance on coal, but a shift towards cost-competitive green hydrogen—especially driven by wind and solar integration—will require further innovation and adaptation.

Although lacking some advanced technologies and patents relative to more developed nations, China is on an upward trajectory in rapidly growing hydrogen-centered research and development, hinting at a promising future