Huayuan Securities: The hydrogen energy industry is expected to mature and focus on equipment and operator opportunities

The Zhitong Finance App learned that Huayuan Securities released a research report saying that based on the present, with multiple factors such as falling electricity prices, rising carbon prices, policy support, and green fuel order growth, the operating rate of green hydrogen projects is expected to gradually increase, and the upstream electrolyzer industry may gradually enter the “internal volume” stage, and it is recommended to focus on companies related to electrolyzers. At the same time, the economy of downstream green hydrogen or green methanol projects is expected to gradually improve. It is recommended to focus on hydrogen-based energy operators. Furthermore, as the cost of green hydrogen falls, the penetration rate of hydrogen energy is expected to further increase in transportation, industry, etc. It is recommended to focus on fuel cell-related companies.

The main views of Huayuan Securities are as follows:

The large-scale development of renewable energy has opened the door to cost reduction for hydrogen energy, and hydrogen energy is expected to accelerate its penetration into the energy system

Hydrogen has the dual properties of a chemical raw material and fuel, but in the past, hydrogen has long been used as a chemical raw material rather than an energy medium. The bank believes that the main reason is that hydrogen energy is a secondary energy source, whether it is hydrogen from fossil energy or hydrogen production from electrolyzed water, and in the past, its cost was difficult to escape the price of fossil fuel on the power supply side; however, in the era of renewable energy, large-scale electricity with zero marginal cost provides the possibility to reduce the cost of hydrogen production. As an energy conversion medium for wind and solar resources, hydrogen energy is expected to accelerate penetration into the energy system through the “wind - electricity - hydrogen - electric/heat” conversion process.

The “14th Five-Year Plan” hydrogen energy industry focuses on demonstration, with the aim of initially establishing an industrial system

In order to promote the natural expansion of hydrogen energy driven by economic value, it is necessary to promote a learning curve and achieve economies of scale through large-scale application. However, in the early stages of industry development, related facilities were not yet perfect, and cost reduction in all aspects of manufacturing, storage and application could not be achieved overnight. In China's “14th Five-Year Plan” and Outline of Long-term Objectives for 2035, hydrogen energy is listed as a future industry. Judging from recent policies, China has shown a high degree of rationality and respect for the rules of industrial development in top-level design and industrial planning, and has positioned the “14th Five-Year Plan” as an early demonstration stage for hydrogen energy development, relayout, reguidance, and collaboration at the planning level.

Industrial chain development level: 1) Hydrogen production side: Under the leadership of energy and chemical enterprises, the construction of China's green hydrogen projects continued to advance, and several 10,000-ton green hydrogen projects were gradually put into operation; however, in terms of pace, the actual number of projects implemented during the “14th Five-Year Plan” period was less than planned; however, the production capacity of electrolyzers planned ahead of schedule caused the industry to enter the price competition stage earlier. According to public bid data, the average bid price for 1,000 Nm3/h alkaline electrolyzers dropped from 10 million yuan in 2021 to around 6.5 million yuan in 2024. There is an urgent need for collaboration in the development of the industrial chain.

2) Transportation: Space mismatches increase the cost of hydrogen for terminals, and the scale of hydrogen pipelines needs to be expanded. Comparing the prices on the hydrogen energy production side and the hydrogen use side, it can be seen that the current intermediate transportation costs are still high. In December 2024, the national hydrogen energy production side price fell to 28.0 yuan/kg, and the consumer side price dropped to 48.6 yuan/kg. Although it is the lowest point in the average price statistics for hydrogen energy production side and consumer side, compared with the production side and hydrogen use side, it can be seen that the total cost of intermediate transportation and filling still accounts for about 40%. Gan Yong, an Academician of the Chinese Academy of Engineering, pointed out that the current transportation cost of liquid hydrogen trailers is as high as 8-10 yuan/kg, while pipeline transportation can reduce the cost to 0.3 yuan/kg/100 km. By the end of 2024, China had a total of 15 pure hydrogen pipelines, of which 6 pipelines have been built; 8 and 6 hydrogen mixing pipelines have been basically completed. As the scale of green hydrogen pipelines expands, the cost of using hydrogen energy in North China and East China is expected to drop rapidly during the “15th Five-Year Plan” period, promoting the expansion of green hydrogen consumption and consumption.

3) Using hydrogen: Urban agglomerations lead the promotion of fuel cell vehicles, and the penetration rate in the industrial sector needs to be increased. In the transportation sector, as of March 2025, the five major model urban agglomerations have promoted a total of 15,850 fuel cell vehicles. As the “14th Five-Year Plan” is about to be completed, relevant regions will further accelerate promotion through policies such as urban agglomeration expansion or “hydrogen corridor” construction, and fuel cell vehicle sales are expected to rise. In the industrial field, demonstration applications of hydrogen energy have been launched in chemicals, metallurgy, distributed power generation, etc., and demonstration projects such as hydrogen metallurgy and distributed hydrogen energy generation have been completed and put into operation one after another.

Looking ahead to 2030: carbon costs may stimulate the potential for green hydrogen demand and promote low-carbon hydrogen replacement in the industrial sector

1) Take the carbon tax system in the field of international trade represented by the EU CBAM as an example. The EU began imposing carbon taxes on the shipping and aviation sectors in 2024/2026, respectively, to pay for carbon or have already been decided. Driven by costs, some industries that had no demand for hydrogen in the past are planning to reduce carbon through green hydrogen-related products. For example, for industries such as shipping, green hydrogen derivatives — green methanol/green ammonia, etc. can be used as alternative fuels to reduce carbon. Higher carbon prices mean that the green competitiveness of green hydrogen continues to increase in the form of economic benefits. As electricity costs at the hydrogen production end decline simultaneously, the scale of demand for green hydrogen is expected to expand. 2) The domestic carbon market is expanding, and related industries are expected to actively reduce carbon. In March 2025, the Ministry of Ecology and Environment issued the “National Carbon Emissions Trading Market Work Plan to Cover the Steel, Cement and Aluminum Smelting Industry”, which expanded the carbon emissions trading market, adding about 3 billion tons of carbon emissions, and increasing the proportion of carbon dioxide emissions covering the country from 40% to 60%. The industrial sector is the largest demand for hydrogen, and green hydrogen can help the industrial sector achieve carbon reduction. 3) Infrastructure construction such as midstream pipelines and hydrogen refueling stations is expected to be strengthened, and interregional hydrogen production collaboration is worth looking forward to.

Risk warning: the cost of green electricity fell short of expectations; the increase in carbon prices fell short of expectations; downstream demand for green hydrogen fell short of expectations; the commencement of green hydrogen projects fell short of expectations.