China Backs Wider Hydrogen Adoption As Strait Of Hormuz Crisis Jolts Energy Markets

Initiative to expand industrial hydrogen use and lower the renewable fuel’s price dovetails with Beijing’s energy security strategy amid oil crisis

Beijing is launching a pilot programme to expand industrial use of hydrogen energy, at a time when war in the Middle East is exposing the risks of global reliance on fossil fuels.

Iran’s effective blockade of the Strait of Hormuz amid its war with the United States and Israel – now in its third week – has disrupted oil and gas supplies, prompting some nations to re-examine their energy mix, with renewables emerging as a potential hedge against volatility.

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In a Monday notice, the Ministry of Industry and Information Technology and several other agencies set a target to cut the average hydrogen price for end users to below 25 yuan (US$4) per kilogram by 2030, and to about 15 yuan per kilogram in certain “advantaged regions”.

The programme will be applied across urban clusters in sectors such as transport and heavy industry, aiming to double fuel-cell vehicle ownership from 2025 levels to 100,000 units in five years – a sizeable increase for the still nascent sector.

The guidelines also called for expanding hydrogen-powered public transport and urban logistics, and exploring the use of the renewable fuel in ride-hailing fleets. Beijing also plans to blend hydrogen into natural gas pipelines and industrial boilers to promote its use as a heat source.

According to the notice, the programme will “construct renewable hydrogen production projects to gradually replace existing hydrogen production using coal, natural gas and other fossil energy”.

China is already the world’s leading hydrogen producer, but most of its current supply comes from coal. The latest initiative aims to accelerate the shift to alternatives such as green hydrogen – produced via electrolysis – which remains far more expensive than fossil-fuel-based options.

A further option lies in natural hydrogen. Geological reserves have the potential to provide an inexpensive, low-carbon source, but the sector remains constrained by hefty exploration costs and limited infrastructure. To date, there is only one commercial site in operation worldwide – in Mali.

Even so, Jin Zhijun, dean of the Institute of Energy at Peking University, urged Beijing to speed up the exploration of natural hydrogen to help reshape the country’s energy mix.

“If we could chart a new course by discovering natural hydrogen reservoirs underground and extracting them for human use, I believe this would transform the global energy landscape,” he said.

To overcome investment barriers, Jin said private capital would have to play a leading role. He cited the success of private firms entering the oil and gas sectors as a model for financing high-risk projects.

“Natural hydrogen should also be managed at the local level rather than under centralised state control,” he added. “It will be a very positive development if investors are willing to put money in, and so we must liberalise mining rights and provide support.”

Beijing has made the green transition a pillar of its latest five-year plan to both meet its climate mandates and bolster energy security. In the socio-economic blueprint, policymakers identified green hydrogen and nuclear fusion as strategic priorities.