China has taken the first critical steps in fostering a hydrogen economy. The nation has established an initial policy mechanism to stimulate fuel cell vehicles (FCVs) and fueling infrastructure investment: it selected five “city alliances” for FCV industry demonstration (燃料电池汽车示范应用) and one province to develop a pilot “hydrogen society” program.
The performance of these six regions (5+1 in two programs) will become the key factor determining the near-term market size of China’s hydrogen fuel cell mobility market.
So what is the realistic outlook of China’s 2025 hydrogen fuel cell market?
Energy Iceberg conducted a deep dive into the hydrogen fuel cell market targets set by all relevant regional governments. The study considers target from six “most-important” provinces and 15 high-relevant regions. The policy targets of these regions will support the robust growth of hydrogen fuel cell vehicles and fueling infrastructure.
While a low-scenario means that at least 48,000 hydrogen fuel cell vehicles will be in operation, a high-scenario point to 100,000 fuel cell vehicles in China by the end of 2025.
Pessimistic Projection of 2025 Hydrogen Fuel Cell Vehicle Adoption in China
The base scenario assumed that only the five city alliances fully achieved their FCV demonstration plan targets. The funding mechanism–a performance-based reward system–ensure the cities involved in the program deliver results as planned. The combined targets of the five alliances point to 48,010 FCVs in operation.
Notably, Guangdong province currently set 10,000 FCV in operation as the 2025 target. But it is drafting a new hydrogen policy, which is likely to see a significant target increase, Energy Iceberg came to understand from the regional sources. Guangdong’s latest target is expected to raise the final result. (Table 1)
We assumed that cities not included in the FCV demonstration program would slow down their FCV orders and, instead, focus on applying for the next-stage funding. (Table1) Nevertheless, many regions will still need to expand their hydrogen mobility portfolio to prepare for the next round’s funding selection. Moreover, regions might enjoy spill-over effects from the 41 demonstration cities. In reality, the 2025 market result will likely be more than 50,000 FCV in operation.
The High Scenario
Besides the FCV industry application demonstration program, two other funding projects are highly relevant, too. The “Hydrogen Society”(氢能进万家), led by the Ministry of Industry and Information Technology, currently involves Shandong province as the first demonstrators. Meanwhile, the “Sichuan-Chongqing Hydrogen Corridor” scheme would also play a role in China’s FCV adoption.
Under the demonstration and other funding programs, 15 provinces have established 2025 hydrogen and FCV targets. The combined targets of these provinces mount to 109,300 FCVs and 1,066 refuelling stations in operation by the end of 2025. (Table 2) We believe that the combined policy targets provide a high scenario of the FCV market adoption in 2025. (Table 2)
****In reality, not all of the provincial targets will be met–especially, these targets are more than 10X of the national industrial estimation and 10X of the current FCV adoption.
To compare, China has chosen 25 cities to involve in a similar funding program for the nascent EV industry between 2009-2012. However, a majority of these cities, in the end, failed to deliver even half of their original planned targets. That said, some of the policy lessons in the EV program have been taken into consideration in the FCV demonstration. And a handful of other provinces–especially those of significant chemical industries–would choose to foster a hydrogen value chain as well. The latter factor would lead to more FCV adoption.
Thus, we expect 50,000 FCVs to be the minimum FCV adoption rate by the end of 2025. And between 60,000-80,000 are the likely result.