Transitioning China’s Industries: Creating Clusters for Large-scale Green Hydrogen Integration

The industrial sector is currently China’s largest consumer of hydrogen and is expected to continue dominating hydrogen utilization — at an estimated 60 percent of the overall consumption.

China has carried out extensive efforts in green hydrogen and its utilization in industry. The large-scale utilization of green hydrogen in industry requires addressing two main challenges: (1) the supply of green hydrogen must reach a significant scale and stability, and (2) the high cost of hydrogen utilization needs to be addressed.

To address these challenges, this research introduces a “cluster development” model for efficiently deploying green hydrogen on a large scale in industry. This approach prioritizes locations where the production and consumption of green hydrogen are well aligned, aiming to optimize the economic feasibility through a “production-storage-transportation-utilization” green hydrogen system while deploying coordination methods based on technical feasibility. The goal is to ensure a large-scale, consistent, and stable supply of green hydrogen at the lowest cost.

Specifically, the report conducts techno-economic analysis of green hydrogen production, storage, transportation, and utilization in industry, forming a foundation for achieving cost-efficiency when technically feasible during the cluster development process. Additionally, to facilitate practical implementation, the report outlines methods for industry cluster forming and cost optimization in two common scenarios: when hydrogen supply and utilization are in the same location and when they are in different locations.

In the short to medium term, the industry cluster development model can effectively accelerate the green hydrogen utilization in regions where energy resources and utilization capacity match. Early industrial cluster development practice could demonstrate the technical and economic feasibility of low/zero-carbon solutions represented by green hydrogen, and explore feasible business models. In regions where there is a resource mismatch between green hydrogen supply and utilization, an integrated solution of hydrogen production, storage, transportation, and utilization could be considered. This integrated planning can help determine the optimal methods for acquiring green hydrogen in these regions.