The stakes are substantial. China has more than tripled its annual operational capacity since the end of 2024, and now hosts nearly 250,000 tons — over twice that of the rest of the world combined, according to BloombergNEF. Beijing’s latest five-year plan calls for an eightfold increase to 2 million tons a year by the end of the decade.
China is outstripping rivals that have seen major projects shelved due to ballooning costs and anemic demand. Its success hinges on two distinct advantages over places like India and Europe: a massive industrial base that’s proving tough to decarbonize, and a surplus of clean energy that needs to find a home.
“China is making a strategic bet on renewable hydrogen as a way to carry clean electricity into the sectors electrification struggles to reach,” said Muyi Yang, a Sydney-based analyst at energy think tank Ember.
Two hours north of Beijing by bullet train, Chifeng in Inner Mongolia straddles China’s past and future. Home to nearly four million people, the city is dotted with smokestack chimneys. On the outskirts, one square kilometer has been given over to a project that promises to clean up a local economy founded on mining and powered by coal.
The Envision Group facility, all sharp-angled white facades, floor-to-ceiling glass walls and minimalist interiors — is the world’s biggest green hydrogen plant. At a cost of $2.6 billion, it began operating in 2024, employing electrolyzers that use wind and solar to split water into an element that its boosters say will transform efforts to lower emissions.
China’s extraordinary expansion of clean power has created wind and solar power in abundance, to the degree that an increasing amount is simply being wasted. Diverting the excess to green hydrogen solves the problem of under-utilization. When converted to chemicals such as ammonia, it also allows renewables to be stored for future use, much like a liquid battery.The issue has become more pressing for policymakers because wastage undermines the economics of renewables projects at a time when they’re already grappling with excess capacity and fierce price competition.
Projections on how much green hydrogen capacity the world will add have been scaled back in recent years. If plants like Chifeng succeed, it would reaffirm China’s dominance as a clean-tech powerhouse, and offer a path to cutting emissions in the stubbornest industries. But failure would throw into doubt whether green hydrogen can achieve commercial liftoff anywhere in the near term.
The share of electricity in China’s final energy use has risen steadily, reaching 30% in 2025. The government is targeting 35% by 2030. The gains so far have been smoothed by the country’s vast coal reserves, ever-cheaper wind and solar, and the electric vehicle boom.
The next five percentage points, which also need to take account of the country’s gradual shift from coal to renewables, will be harder to capture without a new approach. Adopting the playbook that delivered its world-beating wind, solar and EV industries, Beijing is focused on shoring up supply first. The hope is that demand will follow.
“With the rollout of China’s new five-year plan, the industry’s growth will increasingly depend on how China, and economies linked to China, can foster demand for green hydrogen,” said Yimin Lou, Envision’s chief product officer and head of its hydrogen business.
But challenges abound. The green version of the fuel is still more expensive than the gray and black hydrogen that comes from gas and coal, and the blue hydrogen that combines fossil fuels with carbon capture.
Green hydrogen producers have access to subsidies from both central and local governments and via national carbon credits. But even combined, the savings fall short of matching gray hydrogen’s cost, BNEF says.
Moreover, the subsidies don’t necessarily feed directly into consumption. “The most important thing is whether demand-side policies can be implemented, and whether they can stimulate some real demand and support the price premium,” said BNEF analyst Kathy Gao.
Pole Position
Still, China’s advantages are considerable.
Its electrolyzers cost about four times less than those made in Europe, according to BNEF. In addition to its lead in clean energy, the country dominates global production of highly polluting industries like steel, cement and chemicals, which have been slow to cut emissions but must decarbonize if Beijing is to meet its climate goals. For other countries to get to the same level on hydrogen, they’d need to invest a lot more and rely on exports for future demand.
“It’s fair to say that, from virtually every perspective, China is the most favorable market for the development of this industry,” said Gao.
Inner Mongolia exemplifies the opportunity. It boasts some of the world’s richest wind and solar resources, yet electricity demand is concentrated in faraway coastal cities. Grid infrastructure is lagging, which has led to rising curtailments of renewable power.
Hydrogen offers a remedy. At Envision’s facility, nearby wind and solar farms supply all the electricity. The plant’s electrolyzers are specifically designed for the variable levels of power delivered by the wind and sun.
“The key consideration is how to unlock greater demand for renewable energy,” said Envision’s Lou. “Historically, the ability of the market to absorb renewable power, particularly from wind and solar, has been constrained. Products such as green hydrogen and green ammonia create entirely new sources of demand.”
On the Wire
China’s steel demand is set to remain subdued as construction remains constrained by adverse weather, tight funding and contracting PMIs, said Bloomberg Intelligence. Exports are expected to face rising pressure amid the EU and UK’s quota tightening, rising trade barriers and Middle East shipping disruptions.
Singaporean police raided the local office of iron ore trader Radiant World last week and questioned some of the firm’s employees, according to people familiar with the matter.
China’s biggest offshore oil and gas driller said its first-half profits rose due a surge in global energy prices.
