In Depth: Why Making Green Hydrogen Is Keeping Producers in the Red

The relatively clean fuel source’s high prices are preventing the technology from going mainstream

China’s green hydrogen sector is at a crossroads. Even after a flurry of investment and development activity, the high price of the end product is preventing the technology from breaking through, as firms bleed red ink.

This challenge has been compounded by a classic chicken-and-egg dilemma — expensive production processes mean high per-unit costs are limiting downstream market penetration, and the lack of widespread take-up is holding back efficiencies of scale.

China’s heavy reliance on coal power to make hydrogen is one big hurdle. Green hydrogen accounted for only 1% of the around 35.5 million tons produced in 2023, according to the China Hydrogen Alliance, an industry group. 

As it’s generated from renewable energy sources like wind and solar, green hydrogen offers substantial environmental benefits, and a significant advantage in the context of China’s high-level carbon pollution goals, but it remains far more expensive than gray or “dirty” hydrogen produced from fossil fuels.