China's Inner Mongolia to allow green hydrogen projects outside restricted industrial zones

Inner Mongolia, an autonomous region of northern China, will allow renewable-based hydrogen projects outside the designated chemical industrial zones and eliminate the requirements for licenses of dangerous goods production, the region's government said in a statement late Feb. 26.

In the past, hydrogen was not widely recognized as a source of energy but a raw material for industrial processes. Hence, provincial governments across China imposed regulations to address hazards associated with chemical production, including constraining production within designated areas and requiring additional licenses like what Inner Mongolia had done.

In recent years, hydrogen has become an alternative fuel for power generation and transportation. Meanwhile, to meet China's targets of carbon peaking by 2030 and carbon neutrality by 2060, electrolytic hydrogen production from renewables needs to scale up. Constraining hydrogen production within chemical industrial zones hinders installing renewable generation capacities.

The Inner Mongolian government said building production bases and refueling stations for renewable-based hydrogen outside the chemical industrial zones are now allowed, but hydrogen production from fossil fuels or as industrial byproducts still needs to follow the previous regulations.

Lifting the regulatory hurdles is expected to help Inner Mongolia expedite project approvals and scale up green hydrogen deployment. This is important because Inner Mongolia has a large geographical area, abundant renewable resources, and is expected to become one of the renewable and hydrogen hubs of the country.

As of January 2024, over 400 renewable-based hydrogen production projects have been planned in China, among which 123 are based in Inner Mongolia, according to government-backed industry association China Hydrogen Alliance (CHA). If all projects start operating as planned, the total output is expected to reach 6 million mt/year.

Inner Mongolia is not the only province that has attempted to eliminate these regulatory constraints. Jilin, Guangdong and Hebei provinces have also allowed building renewable-based hydrogen production bases and refueling stations outside the chemical industrial zones, according to information from CHA.

Production costs for renewable-based hydrogen were at around Yuan 20/kg ($2.78/kg) in Inner Mongolia, CHA said in a report published in 2023.

Platts, part of S&P Global Commodity Insights, assessed average cost-based prices(opens in a new tab) of hydrogen produced from alkaline electrolysis at $1.85/kg in Victoria, Australia, $6.01/kg in the UK, $4.83/kg in Japan and $3.15/kg in the US Gulf in January.