CITIC Securities: Policy Expectations Rise Again, Hydrogen Energy Approaching Industrialization Turning Point

CITIC Securities Research Report believes that policy expectations are heating up again, and hydrogen energy is approaching an industrialization inflection point. The 2026 government work report will upgrade hydrogen energy to a new growth point and will include green fuels for the first time, simultaneously proposing the establishment of a national low-carbon transition fund to foster industry development. Proposals from NPC and CPPCC representatives and members have focused intensively on advancing pipeline storage and transportation, deepening electro-hydrogen coupling, accelerating mechanisms like carbon pricing, and setting subsidy policies to address industrialization bottlenecks. The policy closed-loop is beginning to take shape. CITIC Securities believes that during the 14th Five-Year Plan period, the focus of the hydrogen industry will shift from technological demonstration to systematic supply and scenario expansion, with integrated projects of green electricity—green hydrogen—green fuels expected to break through first. It is recommended to pay attention to investment operators of green hydrogen, ammonia, and alcohol-based green fuel projects.

Hydrogen Energy | Policy Expectations Rise Again, Approaching Industrialization Inflection Point

The 2026 government work report upgraded hydrogen energy to a new growth point and included green fuels for the first time, also proposing the establishment of a national low-carbon transition fund to promote industry development. During the “Two Sessions,” proposals from representatives and members focused heavily on advancing pipeline storage and transportation, deepening electro-hydrogen coupling, speeding up mechanisms like carbon pricing, and implementing subsidy policies to overcome industrialization bottlenecks. The policy closed-loop is beginning to take shape. We believe that during the 14th Five-Year Plan, the industry will shift from technological demonstration to systematic supply and scenario expansion, with integrated projects of green electricity—green hydrogen—green fuels likely to lead the breakthrough. We suggest monitoring investments in green hydrogen, ammonia, and alcohol-based green fuels.

Event: The 2026 Government Work Report Officially Released, Proposing to Cultivate New Growth Points in Hydrogen Energy

On March 5th, Premier Li Qiang explicitly proposed in the 2026 government work report to “establish a national low-carbon transition fund to cultivate new growth points such as hydrogen energy and green fuels,” and highlighted “cultivating and developing future energy (including hydrogen and nuclear fusion)” in the section on “cultivating and strengthening new drivers.” This marks the third time hydrogen energy has been included in a government work report, with its mention and positioning elevating from “promoting hydrogen refueling infrastructure” in 2019 and “frontier emerging industry” in 2024 to “new growth point” and “future energy,” reflecting a significant strategic upgrade. Green fuels are also included for the first time. Coupled with previous policies from the National Energy Administration, the industry’s policy narrative has shifted from carbon reduction tools to “substituting oil and ensuring energy security.” Supporting measures include establishing a national low-carbon transition fund, expanding carbon market coverage, formulating an energy powerhouse development plan, and setting a quantitative target to reduce per-unit GDP carbon emissions by about 3.8% by 2026. We believe these policies, under the joint influence of funding support, mechanism coordination, and target constraints, will accelerate industry development.

Multiple “Two Sessions” Representatives Voice Support, Potentially Driving Policy Optimization and Industry Bottleneck Resolution

During the Two Sessions, over ten proposals from representatives and members focused precisely on industry bottlenecks: 1) advancing pipeline storage and transportation by coordinating the “West Hydrogen East Delivery” strategic backbone; 2) deepening electro-hydrogen coupling by ensuring wind and solar power integration for projects, and reducing hydrogen production electricity costs and network fees; 3) accelerating mechanism support by promoting green value certification, linking with carbon markets, realizing carbon reduction value, and recognizing international standards; 4) supporting absorption subsidies by encouraging local consumption and large-scale application of green hydrogen, with differentiated subsidy policies. These proposals form a policy closed-loop of “infrastructure—market mechanisms—carbon pricing system—application scenarios.”

From an industry logic perspective, while renewable energy installations are growing rapidly, their volatility increases absorption pressure; industries like steel, chemicals, and building materials, which are hard to decarbonize, need not only clean electricity but also clean raw materials and high-temperature heat sources. Electrification alone cannot solve raw material carbon emissions. Hydrogen energy, with its dual role as an energy carrier and industrial raw material, offers a transformation path of “green electricity → green hydrogen → green fuels,” which is central to non-electrical absorption and industrial deep decarbonization. Additionally, with the EU’s CBAM carbon tariffs officially implemented in 2026, the demand for zero-carbon factories and product carbon footprint management will further enhance the strategic value of green hydrogen. Meanwhile, amid the blockade of the Strait of Hormuz for over a week and soaring international energy prices, China’s energy security issues deserve more attention. Green fuels could further reduce China’s industrial and transportation system dependence on foreign energy.

Outlook for the 14th Five-Year Plan: Hydrogen Industry Expected to Achieve “Systematic Supply + Scenario Expansion” Under Policy Support

On the supply side, the first batch of green liquid fuel pilot projects mandated by the National Energy Administration are expected to be completed and operational by the end of 2026. Benchmark projects like Jilin Electric Power’s Daan and Shanghai Electric Power’s Taonan have been running for over half a year, with construction paths becoming clearer. On the demand side, Yunnan has announced subsidies of up to 13 yuan/kg for green hydrogen, potentially bringing green hydrogen costs down to the level of gray hydrogen and establishing replicable regional models. Multiple provinces have also proposed building zero-carbon hydrogen corridors and zones, with national green hydrogen support policies expected to strengthen. We believe that during the 14th Five-Year period, hydrogen will move from demonstration to large-scale industrialization, with the “green electricity—green hydrogen—green fuels” integrated projects and regional hydrogen corridors likely to be the first breakthroughs. Upstream electrolysis systems, system integration, project operation, and storage and transportation infrastructure are expected to benefit first. We recommend continuing to monitor the implementation pace of relevant policies after the Two Sessions.

Risk Factors:

• Policy details and implementation progress fall short of expectations;
• Policy enforcement is weaker than anticipated;
• Major technological changes in green fuel industry routes;
• Cost reduction speeds slower than expected.

Investment Strategy:

Recently, hydrogen policies have been continuously reinforced. The 2026 government work report designated hydrogen energy and green fuels as new growth points. During the Two Sessions, hydrogen was frequently mentioned, with active proposals from representatives. During the 14th Five-Year Plan, policies related to hydrogen and green fuels are expected to strengthen further, and industry positioning is likely to continue rising. We are optimistic about:

1. Investment operators of green hydrogen, ammonia, and alcohol-based green fuels projects;
2. Key equipment manufacturers for green hydrogen production—electrolyzer producers.

(Source: People’s Financial News)