DSET on Nov. 5 published an article on Pacific Forum’s weekly publication “PacNet,” titled “Hydrogen on the Rise: Navigating China’s Electrolyzer Dominance and Global Risks.” The article, co-authored by DSET Energy Security and Climate Resilience Program Director Tsaiying Lu, Global Fellow Sunny Cheung, and Policy Analyst Chen-Yen Chang, highlights China’s rapid dominance in the global hydrogen supply market, posing strategic and technological challenges for the global clean-energy transition.
According to the report, global demand for low-carbon hydrogen is expected to surge—from roughly US$26 billion in 2024 to US$113 billion by 2034—as countries pursue net-zero targets. Central to this growth is the electrolyzer, the device that produces “low-carbon” hydrogen by splitting water using renewable electricity. Chinese manufacturers now account for around 60 percent of global hydrogen electrolyzer production capacity and around 85 percent of global manufacturing capacity for mature alkaline water electrolysis (AWE) technology. Meanwhile, China is rapidly closing the gap in manufacturing the more flexible proton exchange membrane (PEM) technology, having successfully achieved price competitiveness by cutting costs by 40% between 2022 and 2024.
In the op-ed, the authors further elaborate that China’s government-led industrial strategy has been instrumental in achieving this lead. In 2023, the Chinese government designated hydrogen as one of six “industries of the future,” alongside AI and advanced materials, and channelled extensive policy support, subsidies, and investment through state-owned conglomerates such as Sinopec and CNPC. The strategies implemented in China’s electrolyzer industry have produced both domestic leadership and international expansion, says the op-ed, accelerating cost reductions and ensuring Chinese technology sets global price benchmarks among overcapacity risks.
While China’s mass production of AWE and PEM electrolyzers offers a tempting path to affordable green hydrogen, the op-ed also underscores the limitations of China’s electrolysis technologies. Despite large-scale output, many Chinese electrolyzers remain less efficient. The authors cite operational shortfalls—such as Sinopec’s 260 MW green hydrogen facility in Kuqa, running at below one-third capacity—as evidence of performance gaps and potential overcapacity risks. These issues open the door to further strategic investment in alternative technologies better suited to complex demands such as industrial decarbonization.
To mitigate the supply chain risks posed by China’s hydrogen industry, the article calls for innovation and diversification across the global hydrogen sector. Emerging alternatives like solid oxide electrolyte (SOE) offer higher efficiency and better performance in high-temperature industrial settings. For instance, SOE could utilize the waste heat during the steel-making process to produce hydrogen, as proven in a 2024 Australian collaboration that reduced electricity use by 30 percent. The authors conclude that strategic partnerships, investment in alternative technologies, and supply-chain resilience will be vital to ensuring a secure, diversified, and resilient hydrogen future.
