CITIC SEC: The demand side of green hydrogen ammonia alcohol is approaching a policy turning point, and the industry is expected to usher in a new round of growth.

CITIC SEC released a research report stating that the National Development and Reform Commission (NDRC) proposed setting a proportion of non-electric renewable energy consumption for energy users, with consumption of green hydrogen and alcohol included. The company believes that this system, as the first policy to include non-electric sectors in renewable energy consumption targets, will effectively promote the green transformation of high-energy-consuming industries, especially in the steel, chemical, and other industrial sectors, paving the way for the adoption of green hydrogen as an alternative. With the arrival of a turning point in green hydrogen and alcohol demand-side policies, the industry is expected to see a new round of growth. It is recommended to focus on core equipment suppliers such as electrolyzers and companies with leading advantages in green methanol projects and process innovation. Investment Strategy: 1) Focus on equipment manufacturers of core equipment for converting green electricity into green hydrogen - electrolyzers; 2) Green methanol project investors: Focus on companies that have signed sales agreements with downstream customers, or have cost advantages in project locations, and are the first to achieve green methanol certification. 3) Provide green methanol biogas synthesis process providers and project investors with cost advantages. Event: NDRC proposed setting a proportion of non-electric renewable energy consumption for energy users, with green hydrogen and alcohol consumption included. On October 13, 2025, the NDRC issued the "Implementation Measures for the Minimum Proportion of Renewable Energy Consumption Targets and the Weighted Responsibility System for Renewable Energy Power Absorption (Draft for Comments)". The document proposes establishing and standardizing the minimum proportion of renewable energy consumption targets and the responsibility weighting system for power consumption of renewable energy, with the addition of non-electric renewable energy consumption targets. The company believes that the implementation of this policy and subsequent supporting policies are expected to play an important role in promoting the development of the green hydrogen industry. CITIC SEC's main points are as follows: The Implementation Measures clarify the regulatory framework for non-electric renewable energy absorption: 1) Establishing two types of consumption proportion targets: Setting minimum proportion targets for renewable energy consumption for energy users, which can be divided into two categories: minimum proportion targets for renewable energy power consumption and minimum proportion targets for renewable energy non-electric consumption. 2) Implementation by the energy supervisory authority: The State Council's energy supervisory authority, together with relevant departments, will coordinate the development of non-electric utilization industries of renewable energy and the construction of statistical accounting systems, monitor, evaluate, and assess the minimum proportion targets for renewable energy non-electric consumption in key energy-consuming industries in a timely manner, and clarify the transition period. 3) Identifying the path to achieving the targets: The minimum proportion targets for renewable energy power consumption in key energy-consuming industries can be achieved through various means such as self-generation and consumption of renewable energy electricity, direct connection to green electricity, green certificate and electricity trading, etc.; The minimum proportion targets for non-electric consumption of renewable energy can be achieved through methods such as renewable energy heating (cooling), utilization of green hydrogen and alcohol, biomass non-electric utilization, etc. 4) Proposed penalties for non-fulfillment: For enterprises that fail to meet the targets, supervised by the provincial energy supervisory authority and others, they will be urged to complete the targets through green certificate trading or other market-based trading within three months of the publication of the targets. If the targets are still not met after the deadline, they will be subject to interviews, notifications, and inclusion in the dishonesty record, strengthening key supervision. The Implementation Measures clarify that the absorption of hydrogen and alcohol into non-electric consumption will bring a policy turning point for demand for green hydrogen and alcohol. The Implementation Measures mark the first systemic inclusion of non-electric renewable energy consumption in the minimum proportion assessment, indicating that structural issues of renewable energy demand are being addressed. Many high-energy-consuming and high-carbon-emitting industry enterprises find it difficult to achieve effective carbon reduction through the consumption of green electricity, while green hydrogen and alcohol provide a solution. For example, in the steel industry, the long process of steelmaking relies on the reduction of iron oxide by coke, which generates a large amount of carbon dioxide. The use of green hydrogen metallurgy can effectively replace coke and achieve carbon reduction. Major chemical products in the chemical industry such as urea and polyolefins usually rely on hydrogen obtained from coal gasification/natural gas reforming for further synthesis of ammonia and methanol as basic raw materials. Green hydrogen-derived green ammonia, green methanol, and other products as raw materials can effectively reduce carbon emissions generated in the process of processing fossil fuels as raw materials. The Implementation Measures clarify the specific accounting methods for green hydrogen and alcohol: 1) Raw materials: Consumption of green hydrogen and alcohol as raw materials is included in their corresponding energy consumption. 2) Fuel: Consumption of green hydrogen and alcohol as fuel is included in the heat generated by their use through combustion and other methods. The Implementation Measures are expected to further promote the conversion of industrial enterprises to green hydrogen technologies for carbon reduction. Risk factors: The actual implementation of policies may be less than expected; Progress in green hydrogen projects may be slower than expected; Progress in the promotion of hydrogen-based green fuels, hydrogen chemical industry, hydrogen metallurgy, and other hydrogen applications may be slower than expected; Risks related to technological changes, etc.