Hydrogen, Ammonia and Energy Storage in China

Hydrogen, ammonia and energy storage in China: where the law stands

Hydrogen, ammonia and energy storage in China have moved from pilot projects to industrial scale in less than five years. China already has the world's largest fleet of new-type energy storage, and it is building more renewable hydrogen capacity than any other country. Much of that hydrogen is destined to become green ammonia and methanol for fertiliser, chemicals and shipping fuel. For investors, equipment suppliers, offtakers and lenders, the legal questions are now about revenue models, permitting, safety and export markets, not just subsidies.

The legal foundation is still being built. The Energy Law, effective 1 January 2025, brought hydrogen formally within the national energy management system for the first time. Storage revenue rules were rewritten in 2025 and early 2026. Hydrogen and ammonia remain hazardous chemicals, now governed by the Hazardous Chemicals Safety Law that took effect on 1 May 2026. This page explains the framework as at November 2026. It is general information; PRC law questions should be confirmed with a licensed PRC law firm.

The table below summarises the main instruments affecting the three technologies.

Hydrogen: from hazardous chemical to recognised energy source

For years the central legal obstacle for hydrogen in China was classification. Hydrogen was regulated almost exclusively as a hazardous chemical, which meant that production was in principle confined to chemical parks and required hazardous chemicals safety production licences. That fitted refinery and ammonia plants but not distributed electrolysis at wind farms or refuelling stations.

The Energy Law changed the starting point by treating hydrogen as part of the energy system and calling for its active and orderly development. Several provinces have since allowed renewable hydrogen production outside chemical parks in defined circumstances, and some no longer require a hazardous chemicals production licence for electrolytic hydrogen used as energy. These local rules vary, so project developers must confirm the position in each province and city before committing to a site.

Scale is growing quickly. According to the NEA, by the end of March 2026 China had more than one million tonnes a year of renewable hydrogen capacity built or under construction, of which about 250,000 tonnes a year was operating, more than double the end-2024 level. Water electrolysis is the main route, and most operating capacity is in the northeast, north and northwest. In April 2026 the NEA said it would work with the NDRC to set hydrogen goals and tasks for the 15th Five-Year Plan period (2026–2030), so national targets were still pending at the time of writing.

Key legal issues for hydrogen projects include:

• Site and classification. Whether production may take place outside a chemical park, and which licences apply.
• Power supply. Whether the electrolyser can take power directly from a dedicated renewable plant, how grid connection and green certificates work, and how electricity is priced.
• Transport and storage. Pipeline, tube trailer and storage rules, and the interface with gas pipeline and hazardous goods transport regulations.
• Offtake. Who buys the hydrogen, on what price basis and with what volume commitment, especially where the end product is ammonia or methanol.

Green ammonia and methanol: export-oriented fuels and chemicals

Hydrogen is hard to transport, so most large Chinese projects convert it into ammonia or methanol on site. The NEA has identified integrated green hydrogen, ammonia and methanol production as an important model for scaling up hydrogen. The idea is to turn ammonia and methanol from conventional chemical feedstocks into low-carbon fuels and feedstocks for fertiliser, chemicals and shipping.

Many of these projects are designed for export, which brings foreign law directly into the picture. Buyers in Europe, Japan and Korea typically require certification that the product meets their definitions of renewable or low-carbon fuel. In the EU, this includes the rules for renewable fuels of non-biological origin, and the Carbon Border Adjustment Mechanism, which covers hydrogen and certain fertilisers and entered its definitive phase on 1 January 2026. Shipping lines want fuel that meets lifecycle emissions standards under evolving maritime rules.

Offtake agreements for green ammonia and methanol therefore need careful drafting on:

1. the certification scheme, who obtains and pays for certificates, and what happens if the scheme changes;
2. the treatment of electricity sourcing, additionality and temporal matching evidence;
3. delivery terms, including port, storage and shipping arrangements for a hazardous cargo;
4. price formulae and price review in a market with limited benchmarks; and
5. allocation of risk if export controls, tariffs or trade remedies affect the product or its inputs.

Ammonia's toxicity also matters. Ammonia storage and bunkering facilities are subject to strict safety and siting rules under the Hazardous Chemicals Safety Law and port regulations, and these often take longer to clear than the production plant itself.

New-type energy storage: market reforms and revenue models

New-type energy storage, meaning storage other than pumped hydro, has grown faster than almost any other energy asset class in China. The NEA's 2026 development report records 136 GW and 351 GWh of operating capacity at the end of 2025, up 84.3% year on year. Lithium-ion batteries accounted for about 96% of capacity. North and northwest China together held about 61% of the total, reflecting the concentration of wind and solar bases there.

The business model changed in 2025. Before then, many provinces required new wind and solar projects to pair with storage, and developers leased storage capacity to meet that condition. Document 136 ended storage as a precondition for renewable projects as part of moving renewable output to market pricing. Storage now has to earn its own revenue, and market reports suggest the loss of leasing income sharply reduced returns on some new projects.

The January 2026 capacity price notice is the main policy response. For the first time, grid-side independent storage that supports system security, and is not paired with a new renewable project, can receive a capacity price set by local authorities. The price is based on the local coal-power capacity price, converted according to the storage asset's peak-regulation capability and adjusted for local market conditions. Independent storage made up about 51% of cumulative capacity at the end of 2025.

Behind-the-meter storage at factories, data centres and industrial parks follows a different logic, relying on peak and off-peak tariff differences and demand charge savings. Here the key documents are energy management contracts with the host, which should address ownership of the equipment, metering, sharing of savings, fire safety responsibility and what happens if the host relocates or becomes insolvent.

Developing hydrogen, ammonia and energy storage projects: a step-by-step path

Although each project is different, most hydrogen, ammonia and energy storage developments in China follow a similar sequence:

1. Site selection and local policy. Confirm provincial and city policies on hydrogen production sites, storage project lists and grid connection, and check whether the project needs to be included in a local plan.
2. Corporate set-up. Establish the project company, usually a foreign-invested enterprise or a joint venture with a local energy group. These sectors are not on the foreign investment negative list. See our page on market entry and foreign-invested enterprises.
3. Project filing or approval. Most storage and hydrogen projects are filed rather than approved, but the filing must match the local energy plan.
4. Land, environmental and safety approvals. Obtain land use rights, environmental impact assessment under the Ecological Environment Code, safety assessments and, for chemical production, the relevant hazardous chemicals permits.
5. Grid connection and market registration. Agree connection with the grid company and register with the electricity trading centre to participate in spot and ancillary markets.
6. Contracts and financing. Negotiate EPC, equipment supply, operation and maintenance, offtake or tolling, and finance documents. See our page on project finance.
7. Commissioning and compliance. Complete fire safety acceptance, safety and environmental acceptance, and set up ongoing reporting.

In practice, steps 4 and 5 are where hydrogen, ammonia and energy storage projects most often lose time. A grid connection queue or a delayed safety assessment can hold up an otherwise complete project for months, so financing and EPC timetables should build in realistic buffers.

Battery fire safety deserves special mention. Storage fires have led regulators to tighten standards and inspections, and liability for a fire can extend to the owner, operator, integrator and host. Contracts should allocate these risks clearly, backed by insurance.

Investing in hydrogen, ammonia and energy storage assets: due diligence and deal terms

As the sector matures, more capital is flowing into operating assets and platforms rather than greenfield projects alone. Strategic buyers, infrastructure funds and state-owned energy groups are acquiring storage portfolios, while equipment makers raise growth capital and form joint ventures with project owners. Transactions in hydrogen, ammonia and energy storage share some features with renewable energy deals but raise distinct issues.

A focused due diligence list for hydrogen, ammonia and energy storage targets should cover:

• Revenue basis. Which spot, ancillary and capacity revenues the asset actually earns, under which provincial rules, and how sensitive the model is to rule changes.
• Legacy leasing arrangements. For storage built to satisfy former pairing requirements, whether capacity leases with renewable developers remain enforceable and bankable now that pairing is no longer required.
• Permits and classification. For hydrogen and ammonia, whether production, storage and transport permits match actual operations and whether the site is approved for hazardous chemicals.
• Equipment and warranties. Battery degradation, augmentation obligations, electrolyser performance guarantees and the creditworthiness of suppliers who give them.
• Safety record. Fire incidents, inspection findings, rectification orders and insurance claims history.
• Grid and land. Connection agreements, curtailment history, land use rights and any collective land issues.

Deal terms then reflect the findings. Buyers commonly seek specific indemnities for permit gaps and safety rectification, price adjustments tied to the outcome of pending capacity price decisions, and conditions precedent covering grid and trading-centre registration in the buyer's name. Where a state-owned seller is involved, transfers of state-owned assets may need to go through an equity exchange, which affects timing and the ability to negotiate bespoke terms. Larger deals may also require a merger control filing.

Foreign investors should also consider how they will exit. Infrastructure REITs in China now include energy assets, which offers a potential route for mature storage portfolios, while minority stakes may be sold to domestic energy groups. Exit planning at the outset helps shape shareholder agreements, transfer restrictions and information rights.

Cross-border issues: export controls, trade measures and foreign subsidy rules

China dominates global supply chains for batteries and electrolysers, which makes these sectors a focus of trade policy on both sides.

For hydrogen, ammonia and energy storage businesses with international supply chains, the result is a two-sided compliance task: Chinese controls on what can leave China, and foreign rules on what can enter or receive support elsewhere.

Chinese export controls. In October 2025 MOFCOM announced export controls on certain lithium battery, cathode and graphite anode items and related technologies, alongside rare earth measures. Following the US-China consultations in Kuala Lumpur, MOFCOM said in April 2026 that the October 2025 measures were suspended until 10 November 2026. Companies exporting battery technology or relocating production abroad should check whether the suspension has been extended and whether items or technologies fall under the separate catalogue of technologies restricted from export. Our page on rare earths and critical minerals controls covers the wider regime.

Foreign measures. US tax credit rules now restrict benefits for projects using components from prohibited foreign entities, the EU has used its Foreign Subsidies Regulation in tenders involving Chinese clean-tech suppliers, and tariffs and trade remedies apply to batteries and components in several markets. Chinese suppliers bidding abroad need early analysis of eligibility rules, local content and subsidy disclosures.

Outbound projects. Chinese developers are building storage and green hydrogen projects in the Middle East, Southeast Asia, Latin America and Europe. These involve outbound approvals, host-country licensing, offtake with international buyers and finance from development banks or export credit agencies. See international projects and overseas EPC.

How TRW & Co helps with hydrogen, ammonia and energy storage

From our Shenzhen representative office, TRW & Co supports investors, developers, equipment suppliers and offtakers in hydrogen, ammonia and energy storage projects with a cross-border dimension. We structure joint ventures and project companies, negotiate offtake, tolling, EPC and supply agreements under English law and other non-PRC laws, and review export control, sanctions and foreign subsidy exposure. We coordinate international financing and certification workstreams. Where PRC legal advice, approvals or representation are needed, we work with licensed PRC law firms and manage the combined team. To discuss a project, contact us.