Interpretation of the Policy of "Substituting Subsidies with Rewards"

Among the national-level policies released in the past two years, there is nothing heavier than the "Notice on the Demonstration and Application of Fuel Cell Vehicles" jointly issued by the Ministry of Finance, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, the Development and Reform Commission and the Ministry of Energy in September 2020, i.e., the "Substituting Subsidies with Rewards" policy, which officially adjusts China's fuel cell vehicle purchase subsidy policy to the four-year fuel cell vehicle demonstration and application support policy, thus opening a new chapter of fuel cell vehicle demonstration and application in China.

In 2021, the national "3 + 2" fuel cell vehicle demonstration pattern was formed, with a total of 47 cities. It is expected that by the end of 2024, the total number of fuel cell vehicles promoted in the five city clusters will be no less than 32,305. In August and December 2021, the five ministries issued the "Notice on the Launch of Fuel Cell Vehicle Demonstration and Application" and "Notice on the Launch of New Batch of Fuel Cell Vehicle Demonstration and Application" respectively, officially launching the demonstration of fuel cell vehicles in Beijing, Tianjin, Hebei, Shanghai, Guangdong, Hebei and Henan.

Table1 Five Major City Agglomerations and Participating Cities

Data Source: Public Information, collated by the Research Institute of the Orange Group.

By the end of 2021, the number of fuel cell vehicles in China is about 8,947, but less than 6,000 of them are really on the road. One important point is that the industry chain of hydrogen energy and fuel cell vehicles in China has not yet been well established. In particular, the construction of hydrogen energy industry chain consisting of hydrogen preparation, hydrogen storage and transportation and hydrogen refueling is not perfect, resulting in the high cost of fuel cell vehicles and the difficulty of large-scale promotion. It is impossible to promote the iterative upgrading of fuel cell technology through the scale effect, as well as the rapid decline of the whole vehicle cost of fuel cell vehicles. The end result is that fuel cell vehicles mainly rely on government buying behavior, and it is difficult for the market to find other suitable procurement subjects.

Therefore, the primary starting point of the "substituting subsidies with rewards" policy is to open up the hydrogen energy and fuel cell vehicle industry chain by setting up "vehicle purchase incentives" and "hydrogen incentives". The total amount of vehicle purchase incentive for a single city cluster is 1.5 billion yuan, and it is clear that the development of fuel cell heavy-duty commercial vehicles is encouraged. Fuel cell heavy-duty trucks with system rated power of 80kW or more and total mass of 12 tons or more can receive additional incentives, and the higher the system rated power and total mass, the higher the additional incentive for a single vehicle. The hydrogen incentive for a single city cluster is 200 million yuan, and it is clear that the hydrogen incentive is only applicable to the operation of hydrogen refueling stations and cannot be used for the construction of hydrogen refueling stations, and the retail price of hydrogen does not exceed 35 yuan/kg in order to get the incentive, of which the incentive is given at 7 yuan/kg in the first year, and decreases to 6 yuan/kg, 4 yuan/kg and 3 yuan/kg year by year thereafter.

Table2 Incentive Amount for a Single Vehicle under the "Award in Lieu of Subsidy" Policy (in 2021, for example)

Data Source: Notice on the Demonstration and Application of Fuel Cell Vehicles, collated by the Research Institute of the Orange Group.

At the same time, the "substituting subsidies with rewards" policy learns from the lessons of pure electric vehicle subsidies and puts forward a series of detailed technical requirements for fuel cell vehicles in order to prevent the phenomenon of "subsidy fraud", as shown in the table below:

Table3 Technical Specifications for Fuel Cell Vehicles

Data Source: Notice on the Demonstration and Application of Fuel Cell Vehicles,collated by the Research Institute of the Orange Group.

In addition, in order to promote the progress of fuel cell technology in China and realize industrialization as soon as possible, the policy of "substituting subsidies with rewards" clearly stipulates that the proton exchange membrane, catalyst, gas diffusion layer (carbon paper), membrane electrode, bipolar plate, fuel cell stack, air compressor and hydrogen circulation system are the "eight key components ", and "key components incentive" is established with high requirements, as shown in the table below:

Table4 Unit Award Amount and Requirements for Key Components

Data Source: Notice on the Demonstration and Application of Fuel Cell Vehicles, collated by the Research Institute of the Orange Group.