Using system dynamics to evaluate the impact of subsidy policies on green hydrogen industry in China

This paper establishes a system dynamics model for the development of green hydrogen (GH) industry in China supported by government subsidy policies. The changes in the installed capacity, return on investment and carbon emission reduction of GH and the corresponding government expenditure are simulated under different single and combination subsidy scenarios including subsidy form, intensity, duration and decline mode. The result shows that the subsidy policies for investment, production, hydrogen-production electricity price and income tax rate will promote the development of the GH industry to varying degrees. A flexible combination subsidy policy needs to be adopted to coordinate with the development, technology and subsidy expenditure of the GH industry. Specifically, in the initial stage, 35%-40% of the initial investment-based subsidy or 30%-40% of the production-based subsidy can be employed for 5 years to ensure the GH industry's rapid development, combined with income tax rate (15%-20%) and higher hydrogen-production electricity price (0.3-0.35 yuan/ kWh), or with low hydrogen-production electricity price (0.25-0.3yuan/kWh) and 25% income tax rate. The government will then dynamically adjust the subsidy policy according to the scale, technological progress and cost, and reduce the subsidy intensity by 5%-10% every 1-2 years to make it gradually decline to the end.