Hydrogen-based market dynamics and economic viability of hydrogen-based storage and Li-ion batteries for financial risks: A game-theoretic perspective

Abstract

The transition toward carbon neutrality in China requires large-scale energy storage solutions capable of supporting high renewable energy penetration while maintaining system reliability, economic efficiency, and investment attractiveness. Existing studies frequently assess lithium-ion batteries and hydrogen-based storage technologies independently and often overlook the strategic interactions among governments, energy producers, investors, and technology providers that shape deployment decisions under market uncertainty. This study develops a game-theoretic framework to evaluate the market dynamics, financial risks, and economic viability of hydrogen-based energy storage systems and lithium-ion batteries within China's evolving low-carbon energy landscape. The model captures both competitive and cooperative stakeholder behaviours under varying policy, technology, and market conditions, incorporating capital investment requirements, operational performance, technological maturity, carbon pricing mechanisms, government incentives, and energy price volatility. Results indicate that lithium-ion batteries maintain a near-term economic advantage and dominate short-duration storage applications due to lower capital costs and higher technological maturity. However, hydrogen-based energy storage exhibits superior long-term potential for large-scale and seasonal storage, particularly in regions characterized by abundant renewable energy resources and increasing system flexibility requirements. The analysis further demonstrates that infrastructure investment risk, technology adoption uncertainty, policy fluctuations, and market volatility significantly influence stakeholder decision-making and project profitability. Government subsidies, carbon pricing instruments, and strategic partnerships are found to substantially reduce investment risks and improve the economic feasibility of hydrogen storage deployment. Moreover, cooperative strategies among stakeholders generate greater economic returns and accelerate technology diffusion compared with purely competitive market behaviour. These findings suggest that coordinated policy support and stakeholder collaboration can enhance the commercial viability of hydrogen-based energy storage while complementing lithium-ion battery deployment, providing valuable guidance for policymakers, investors, and energy planners seeking to optimize energy storage investments and support China's long-term transition toward a resilient, low-carbon energy system.