Green Hydrogen: India Needs To Ramp Up Efforts To Lead The Global Race To Turn Water Into Fuel

India’s energy demand has doubled in the past 20 years and is likely to grow by at least 25 per cent by 2030. Currently, India is the third-largest economy in the world in terms of energy needs. A worryingly large part of its energy requirements is met via imports, which are susceptible to geopolitical uncertainties.

Rising energy consumption in the country has mostly meant increased burning of fossil fuels, making the transition to a low-carbon future difficult. But ramping up decarbonisation efforts is crucial to achieving the country’s target of net zero by 2070. In its updated Nationally Determined Contribution, India has proposed to reduce its emissions intensity by 45 per cent by 2030.

To achieve this, it is taking policy initiatives to accelerate the adoption of renewable energy technologies, shifting to clean mobility systems and commercialising alternative fuels such as green hydrogen in energy-intensive sectors such as refining, steel manufacturing, fertilisers and trucking.

Fuel Of The Future

Currently, India produces 6.5 million metric tonnes per annum (MMTPA) of hydrogen. A big chunk of this is grey hydrogen, produced using fossil fuels in a process that creates CO2 gas emissions. Most of this hydrogen is used in crude oil refineries and fertiliser production. Green hydrogen, on the other hand, requires an ample supply of renewable energy for electrolysis - the process of splitting water molecules into hydrogen and oxygen.

Green hydrogen is critical for India’s energy security and for reducing emissions in hard-to-abate sectors on the path to net zero. In early 2022, the government launched the National Green Hydrogen Mission with an outlay of Rs 19,744 crore to spur production capacity to 5MMT per annum by 2030 — about half of the projected overall hydrogen demand of 11 MMTPA at that time.

Fortunately, India’s renewable energy potential can support its goals for green hydrogen growth but needs rapid capacity addition – additional capacity is required to generate green hydrogen and meet the country’s electricity needs.

However, there appears to be limited on-the-ground traction for green hydrogen in the country. Though the big industry players – such as Reliance Industries, Indian Oil, NTPC, Adani Enterprises, JSW Energy and engineering major L&T – have started warming up to the fuel and announced investments or pledged to invest, most are still in a “wait-and-watch” phase. As these investments would require time to mature, any sizeable production of green hydrogen is expected to take effect beginning in 2027.

Constraints & Solutions

The mass adoption of green hydrogen faces two main issues: the cost of production and delivery and the industry’s readiness to consume the fuel in traditional industrial processes. A report by the World Economic Forum, prepared in collaboration with Bain & Company, recommends five goals that, if met, can accelerate the adoption of green hydrogen in India. They are:

– Production cost: India needs to reduce the cost of green hydrogen to less than or equal to US$ 2 per kg to bring parity with grey hydrogen. In terms of energy production, that equates to a renewable energy cost of less than or equal to Rs 2 per kWh.

Green hydrogen today costs about US$ 4-5 per kg to produce, nearly double the production costs for grey hydrogen. The majority of production costs for green hydrogen (50–70 per cent) are driven by the need for round-the-clock (RTC) renewable electricity. The remaining 30–50 per cent are electrolyser costs. The government has offered incentives for setting up electrolyser plants and the first set of successful bidders was announced earlier this month. It is also trying to bring down the cost of renewable energy by offering incentives and tariffs.

As India gains scale, the cost of renewable energy will further go down. Additional steps need to be taken to reduce the cost of electricity storage, intra-state distribution and wheeling (general distribution) charges.

– Conversion, storage and transport costs: Infrastructure demands – including facility costs for conversion and reconversion, storage and transport – could push the landed cost of green hydrogen and its derivatives. Minimizing the costs of establishing this infrastructure, wherever possible, will reduce delivery costs and increase offtake.

In the short-to-medium term, clusters for seamless production and offtake of green hydrogen should be developed. In the long term, infrastructure construction, including pipelines for transporting green hydrogen throughout the country should be developed.

– Support industries likely to adopt green hydrogen: Some industries are more likely to embrace green hydrogen than others. Incentives, subsidies and other support mechanisms should target these likely adopters to increase domestic demand. Chief among these are existing grey hydrogen users.

– Export potential: The cost of green hydrogen varies across the world. This offers an opportunity for international trade in green hydrogen and its derivatives. India, by rapidly developing a green hydrogen production ecosystem, can become an export hub. It has relatively low-cost renewable energy, a skilled workforce and abundant land for renewable energy expansion.

– Disincentivising carbon-intensive alternatives: More subsidies need to be diverted towards building a green economy while ensuring the basic energy needs of people are met. Doing so will make the relative economics of green energiesmore viable. Specifically, central and state governments should consider diverting their current spending on fossil-fuel subsidies to projects that support green hydrogen production and infrastructure-building.

Building a hydrogen production ecosystem is not just a necessity but it also makes economic sense. According to Morgan Stanley, the total addressable market for hydrogen (blue and green) in India could reach US$ 19 billion by 2030. Telecom, heavy trucks and buses, city gas distribution systems, refining and fertiliser sectors, and the steel industry will contribute to creating the market.

At a session on green hydrogen at the World Economic Forum in Davos, Union Minister Hardeep Puri declared that India “stands out” in demand, production and consumption of this fuel. A booming economy may give credence to Puri’s statement, but there is a lot to be done before India can claim to have built a thriving ecosystem for green hydrogen.