Will India Be The Next Hub For Green Hydrogen, Touted To Be The Fuel Of The Future?

As the second edition of the International Conference on Green Hydrogen kicks off, it is important to understand how green hydrogen is emerging as a promising alternative that can help in decarbonising industries – such as refineries, fertilizers, steel, and heavy-duty transportation that are difficult to electrify – and also act as a storage solution for surplus renewable energy.

The Secretariat does a deep dive to explain to readers how far India has traveled in its quest to harness the new energy source and what it needs to do in the years ahead as it works to reduce carbon emissions.

Green Fuel Of The Future

Green hydrogen is critical as India, which is responsible for more than 7 per cent of global greenhouse gas emissions, aims to reduce the country’s carbon intensity by at least 45 per cent by 2030 and achieve net zero by 2070.

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.

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. 

However, as these investments would require time to mature, sizeable production of green hydrogen is not expected before 2027.

Earlier this week, a start-up  – Gensol-Matrix – announced it will set up a green hydrogen production plant on Build Own and Operate (BOO) basis to supply fuel to the specialty chemical sector with a firm offtake for 20 years. This declaration was made public through an exchange filing on Tuesday.

Constraints And Solutions

The mass adoption of green hydrogen faces two main issues: the cost of production along with 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 existing energy sources. 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. Minimising costs of establishing this infrastructure, wherever possible, will reduce delivery costs and increase offtake.

While 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 will need to come up.

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. 

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 a credible 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 energies more 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.