By : Shantanu Pratap Singh & Tanusri Setamraju
India has recently announced an ambitious National Green Hydrogen Mission. The mission envisages annual production of of 5 MMT green hydrogen by 2030[i].
However, this process still costs more than other means of producing Hydrogen. The Council on Energy, Environment and Water (CEEW) estimates that Green or Decarbonised Hydrogen costs USD 3.5 – 4.5 per kg to produce, which is far above the cost of “Grey Hydrogen” (produced using Natural Gas) at USD 0.5 – 0.7 per kg. This cost differential prevents the former from becoming a viable alternative. Currently, it accounts for only 1% of global hydrogen production.[i] However, there has been a global push for Green Hydrogen with the EU, India, China, and several countries setting ambitious targets for capacity addition. India is poised to be at the forefront of this push because of two factors – significant reductions in costs of renewable energy and government policy measures such as the National Green Hydrogen Mission and the National Green Hydrogen policy.
Driven by technological advancements, cost of solar and wind power has been declining rapidly in India. Between 2013 and 2020, the average cost of a residential rooftop solar system in India declined 73% to reach US$658 per kilowatt (kW). The Levelised Cost of Electricity (LCOE – The price at which electricity should be sold for the project to break even at the end of its life cycle) for the residential and commercial solar sector was the second lowest in the world in 2021. In a 2022 report, Wood Mackenzie, a UK based research firm, said that India is amongst the top three countries where renewable energy is cheaper by 12% – 29% compared to the lowest cost fossil fuel.[ii] India stands 4th globally in Renewable Energy Installed Capacity (including Large Hydro), 4th in Wind Power capacity & 4th in Solar Power capacity (as per REN21 Renewables 2022 Global Status Report).[iii] India has also set ambitious targets as part of its Nationally Determined contributions under the UNFCCC to achieve 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. Renewable Energy sources already make up 40.7% of the installed power generation capacity (167,750 MW) in India as on January, 2023.[iv]
Driven by these advancements in Renewable energy capacity, technological advancements and a strong start up sector, which can push innovation, India can become a hub for Green Hydrogen production if it addresses constraints related to electrolyser capacity and infrastructure for Green Hydrogen storage and export. The Ministry of New & Renewable Energy has also noted that “The costs of capital, supply and treatment of water, storage and distribution, conversion of hydrogen to suitable derivatives, and enabling infrastructure would also contribute significantly to the final delivered cost of Green Hydrogen for any particular application.”[v]
The National Green Hydrogen Mission, approved by the Indian cabinet seeks to address these limitations and has set a target of 5 Million Metric Tonnes of Green Hydrogen by 2030. The initial outlay for the Mission is close to INR 20,000 crores, and includes provisions for Pilot projects, Research & Development and Strategic Interventions for Green Hydrogen Transition (SIGHT).[vi] The latter is key to the mission as it envisages introducing financial incentive mechanisms for domestic manufacturing of electrolysers, one of the main supply side challenges facing the industry.
The comprehensive measures under the “National Green Hydrogen Mission” are likely to bring down the costs of production associated with Green Hydrogen in India, remove supply side bottlenecks and push innovation. Through this mission, the government intends to make a smooth transition to green hydrogen and green ammonia as the primary energy fuels and advance further into extended research and development in hydrogen technology, while at the same time, developing the infrastructure necessary for the generation and delivery of hydrogen.
India’s ambition to become a Green Hydrogen hub is also in line with its quest for energy security and its target of becoming Net Zero by 2070. Further, developing this industry will have complementary benefits to India’s fertiliser industry (where Green Ammonia, a derivative of Green Hydrogen, can be used), steel, automotives and various other growing sectors. Simultaneously the Indian Government has also introduced the Green Hydrogen policy in 2022, which addresses other supply side constraints. The policy envisages waiver of interstate transmission charges for a period of 25 years, renewable power banking for up to 30 days (not available anywhere in the world) and streamlining of clearance procedures for projects.
The government has also focused on Demand Creation for Green Hydrogen. The Mission’s roadmap with regards to demand is divided into two phases. Phase I (2022-26) looks to deploy Green Hydrogen in sectors already using it and build a robust R&D ecosystem along with regulations, enabling policies and pilot projects. Phase II (2026-2030) will build on this foundation to take Green Hydrogen to new hard-to-abate sectors. The Energy Conservation (Amendment) Act passed by Indian Parliament in 2022 also gives government the power to introduce purchase obligations related to Green Hydrogen such as mandating use in blended fuels. Replying during a discussion on the bill in Parliament, Power Minister Mr. R.K. Singh has said that “….goverment plans to mandate the use of green hydrogen in sectors like steel, refineries, fertilizer and cement industries, through green hydrogen consumption obligation.”[i]
There are already indications that Indian industry is betting on Green Hydrogen as an alternative fuel in the future. It has been reported that “…big players in the sector such as Adani New Industries Ltd (ANIL), L&T, Reliance Industries, NTPC Renewable Energy, and Indian Oil Corporation (IOC) have already announced strategic partnerships for research and technology development in the sector.”[ii]
But there are serious challenges too – the cost of renewable energy in India has been actually going up in recent times. This is mainly due to the government’s interventions for protecting the domestic solar and wind industries. So, there is an urgent need to address this policy conundrum. It is important to realise that at the end of the day pricing has to be competitive. At current rates and by using the most efficient technology, it would be nearly impossible to sell green hydrogen below $3.5 per kg. There would be cost for transportation and storage as well and the price maxes out at $4/kg. Additionally, supply constraints of electrolysers in global market poses another serious challenge.
The biggest challenge of course comes in terms of scaling up – the National Chemicals Laboratory, Pune has shown in a recent report that to produce 5 MMT a year green hydrogen, India will require 130 GW of renewable energy (that means India has to double its existing solar and wind capacity in next 7 years), 35 GW of electrolyser capacity (that is half of the total global capacity by 2030) and 115 million litres of water a day and 3,40,000 hectares of land – this is going to be a serious uphill climb[i].
The Russia-Ukraine War and its impact on fuel prices, demonstrated the risks of over reliance on fossil fuels. Developing nations are looking for paths to make a transition to clean energy and fulfil their climate change commitments. Further, as global carbon tax regimes are likely in the near future, it is important for nations reliant on traditional polluting fuels to undertake energy transition in all sectors. Even in the developed world, Green Hydrogen is being looked at as a viable alternative. According to CEEW, “…. as of August 2022, at least 38 countries (including 29 developed economies), and the European Union have announced developing national policies/strategies for hydrogen.”[ii] Taking into account India’s export ambitions for the sector, its success in developing affordable renewable energy sources and the holistic interventions that are planned under its National Green Hydrogen Mission, the success of its Green Hydrogen sector may hold the key for countries of the Global South to transition to environmentally friendly sources of energy.