Five ways for India to accelerate green hydrogen adoption, Energy News, ET EnergyWorld

As one of the fastest-growing economies in the world, India’s energy demands are set to surge by 35% by 2030. The tension between the need for energy affordability—India had an energy import bill of $185 billion in 2022—and the country’s commitments to reduce greenhouse gas emissions and achieve net zero by 2070 presents a problem of enormous scale and complexity.

In such a situation, green hydrogen can provide a pathway to energy transition while supporting the country’s growing energy needs. India could also potentially emerge as an export hub for likely importers such as the European Union (EU), Japan, and South Korea.

Crucially, the next few years present a once-in-a-lifetime opportunity for India to develop a green hydrogen ecosystem. This ecosystem will address the country’s growing energy needs, meet its decarbonisation goals, and set the foundation for a potential energy export market. A recent report by the World Economic Forum and Bain & Company titled ‘Green Hydrogen: Enabling Measures Roadmap for Adoption in India’ highlights this opportunity.

The case for green hydrogen

Green hydrogen is produced through the electrolysis of water using renewable energy (RE) sources. Using it to meet half the country’s hydrogen demand by 2030 alone can abate at least 50 million metric tonnes per annum (MMTPA) of greenhouse gases, while reducing dependence on energy imports, according to the report.

The Government of India’s National Green Hydrogen Mission 2022 is already seeking to spur production and consumption through roughly $2.3 billion in funding between 2022 and 2030 and has set a production target of 5 MMTPA by 2030.

However, on-ground traction is limited so far, with most players in a ‘wait-and-watch’ phase. This is due to several demand- and supply-side constraints, such as the high cost of production and delivery and the lack of readiness of the Indian industry to consume green hydrogen in traditional production processes.

India currently produces 6.5 MMTPA of hydrogen, most of which is grey hydrogen produced using fossil fuels, resulting in carbon emissions. Crude oil refineries and fertilisers account for 90% of its consumption.

Hydrogen has a similar potential to solar power. Ten years ago, solar energy was not considered viable in India due to high costs of around INR 10+/kWh. However, the government incentivised its production and consumption, leading to a much lower cost (INR 2–3/kWh) and rapid growth of the RE sector. Similarly, early-stage interventions are needed to convert the green hydrogen opportunity into reality.

The report has identified five key goals and enabling measures to develop the country’s fledgling green hydrogen ecosystem. These are:

Reduce green hydrogen production costs to less than $2/kg

Green hydrogen’s high production cost of roughly $4–5/kg, nearly twice that of grey hydrogen, needs to drop to $2/kg or lower to achieve effective scale and widespread adoption.

To achieve this, it is essential to address two key cost drivers: round-the-clock (RTC) RE electricity and electrolysers costs. While costs will fall over time with scale, targeted incentives can help immediately.

RTC renewable energy is expensive because of the high cost of energy storage systems (ESS). The government could provide direct and indirect subsidies, such as reducing the customs duty on battery storage components, similar to what was done for lithium-ion batteries used in electric vehicles (EVs) and providing clarity on the process for banking RE with the grid.

Furthermore, increasing the subsidy for electrolyser producers could be beneficial. The existing production-linked incentive (PLI) of $54/kW during the first year of production only reduces the cost of green hydrogen production by a negligible $0.1/kg.

2. Optimise green hydrogen conversion, storage, transportation cost

Given its volatility, hydrogen most often needs to be converted into a derivative at the point of production and then back to hydrogen at the consumption point for long-distance transportation. India currently lacks this conversion, storage, and transportation infrastructure. Building a hydrogen pipeline network will require both time and resources. While in the long term, India could emulate the European Hydrogen Backbone project by converting existing gas pipelines, for now, captive green hydrogen plants could eliminate storage and transport costs.

The creation of clusters for both hydrogen production and offtake can significantly reduce infrastructure costs. The government could encourage their development by providing clearances at a cluster level and offering PLIs to companies within a cluster.

3. Drive domestic uptake

Existing grey hydrogen users, transportation providers, power suppliers, and major industries like cement, steel, and chemicals are expected to be adopters of green hydrogen in India over various phases of adoption.

Demand-side interventions tailored for these different users are required to encourage them to switch to green hydrogen. For instance, cost is a key barrier for refineries and fertilisers. The government could mandate the use of blended hydrogen, which combines both grey and green hydrogen, that will have minimal impact on final product cost but would encourage widespread adoption. To illustrate, historically, demand-side interventions like RE purchase obligations have led to massive capacity addition and price correction in the RE sector.

4. Capitalise on India’s export potential

India could emerge as a cost-competitive green hydrogen derivative exporter, thanks to its access to relatively low-cost RE, a skilled workforce, and a connected power grid. Additionally, exports could help spur the domestic green hydrogen ecosystem by reducing production costs.

To achieve this, improvements are needed in storage and shipping facilities at ports. The Indian government recently started allowing the manufacturers of green hydrogen and green ammonia to establish storage bunkers near ports. In the future, India could further optimise port infrastructure to enable green hydrogen production and conversion on-site.

India should also prioritise the co-development of hydrogen networks and supply chains if it wants to compete with emerging low-cost exporters like Saudi Arabia, Chile, and Australia, who have already begun entering export pacts with potential importers like the EU.

5. Disincentivise carbon-intensive alternatives

Incentives alone are not enough. The government could divert subsidies away from high-emission sources and redirect funds toward the green energy transition. A comprehensive carbon-tax regime, while ensuring energy affordability for the population, and imposing emission penalties on carbon-intensive manufacturing processes, could also promote the use of green hydrogen.

Seize the day

Green hydrogen is critical to help meet India’s energy security needs while reducing emissions in hard-to-abate sectors on the path to net zero. By reducing the cost of producing and delivering green hydrogen, increasing domestic demand, and establishing itself as a global exporter, India can further its fledgling green hydrogen ecosystem and establish a pathway to meet its ambitious goal of creating 5 MMTPA green hydrogen production by 2030.

  • Published On Mar 18, 2024 at 12:24 PM IST

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