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Where is India in the Green Hydrogen Race

[/vc_column_text][vc_separator][vc_column_text css=”.vc_custom_1655375458896{margin-top: 10px !important;margin-bottom: 10px !important;}”]There isn’t a lot of good news flowing around in current times with the central banks increasing rates, the statistics office coming out with higher than ever inflation rates, world leaders in lockhorns and, lastly (but definitely not the least), THIS HEAT here in Delhi! Analysts really have to scour through the headlines and the press releases to find that ray of hope, something that promises of a better future. Well, most recently, that ray of hope was India’s big brother, Mr. Gautam Adani.

At the start of this week, Gautam Adani’s newest venture, ‘Adani New Venture Ltd.’, finalised a deal to sell a quarter of their business to TotalEnergies for an undisclosed amount, which we are sure is quite a heft sum. But wait, that’s not the headline; the headline was their foray into ‘Green Hydrogen’ and an earmarked investment of $50 billion dollars over the next 10 years (let that sink in).

On top of that, Hyderabad-based Greenko group and Belgium-based John Cockeril recently announced that they would build a hydrogen electrolyser gigafactory targeting 2-gigawatt in India. This would be the largest such facility outside of China. This partnership will reportedly entail an investment of about Rs 4,000 crore.

Green Hydrogen… that sounds familiar. At the start of the year, one more of India’s big brother (in fact, the former), Mukesh Ambani, announced an investment of $75 billion in renewables infrastructure including generation plants, solar panels and electrolyzers.

The world is facing the major challenge of climate change. In Paris agreement of 2015, the global community committed to taking action to keep global temperature rise in the current century well below 2°C above pre-industrial levels. A growing number of countries are pledging to reach net-zero carbon dioxide (CO₂) emissions by mid-century with the goal of limiting temperature rise to 1.5°C. And it is not just Indian billionaires that are serious about this goal; the initiative has seen active investments from all over the globe and across various stages of the value chain.

To this end, experts in the field started experimenting with new and old methods to be able to reach to a large-scale sustainable solution. Hydrogen has long been the ‘fuel of the future’ but has to-date never quite made it as a major player in the energy system. To be deployed at scale, hydrogen will need to compete with incumbent fossil fuels and emerging low carbon alternatives, such as battery electric vehicles.[/vc_column_text][vc_single_image image=”69980″ img_size=”large” alignment=”center” css=”.vc_custom_1655375554067{margin-top: 10px !important;margin-bottom: 10px !important;}”][vc_column_text]

What is Green Hydrogen

Okay, time for a small chemistry lesson. Hydrogen is the simplest and smallest element in the periodic table. No matter how it is produced, it ends up with the same carbon-free molecule. However, the pathways to produce it are very diverse, and so are the emissions of greenhouse gases like carbon dioxide (CO2) and methane (CH4).

Green hydrogen is defined as hydrogen produced by splitting water into hydrogen and oxygen using renewable electricity. Now, hydrogen production has been around for decades, even for industrial purposes, but that was mostly grey or blue hydrogen as depicted below. They are produced using methane or coal. Green hydrogen is produced using renewable energy like solar or wind energy.[/vc_column_text][vc_single_image image=”69981″ img_size=”large” alignment=”center” css=”.vc_custom_1655376491390{margin-top: 10px !important;margin-right: 200px !important;margin-bottom: 10px !important;margin-left: 200px !important;border-top-width: 2px !important;border-right-width: 2px !important;border-bottom-width: 2px !important;border-left-width: 2px !important;border-left-color: #0c0c0c !important;border-left-style: solid !important;border-right-color: #0c0c0c !important;border-right-style: solid !important;border-top-color: #0c0c0c !important;border-top-style: solid !important;border-bottom-color: #0c0c0c !important;border-bottom-style: solid !important;border-radius: 1px !important;}”][vc_single_image image=”69982″ img_size=”large” alignment=”center” css=”.vc_custom_1655376509888{margin-top: 10px !important;margin-right: 200px !important;margin-bottom: 10px !important;margin-left: 200px !important;border-top-width: 2px !important;border-right-width: 2px !important;border-bottom-width: 2px !important;border-left-width: 2px !important;border-left-color: #0c0c0c !important;border-left-style: solid !important;border-right-color: #0c0c0c !important;border-right-style: solid !important;border-top-color: #0c0c0c !important;border-top-style: solid !important;border-bottom-color: #0c0c0c !important;border-bottom-style: solid !important;border-radius: 1px !important;}”][vc_column_text]Well, if it is that easy, then why is not everybody doing it?

HIGH PRODUCTION COSTS: Green hydrogen produced using electricity from an average VRE plant in 2019 would be two to three times more expensive than grey hydrogen. Vehicles with fuel cells and hydrogen tanks cost at least 1.5 to 2 times more than their fossil fuel counterparts.

LACK OF DEDICATED INFRASTRUCTURE: Hydrogen has to date been produced close to where it is used, with limited dedicated transport infrastructure. There are only about 5 000 kilometres (km) of hydrogen transmission pipelines around the world, compared with more than 3 million km for natural gas. There are 470 hydrogen refuelling stations around the world, compared with more than 200,000 gasoline and diesel refuelling stations in the United States and the European Union.

ENERGY LOSSES: Green hydrogen incurs significant energy losses at each stage of the value chain. About 30-35% of the energy used to produce hydrogen through electrolysis is lost. In addition, the conversion of hydrogen to other carriers (such as ammonia) can result in 13-25% energy loss, and transporting hydrogen requires additional energy inputs, which are typically equivalent to 10-12% of the energy of the hydrogen itself. Using hydrogen in fuel cells can lead to an additional 40–50% energy loss.[/vc_column_text][vc_single_image image=”69983″ img_size=”large” alignment=”center” css=”.vc_custom_1655376523972{margin-top: 10px !important;margin-right: 200px !important;margin-bottom: 10px !important;margin-left: 200px !important;border-top-width: 2px !important;border-right-width: 2px !important;border-bottom-width: 2px !important;border-left-width: 2px !important;border-left-color: #0c0c0c !important;border-left-style: solid !important;border-right-color: #0c0c0c !important;border-right-style: solid !important;border-top-color: #0c0c0c !important;border-top-style: solid !important;border-bottom-color: #0c0c0c !important;border-bottom-style: solid !important;border-radius: 1px !important;}”][vc_column_text]

Hydrogen – Demand

Industry is currently the dominant user of hydrogen both in India, and globally. Most hydrogen is currently used in four sectors: fertilizers, refineries, petrochemicals, and methanol. In India, the vast majority of methanol is imported, leaving the dominant sectors for hydrogen use as fertilizers and refineries, constituting approximately 50% of the demand each. In future, these sectors will continue to grow to satisfy the demands of a rapidly growing country, requiring more hydrogen.

[/vc_column_text][vc_single_image image=”69984″ img_size=”large” alignment=”center” css=”.vc_custom_1655376541040{margin-top: 10px !important;margin-right: 200px !important;margin-bottom: 10px !important;margin-left: 200px !important;border-top-width: 2px !important;border-right-width: 2px !important;border-bottom-width: 2px !important;border-left-width: 2px !important;border-left-color: #111111 !important;border-left-style: solid !important;border-right-color: #111111 !important;border-right-style: solid !important;border-top-color: #111111 !important;border-top-style: solid !important;border-bottom-color: #111111 !important;border-bottom-style: solid !important;border-radius: 1px !important;}”][vc_column_text css=”.vc_custom_1655376065723{margin-bottom: 10px !important;}”]The main sector of interest is iron and steel, where hydrogen has the potential to replace coking coal, non-coking coal, and natural gas, depending on the production route. Since the iron and steel sector represents the largest industrial sector, the potential growth in hydrogen demand from this new use is significant. Beyond the steel sector, there is also the potential for hydrogen to replace fossil fuels as a source of industrial heat. Today, in India, heat is generated by coal, oil or natural gas in a number of industries, including cement, bricks, food processing, forging, and many others. The optimal route for decarbonizing industrial heat is electrification, as this uses less energy than hydrogen. However, where this is not possible, hydrogen could be a viable option.

The fertilizer industry in India currently consumes a large amount of fossil fuels, principally natural gas. This is used to produce ammonia, which is the main intermediary for providing nitrogen in all nitrogen-containing fertilizers. This can be used directly (only nitrogen) or as a complex fertilizer (one or more nutrients in addition to nitrogen). Urea is the main nitrogenous fertilizer, with various grades of complex fertilizer having different nitrogen content. Further emissions reductions will require more significant changes to the production of ammonia. This could include ensuring that the hydrogen feedstock used for fertilizers is low carbon, either through adopting carbon, capture, and storage technologies (blue ammonia) or by using renewable electricity to produce green hydrogen (green ammonia).

Hydrogen is mainly used to process crude oil into refined products and for desulphurisation, with different products allowing different levels of sulphur, based on regulations and industry requirements. The lower the sulphur content requirement, the higher the demand for hydrogen. Policies such as the BSVI Standards, which require lower amounts of sulphur in transportation fuels, are driving increased demand for hydrogen in this sector.

It is clear that there is significant potential for hydrogen to continue to play a role in India’s industrial sectors. Switching existing emissions-intensive hydrogen production to low carbon alternatives should be a priority, where it is cost-effective. Also, expanding into new sectors, such as steel, offers a significant opportunity for growth.

The transport sector accounts for 17% of India’s total energy consumption. Within transport, oil products are the dominant fuel with transport accounting for 47% of India’s oil product consumption. India is dependent on imports for 85% of its crude oil supplies, which represent a major drag on the balance of payments. Transport emissions are also an important source of local air pollution emissions, and thus contribute significantly to India’s air pollution problem.

Over the past decade, we have experienced extremely rapid cost reductions in battery technologies, alongside significant improvements in performance. This has made Battery Electric Vehicles lower cost, with greater range and faster recharging times, making them more attractive to consumers across a growing number of segments. Hydrogen Fuel Cell Electric Vehicles must compete with the ever-improving Battery EV technologies to have an impact on transport decarbonization. Currently, Battery EV technologies is more cost efficient than Hydrogen Fuel Cell EVs and that’s the reason that most electric cars we see are battery operated. Below is a comparison of exactly why battery vehicles are preferred currently.

With rapid cost reduction in the green hydrogen production and enhancement in the technology available, there is strong hope for Hydrogen Fuel Cell powered vehicles. The overall impression that emerges from the analysis is that the heavier-duty and longer-distance vehicle segments will likely decarbonize through a mixture of direct electrification (BEVs) and indirect electrification (FCEVs): BEVs are likely to be highly competitive in sectors where daily utilization rates are less than 500 KM, and routes are highly predictable to allow programming of lengthy charging periods. These include waste disposal, commuter bus routes, service vehicles, etc, whereas, FCEV trucks may be a preferred option for longer routes above 500 KM, although competitiveness of FCEVs is dependent on robust cost declines in multiple technologies and very low delivered costs of hydrogen. Likewise, for net emissions reductions to be achieved, either open access low carbon sources of generation are required, or the electricity grid emissions must reduce by roughly a factor three from today’s level.[/vc_column_text][vc_single_image image=”69985″ img_size=”large” alignment=”center” css=”.vc_custom_1655376555040{margin-top: 10px !important;margin-right: 200px !important;margin-bottom: 10px !important;margin-left: 200px !important;border-top-width: 2px !important;border-right-width: 2px !important;border-bottom-width: 2px !important;border-left-width: 2px !important;border-left-color: #111111 !important;border-left-style: solid !important;border-right-color: #111111 !important;border-right-style: solid !important;border-top-color: #111111 !important;border-top-style: solid !important;border-bottom-color: #111111 !important;border-bottom-style: solid !important;border-radius: 1px !important;}”][vc_column_text]The transport sector accounts for 17% of India’s total energy consumption. Within transport, oil products are the dominant fuel with transport accounting for 47% of India’s oil product consumption. India is dependent on imports for 85% of its crude oil supplies, which represent a major drag on the balance of payments. Transport emissions are also an important source of local air pollution emissions, and thus contribute significantly to India’s air pollution problem.

Where is India in the Green Hydrogen race?

The major cost driver for green hydrogen is the cost of electricity. The price of electricity procured from solar PV and onshore wind plants has decreased substantially in the last decade. With the continuously decreasing costs of solar photovoltaic and wind electricity, the production of green hydrogen is increasingly economically attractive. The capital cost of electrolysis has fallen by 60% since 2010 (Hydrogen Council, 2020), resulting in a decrease of hydrogen cost from a range of USD 10-15/kg to as low as USD 4-6/kg in that period. Many strategies exist to bring down costs further and support a wider adoption of hydrogen. The cost of fuel cells for vehicles has decreased by at least 70% since 2006.

According to S&P Global Commodity Insights data cited by a financial daily, there are 26 hydrogen projects in India, with a total capacity of 255,000 tonnes per year. However, a majority of these announced projects are still in their early stages. Only around 8,000 tonnes per year of capacity is expected to be operational by 2024.

The potential scale of hydrogen demand growth in India is significant. India has set a target to produce 5 million tonnes (mt) of green hydrogen by 2030. Over the next decade, the government plans to add 175 GW of green hydrogen-based energy. Costs of green hydrogen will start to compete with fossil fuel-derived hydrogen latest by 2030.

The Centre unveiled the green hydrogen policy, promising cheaper renewable power, fee waiver for inter-state power transmission for 25 years for projects commissioned before June 2025, land in renewable energy parks, and mega manufacturing zones to help local industries wean themselves off fossil fuels. The policy, aimed at promoting green hydrogen and green ammonia, also spoke of facilitating the ‘banking’ or storage of green power, where a green power producer can save surplus renewable power with an electricity distribution company for up to 30 days. It also envisages building bunkers near ports to store green ammonia for exports. Fuels like Green Hydrogen and Green Ammonia are vital for any nation’s environmentally sustainable energy security.

India’s largest oil refiner, Indian Oil Corp (IOC) estimates that GREEN HYDROGEN POLICY measures will reduce the cost of green hydrogen production by 40-50%. India has already committed to achieving net-zero carbon emissions by 2070, and green hydrogen will play a significant role as a disruptive feedstock in India’s transition from oil and coal.

What are the Challenges Associated?

Charges on Transmission: Producing 1kg of green hydrogen takes about 50kWh of electricity (with electrolyser efficiency of 70%). While India boasts one of the world’s lowest average costs of RE generation, it levies a plethora of charges on wheeling and transmission of electricity between the points of generation and consumption. In cases where the green hydrogen is produced from a remotely-located RE plant, the landed cost of power determines the cost of output which ranges from ₹3.70 to ₹7.14 per kWh. At this rate, green hydrogen will be made at a cost of about ₹500 per kg, which is nearly 3.5 times the cost of grey hydrogen. So, the landed cost of RE from a distant source will need to at least be halved to make green hydrogen competitive vis-a-vis grey.

Reluctance of States: Many public sector electricity utilities are unwilling to let go of their monopoly in power distribution. Gujarat allows settlement for banked solar power only between 7am and 6pm and levies ₹1.5 per unit as its banking charges for ‘high-tension’ consumers. Rajasthan permits banking of up to 25% of Renewable Energy generation and settlement on an annual basis, but levies a 10% charge, among the highest in India. Tamil Nadu and Andhra Pradesh do not allow Renewable Energy banking. Also, most states do not permit banked energy to be drawn during the peak hours.

Lesser Margins for Producers: The GHP omits to mention any waiver of ISTS losses for green hydrogen and ammonia projects. Also, it provides for discoms to procure and supply RE to makers of green hydrogen/ammonia at the cost of procurement with only a small margin determined by the SERCs. This margin may not be enough incentive for discoms to procure and supply RE to green hydrogen makers on a long-term basis.

Unwillingness of Industries: Industrial sectors such as chemicals, fertilisers, steel and refineries are unlikely to transition to low carbon alternatives because of the higher associated costs. Such industries might not find the transition viable with no incentives to reduce emissions.

What Steps Can Be Taken?

Role of State Governments: The measures announced in the Green Hydrogen Policy would require the active cooperation of state governments (including allotment of land in Renewable Energy parks and proposed manufacturing zones) and the relevant SERCs. The Renewable Energy-rich states shall implement the Green Hydrogen Policy’s banking provisions and levy uniform charges, otherwise, it may not help green hydrogen producers much.

Role of Central Government: To get the cooperation of Renewable Energy rich states, the Centre may consider providing concessional finance to the discoms in such states to clear their dues to power generators, and in return require them to waive the aforementioned surcharges for open-access Renewable Energy projects and cap Renewable Energy banking charges at the level specified in the GHP.

Demand Generation: While large refiners like Reliance and IOC have plans to set up green-hydrogen production facilities, other manufacturers and Renewable Energy developers would be hesitant to commit large-scale investments in the absence of demand generators. The Green Hydrogen Policy measures beside enhancing the supply of green hydrogen at competitive rates shall also aim to make moves to stimulate demand.

Incentivising Industries: Hydrogen-purchase obligations or other demand boosters are required to support the creation of a green hydrogen ecosystem. The Centre may consider incentivizing petroleum refiners and fertiliser makers to make and use green hydrogen by offering subsidies linked to their level of its utilisation as feedstock.

Every year, more countries join the pact to transition to cleaner fuels. Green hydrogen has the capability to replace fossil fuels in a host of industries and innovators and scientists are working hard towards making this a possibility. Green hydrogen is one of the long-term plays that we believe in here at our firm have positioned ourselves such that we can benefit from it. Have you?

Source: Green Hydrogen Portal website and reports published/endorsed by them[/vc_column_text][vc_separator][vc_column_text]

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