Hydrogen is extremely versatile and allows for multiple applications. It can be utilised as feedstock; or as a replacement for fossil fuels in industries, gas energy, power generation and transportation. However, the existing fossil-fuel-based hydrogen production has a significant carbon footprint, and so the world wants to shift to green hydrogen. Simply put, green hydrogen is produced when one uses water as a raw material to produce hydrogen, using a process called electrolysis, while using renewable electricity as a source of energy.
While solar and wind energy generation has been taking place for years, green hydrogen has started gaining prominence only in recent years. Green hydrogen has the potential to decarbonise several sectors, especially the ones that are difficult to decarbonise, such as the steel industry, power generation, fertiliser production and transportation. According to Deloitte, green hydrogen is expected to hold an 85 per cent market share by 2050.
The National Green Hydrogen Mission, aimed at making India a global hub for the production, use and export of green hydrogen and its derivatives, was announced early this year with an outlay of Rs 197.44 billion from 2023-24 to 2029-30. This signals India’s intention to leave no stone unturned in becoming energy independent by 2047 and achieving net zero by 2070.
The Ministry of New and Renewable Energy recently unveiled the research and development roadmap for the National Green Hydrogen Mission and committed investments worth Rs 4 billion towards creating a research ecosystem that will focus on the development of materials, technologies and infrastructure to enhance the efficiency, reliability and cost-effectiveness of green hydrogen production, storage, transport and distribution. This step is very encouraging for the industry.
As the market for green hydrogen is just beginning to shape up, several new technologies are being experimented with. Both new and established players are entering the fray, and several companies are trying both forward (such as utility-scale renewable energy players) and backward (large industrial conglomerates such as Reliance and Adani) integration, while several government institutions and utilities are trying to either become consumers or producers of green hydrogen. If we dig deeper, we can clearly see three main business models for green hydrogen:
- Production: Companies are setting up facilities that will use renewable energy to produce green hydrogen. This green hydrogen can be directly sold to end-users, or used to produce other derivatives (such as synthetic fuels).
- Transport and storage: Companies are working non-stop to develop and institute new and innovative technologies to transport and store green hydrogen. This includes the setting up of new gas pipelines dedicated to the transport and distribution of such gas, as well as liquid hydrogen carriers (such as liquid organic hydrogen carriers, ammonia and methanol).
- End-use applications: New technologies and innovations are taking centre stage when it comes to the use of green hydrogen as either fuel or feedstock, including fuel cell vehicles, hydrogen boilers and hydrogen turbines.
The green hydrogen market in India is at an inflection point, and has the potential to grow rapidly. According to a report jointly produced by NITI Aayog and the Rocky Mountain Institute, hydrogen demand in India is expected to increase fourfold by 2050, with the steel industry and heavy-duty transportation driving 52 per cent of the demand. However, several challenges remain, which need to be addressed for India to become a leader in the green hydrogen space:
- High cost of production: The cost of producing green hydrogen is much higher than that of producing fossil-fuel-based hydrogen. However, as we have seen in the case of solar and wind energy, the costs will come down as the technology matures and scales up.
- Lack of infrastructure: A key challenge that producers of green hydrogen face is the lack of infrastructure required for its transport, distribution and storage. It is extremely important that we address this before green hydrogen becomes widely used.
- Awareness and acceptance: Despite a lot of publicity around green hydrogen, currently there is low awareness regarding its benefits. If we want green hydrogen to garner traction and acceptance, initiatives to educate corporates and individuals on its long-term benefits vis-à-vis decarbonisation need to be undertaken.
Mitigation of challenges
Every new beginning has its challenges, but with proper planning and resources, they can be overcome. In the last decade, India has demonstrated great determination, meticulous planning, flexible and agile policymaking, and entrepreneurial initiative to achieve tremendous growth in renewable energy. We need this to be replicated for green hydrogen.
- Access to affordable finance: The Government of India has set itself an ambitious target of producing 5 million metric tonnes of green hydrogen annually by 2030. For this to fructify, significant investments will be needed from both the public and private sectors in green hydrogen production facilities, transport and storage infrastructure, as well as end-user applications. The cost of capital in the initial stages, when the market is being established, will be significantly high, especially for projects in emerging markets such as India. The availability of affordable finance will be a key requirement for this industry to flourish.
- Interregional exchanges: Landlocked regions are left with little choice but to set up interregional exchanges for the trading of green hydrogen. When it comes to fulfilling the demand for green hydrogen with competitive pricing, developing, industrialised and densely populated countries are solely dependent on imports. According to Deloitte, by 2050, the annual gains from global trade could rise to as high as 25 per cent of the total market value, ranging between $180 and $350 billion. This was calculated by contrasting an alternative scenario where leading countries underinvest in transport infrastructure while adopting a protectionist mindset, resulting in four times lower global trade volumes.
- Infrastructure: The development of necessary infrastructure with sufficient lead time is essential for both the production and use of green hydrogen and its derivatives. For any project to be successful, early planning, and rapid creation of transport and storage infrastructure will be crucial. This infrastructure planning should include the use of smart models to compensate for the risks expected during market ramp-up, due to the temporary underutilisation of such infrastructure.
- Contractual and market infrastructure: The development of contractual and market infrastructure, such as hedging products, future markets, trading platforms and spot markets, is a critical prerequisite to creating a viable, lasting business model. The market for green hydrogen can leverage existing conventional commodity markets, and this infrastructure can be used when support is needed to account for specificities such as certification.
Now let us also look at what India needs to do next, to overcome existing challenges and increase the rate of adoption of green hydrogen as a primary source of renewable energy.
- Enhance green hydrogen production capabilities: Given its abundant renewable energy resources, India has the potential to become a major producer of green hydrogen. However, this will require significant support from the government in the form of financial incentives and policy changes.
- Invest in green hydrogen infrastructure: Creating a robust infrastructure ecosystem for the transport and storage of green hydrogen is critical to making green hydrogen more widely available, accessible and affordable.
- Promote the adoption of green hydrogen: To increase the adoption of green hydrogen, the government should provide subsidies for green hydrogen vehicles and end-user equipment, or develop public-private partnerships to support green hydrogen projects.
If India achieves its green hydrogen goals, in addition to decarbonising the industry and achieving net-zero targets, it will result in significant additional benefits for the country:
- Creation of jobs: Data trends show that the adoption of green hydrogen will lead to the creation of over 600,000 jobs.
- Export of green hydrogen: With the abundance of renewable energy resources and a large domestic market, India is well poised to become a major producer and exporter of green hydrogen.
- Energy security: Adoption and usage of green hydrogen will go a long way in reducing India’s dependence on expensive imported fossil fuels.
The government has recognised green hydrogen as a catalyst for achieving its net-zero targets, and is providing financial incentives to support the development of the industry. It is also working to create a more conducive regulatory framework for the industry. By addressing the existing challenges, India has the potential to become a global leader in the green hydrogen space due to its abundant renewable energy resources and progressive-thinking government. And while there is a lot that needs to be achieved, the future looks extremely promising.
By Dhiman Roy, Chief Executive Officer and Director, GreenH Electrolysis Private Limited