Context: An analysis on green hydrogen – Its significance in changing energy paradigm and necessary policy reforms to be put in place to leverage the potential.
An overview of the Indian energy paradigm
High carbon dependence: 82% energy from sources such as coal, oil and gas, and biomass.
India is the world’s third-largest emitter: With 3.6 gigatonnes of Co2 equivalent emissions.
Heavy import-dependent: 85% for crude oil, 53% for gas, and 24% for coal.
Impact on import bill: Reaching $160 billion and accounted by vulnerabilities in fuel prices.
Growing impetus towards carbon-free products and markets: As several countries announced net-zero targets.
Sustainability and rapid growth: Could go hand-in-hand by rapid innovation in clean energy sector.
Significant growth potential:
International Energy Agency (IEA): India will overtake European Union as the world’s third-largest energy consumer by 2030.
Growth share: India will account for biggest share of energy demand growth over next two decades.
Hydrogen, is also a chemical feedstock with an existing global market of 70 million tonnes.
Indian market: India consumes 6 Mt of hydrogen (8.5% of global demand) annually, which is made by reforming 18 Mt of import-dependent natural gas.
Significance of green hydrogen
About: Green hydrogen (H2) is made by splitting water (H20) via renewable power.
Application as an energy carrier: Can replace some energy imports, feasible, given India’s record-low renewable power prices ( ?1.99/$2.7 cents per kWh).
Industrial application: Ideal power source for energy-intensive industries like refining, steel, cement, heavy mobility, and industrial heating.
Critical to meet India’s target of 450 gigawatts of renewable energy by 2030:
Addressing ‘duck curve’ scenario (As experienced by California): By providing an alternative market for cheap surplus generation by renewables in peak-generation hours.
Co-advantage: As electricity accounts for 70% of the production cost of green hydrogen, cheap electricity from renewables adds to the competitiveness of green hydrogen.
Economic potential – Sunrise industry: Enable Indian entrepreneurs to capture new avenues of growth.
Attracting industries: Locally available green hydrogen can attract high-value green industries, like green steel and green chemicals, to shift production to India.
New market and job creation: Localization of production could create a new green technology market worth $18-20 billion and generate domestic jobs.
Export potential: Massive opportunity to create regional hubs to export high-value green products and engineering, procurement, and construction services.
Global Hydrogen Council: Classified India as a net exporter of green hydrogen from 2030.
Way forward
Inspirations from the global trend: West Asian countries, Chile and Australia are aiming to become leaders in green hydrogen.
Policy reforms necessary to support green hydrogen transition
Announce ambitious targets for green hydrogen and electrolyzer capacity by 2030: On similar lines as renewables.
Mandate blending a certain percentage of green hydrogen with grey hydrogen: For existing applications and mandate new greenfield capacities of hydrogen applications like oil refining and fertilizers to use only green hydrogen from a future cut-off date.
Aim to build a vibrant hydrogen products export industry: Such as green steel, using a phased manufacturing programme.
Form a regional alliance with South Korea, Japan, and Singapore: To export green hydrogen from coastal India to help them reach their net-zero ambitions.
Explore dollar-linked contracts for the procurement of hydrogen: As capital cost contributes around 30% of green hydrogen cost.
Roll out production-linked incentive scheme: For electrolyzer manufacturing.