India has embarked on an ambitious plan to develop the hydrogen sector as a part of its target to achieve net zero by 2070. Under the National Green Hydrogen Mission, the government of Prime Minister Narendra Modi has announced plans to make India a global hub for the production, use and export of green hydrogen and its derivatives.

The abundance of potential renewable energy sources, the 2070 net-zero goal and India’s growing economy are some of the factors working in favour of these ambitions. However, challenges include high production costs, lack of domestic demand and the absence of the necessary infrastructure—especially for exports.

Under the National Green Hydrogen Mission, India aims to achieve a green hydrogen production capacity of at least 5mt/yr, powered by 125MW of new renewables capacity, by 2030. The government expects investments worth $100b and the creation of more than 600,000 jobs. This will result in a cumulative reduction in fossil fuel imports of more than $12b and 50mt of annual greenhouse gas reductions.

According to the government, nearly 70% of India’s production of hydrogen and its derivatives will be intended for export, with target markets including Germany, Singapore, South Korea and Japan.

“The cost of green hydrogen will be prohibitively high for the Indian market” Gurunath, Umagine

“At this point in time, for the projects that will be built in the next 5–7 years, the cost of green hydrogen will be prohibitively high for the Indian market. However, this premium can be absorbed by the European, South Korean and Japanese markets,” said Santosh Gurunath, founder of Umagine, a hydrogen consultancy based in India.

The government hopes the focus on exports will help drive the development of infrastructure, and that post-2030 this will reduce costs in the domestic market, he said.

“The idea is the government will go with an export-driven policy and, in the course of that, beyond 2030, the infrastructure development will be in such a way that the cost will go down and eventually it will be introduced to the Indian market,” he said.

The government has also announced a $2.11b support plan for green hydrogen production,

including incentives worth at least $0.36/kg. India is also offering carbon credits for green hydrogen production in exchange for investments from other countries. These incentives would be awarded through a competitive bidding process.

Several Indian companies—including Reliance, Adani, NTPC, and GAIL—have announced green hydrogen projects. State-run Indian Oil Corporation has partnered with private sector firms L&T and ReNew for a joint venture to produce green hydrogen. US-based Ohmium International has set up an electrolyser manufacturing unit in India. Greenko, another Indian firm, has partnered with Belgium’s John Cockerill, while Reliance has signed an agreement with Danish company Stiesdal to manufacture electrolysers.

High cost

One of the biggest challenges facing green hydrogen in India is the high production cost. “Everyone is talking with so much passion and vigour about something that does not have a business case. It is all driven by the Paris Agreement and sustainability,” said Gurunath.

While government incentives would help set up green hydrogen plants, bank funding remains a constraint in the absence of a clear path to profitability, he added.

Access to renewable power for electrolysers also presents a challenge. India’s current renewables capacity is around 160GW.

“To achieve the target of 125 GW of renewable energy (for electrolysis) by 2030 is highly ambitious, and possibly unrealistic,” said Salian Varadaraj, country manager for India, Bangladesh and Sri Lanka at US-based DNV Energy Systems.

Scaling up the country’s electrolyser manufacturing capacity also looks challenging, he said.

According to the IEA’s Net Zero by 2050 scenario, global electrolyser manufacturing capacity needs to reach close to 180GW/yr by 2030 to meet global demand. But projects amounting to only around 140GW have been announced by manufacturers, with less than 25GW coming from Indian firms.

“Manufacturing of electrolysers locally in India, with high efficiency and low cost, needs to scale much faster in order to support such goal,” Varadaraj said.

India would also need a supply of critical minerals such as nickel, platinum group metals and rare earth metals for electrolyser manufacturing. These minerals are found mostly in China, the Democratic Republic of Congo, Australia, Indonesia, South Africa, Chile and Peru.

Export challenges

The Indian government expects the majority of its hydrogen or derivatives to be exported as domestic demand will be limited to captive consumption at refineries and fertiliser units. Domestic demand is expected to increase by 2.5–3.5 times by 2040, but hydrogen still not expected to meet more than 5% of the country’s total primary energy consumption by that date, according to forecasts by the Asian Development Bank.

In the export market, India faces substantial competition from other producing regions, such as Australia, the Middle East and North Africa—which has a distinct advantage in selling into Europe due to proximity.

“India will need to compete with many other nations having optimal hybrid wind and solar resources adjacent to export ports such as Australia, Chile and Oman, and ultimately the lowest cost, sustainable hydrogen source will be preferred,” said Varadaraj.

“It seems likely that India will have a better opportunity to attempt to satisfy domestic hydrogen demand and end-uses rather than competing in what will ultimately be a highly competitive export market for hydrogen as an energy carrier,” he added.

Inadequate export infrastructure is also a major challenge for India, said Rajat Seksaria, former CEO of Indian renewables company ACME Group. “A majority of the renewable energy resource locations in India are outside the coastal areas, making transportation difficult. So that would be an additional challenge,” he said.

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Author: Namrata Acharya