India is starting to deliver on its goal of becoming a global green hydrogen hub. The world's third-largest energy consumer launched its ambitious $2.3b National Green Hydrogen Mission in January 2023 with a raft of incentives to put the country at the forefront of the production, utilisation and export of the fuel.

Now large Indian firms—including Reliance and Adani—have ventured into the sector as a result of government subsidies. The national mission targets 5mt/yr of green hydrogen production capacity by 2030, with potential to reach 10mt/yr depending on export markets.

The programme provides financial incentives for green hydrogen production, with the aim of lowering costs and boosting competitiveness. The intention is also to demonstrate projects that can work across various sectors from transportation to refineries and to accelerate progress in electrolyser technology, storage solutions and hydrogen blending to cut costs and encourage widespread adoption.

Projects leading the charge

Several projects are underway, according to the Global Energy Infrastructure (GEI) hydrogen database. The first phase of the proposed Kochi Green Hydrogen (KGH2) will include a 150MW electrolyser and produce 60t/d of hydrogen, with the expectation for future scale-up to gigawatt capacity. The hub, modelled on ‘hydrogen valley’ projects in the EU, will also establish production, storage, transmission and end-use infrastructure for hydrogen in compressed and liquefied form within a 50km range of Kochi by 2028.

There is also state-controlled GAIL’s 4.5t/d Vijaipur Green Hydrogen Project, which aims to install a 10MW proton-exchange-membrane electrolyser this year at existing facilities in the Guna district of Madhya Pradesh. The green hydrogen produced would be used to enhance GAIL’s natural gas operations.

49 – Hydrogen projects in India

Another important development is the memorandum of understanding for more than $10b of investment signed between Reliance Industries New Energy Giga Complex and the Gujarati government. The plan is to construct a 100GW renewable energy power plant as well as a green hydrogen ecosystem across more than 5,000 acres in Jamnagar, Gujarat, for 2024–25.

There is also state-owned energy conglomerate National Thermal Power Corporation’s Ladakh Green Hydrogen Mobility Project. This aims to establish a hydrogen ecosystem in Ladakh, decarbonising the region's transportation sector and promoting sustainable mobility solutions. The project encompasses hydrogen production, distribution and utilisation infrastructure, along with the deployment of hydrogen fuel-cell vehicles. The first hydrogen-powered buses started operating in August 2023.

GEI has identified 49 hydrogen projects in India, and the number continues to expand. As of February 2024, 73% were green hydrogen projects, while 4% were blue, 10% grey, and 12% other colours. India already has 16 projects operating, with the remainder under construction, planned or proposed.

More cause for cheer

India has ambitious plans for hydrogen. Energy minister Hardeep Singh Puri told Hydrogen Economist that domestic demand will help meet targets for the steel and fertiliser sector, which could benefit from green hydrogen. Oil and gas public sector undertakings have plans to set up green hydrogen projects of around 1mt/yr by 2030, Puri noted, highlighting that he sees green hydrogen as an important part of bringing forward the 2070 net-zero target.

Indian corporations appear optimistic. The results of India’s first auctions for green hydrogen and electrolyser subsidies earlier this year showed bids exceeded allocations for both. Bids hit 550,000t/yr, surpassing the available capacity for support of 450,000t/yr . The subsidies cover the first three years of output.

While Reliance and Adani were the big winners for both electrolyser and hydrogen subsidies, other companies included Jindal India, Ohmium and Larsen & Toubro for electrolysers, and Torrent Power, Welspun, JSW and Bharat Petroleum for green hydrogen.

Vibhuti Garg, director of South Asia at thinktank the Institute for Energy Economics and Financial Analysis (IEEFA), pointed out the auction was designed to attract serious and big corporate entities given the scale and capabilities needed to bring down green hydrogen costs around electrolysers and renewable energy.

Large corporations, such as Reliance and Adani, benefit from having captive demand for hydrogen. For instance, Reliance already has a massive presence in India’s oil and gas sector. About 18–20% of green hydrogen can be blended with oil using existing infrastructure.

Reliance and Adani also are scaling up their renewable energy verticals. Reliance aims to generate 100GW of solar energy by 2030, accounting for nearly one-fifth of India’s total renewable energy capacity target. It has also tied up with Danish company Stiesdal for the development and manufacture of hydrogen electrolysers. In 2021, Reliance announced it was investing $10b in clean energy, including hydrogen.

In the mobility sector, given the falling costs of batteries for electric cars, hydrogen might not be the most cost-effective option. However, long-haul trucks could be viable, and Reliance has already announced plans to convert 5,000 conventional trucks into a hydrogen-powered fleet by mid-2024.

Cost question marks

While India's hydrogen ambitions are bold, there is still some way to go in terms of lowering costs and improving incentives. Analysts say the subsidy per kilogram offered in India is extremely low compared with those in the US and Europe, and the key to turning all the momentum into substantial progress is the ability to make green hydrogen competitive.

Green hydrogen costs in India are expected to fall by up to 40% and reach $3–3.75/kg with these subsidies, according to a recent IEEFA report. The production cost of green hydrogen in India currently stands at $4.6–6.3/kg.

Analysts also believe Reliance’s plans to produce green hydrogen at $1/kg by 2030 are overly ambitious. This would be a significant reduction from the current global minimum cost of $3/kg, data from professional services firm PwC indicates.

“Cost reduction is critical, requiring advancements in technology and infrastructure. Additionally, building a skilled workforce and creating a robust hydrogen ecosystem are crucial,” GEI analysis noted.

Further challenges

Certainly, more work needs to be done. There is no mandate for using green hydrogen in India and it is extremely difficult to secure offtake agreements. A conducive regulatory framework and robust offtake agreements are prerequisites for developing the green hydrogen market. With only around 5% of hydrogen projects reaching FID, it is also prohibitive to produce a steady supply of electrolysers.  

And, so far, the market for Indian hydrogen is more grey than green. The country uses about 5mt/yr of grey hydrogen, mostly in the manufacturing of ammonia for fertilisers.

While the steel sector presents an opportunity—especially as 20–30% of India’s steel goes to environmentally conscious Europe—the blast furnaces in India rely on coking coal, and using hydrogen would need massive infrastructure investment.

“The target of green hydrogen production at $1/kg is very ambitious. The focus should be on reaching the commercial cost parity with grey hydrogen, which is mostly used in the fertiliser sector,” said Charith Konda, energy specialist, India mobility and new energy at IEEFA.

40% – Expected fall in green hydrogen costs in India

There are also challenges for smaller hydrogen projects due to the mandated minimum bid capacity of 10,000t/yr. Analysts suggest a more viable business model for green hydrogen involves setting up multiple production plants with diverse capacities for various end-products aligning with awarded capacities.

However, Santosh Gurunath, founder of H2 Carbon Zero & Umagine, emphasises that small and medium-size enterprises still have opportunities throughout the value chain.

“Distributed green hydrogen production and applications will also be very much relevant across the country, and that will be one of the areas where the smaller players will have a role to play. Additionally, on the technology/equipment side there are several opportunities for the smaller players as well int the form of being an OEM/sub-vendor for some of the components in the hydrogen value chain,” said Gurunath.

Improving efficiency in electrolyser manufacturing in terms of locally sourcing components and the use of energy might be crucial to the future growth. Currently, it takes around 55kWh of electricity to produce 1kg of hydrogen. The goal is to reduce it to around 40kWh or 45kWh, said Konda.

Shaky export market

India envisions exporting nearly 70% of its green hydrogen, targeting key markets such as Japan, Europe, Singapore and South Korea. However, despite subsidies, the cost of green hydrogen production in India may be overshadowed by incentives offered by other countries.

The IEEFA report highlights that current incentives are considered insufficient compared with global production costs and subsidies, with the average incentives in India over the initial three years amounting to $0.48/kg. In contrast, the US Inflation Reduction Act provides production tax credits up to $3/kg over ten years, and the European Hydrogen Bank proposes a fixed premium capped at €4.5/kg for a ten-year contract.

“India’s domestic demand for clean hydrogen has so far been limited, unless the government implements the consumption mandates on existing end-use sectors. Therefore, both Reliance and Adani would need to target overseas markets—and they are making efforts on this front by building partnerships with European and Japanese offtakers,” said Kathy Xitong Gao, senior associate for hydrogen research at research firm BloombergNEF

“However, export demand is very uncertain, as the subsidy policies for hydrogen imports are not finalised yet in Japan and are limited in Europe. Importers are just casting the net across the world with potential suppliers and might sign something concrete with those producing with the lowest costs.”

In February, Japan approved new legislation for hydrogen subsidies by funding the price difference with natural gas.

Cost reductions could come from policy or regulatory interventions to make Indian green hydrogen exports more competitive, according to Konda. These could be outright subsidies, in the form of viability gap funding, or regulatory or policy incentives, such as the waiving of transmission and distribution charges for the electricity used to produce green hydrogen.

Harmonising certification system could be another challenge for India’s green hydrogen sector as rules on permissible CO₂ emissions differ from country to country.

Aligning the supply with the anticipated demand adds to the uncertainty for Indian firms in the sector, given the rapidly increasing production levels in China, said Aashish Mallik, assistant manager of strategy and marketing at Ohmium. China's state-led initiatives on electrolyser manufacturing have resulted in an electrolyser oversupply of four times greater than global demand, according to a report by thinktank The Atlantic Council. Clean energy advisory company Clean Energy Associates predicts China's electrolyser manufacturing capacity could be double anticipated demand by 2030.

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Authors: Namrata Acharya, Paul Hickin, <BR>Editor-in-chief