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India's costly green hydrogen plan

17 Mar 2023

India's green hydrogen ambitions face cost competitiveness challenge

India's ambitious target of achieving 5 million metric tonnes per annum of green hydrogen production by 2030, with an investment of about `16 trillion over the next decade, may face some challenges due to rising production costs. Although green hydrogen is produced by splitting water into hydrogen and oxygen using renewable power such as wind or solar, it is not produced on a commercial scale in India. On the other hand, grey hydrogen, used for industrial purposes, is produced using fossil fuels, mostly natural gas.

The current price of green hydrogen is estimated at around $3-6 per kg, which is significantly higher than grey hydrogen. However, industry experts believe that technological advancements and regulatory support can help boost cost-competitiveness of green hydrogen in the country, compared with other energy sources. The ongoing Russia-Ukraine conflict has spiked the prices of natural gas to a record high level of $30 per metric million British thermal unit (mmBtu) in calendar year 2022, thereby putting grey and green hydrogen almost on a par in terms of cost.

Despite the price impediment, several firms, including Larsen & Toubro (L&T), Reliance Industries, Adani Group, Oil and Natural Gas Corporation, Bharat Petroleum and Indian Oil, have announced their green hydrogen intentions. The government of India has initiated several measures to promote domestic manufacturing of electrolysers and reduce their costs. However, India has limited capacities for manufacturing of electrolyser stacks, which constitute 40-45% of the overall capex for a green hydrogen unit.

In an interview, Subramanian Sarma, whole-time director and senior executive vice-president (energy) at L&T, said, "Looking at the multiple pathways that can bring down the cost of green hydrogen, L&T believes that it's only a matter of time for its full potential to materialise." Munish Aggarwal, managing director-investment banking at Equirus, stated, "While price continues to be the biggest impediment in mass adoption of green hydrogen, other factors impacting adoption include the need to expand the infrastructure to handle hydrogen and rapid evolution in electrolysers which make economic redundancy a real threat."

According to Vish Iyer, global chief commercial officer at Jakson Green, "Price is certainly one of the many niggling impediments, but that is expected to change with the national green hydrogen mission kicking off this year driven by procurement mandates and a general transition of the fertiliser, chemicals, process, and refinery space towards green products driven by markets."

In conclusion, the rising popularity of green hydrogen in India is a positive development, but the cost of production remains a dampener. However, with the government's support, domestic manufacturing of electrolysers is expected to reduce costs and boost the adoption of green hydrogen in the country. Although there are challenges in terms of infrastructure and technology, industry experts remain optimistic about the potential of green hydrogen to become a cost-competitive and sustainable energy source in the future.

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