Green Hydrogen in India - The Audacity of Hope or the Folly of Hype?
Decoding India's recently launched National Green Hydrogen Mission, its accompanying private sector commitments, and the path forward for Hydrogen in the world's most critical market for clean energy
6 in 60: The 1 Minute Digest
Indian Energy Quadfecta (IEQ) is re-emerging from a hiatus to bring to you regular updates on the dynamic world of the energy transition in India. Our topic to de-mystify today is Green Hydrogen. If you only have 60 seconds, here are 6 takeaways:
The Mission: A month ago, India’s Cabinet approved the National Hydrogen Mission with the goal of becoming a “global hub for production, usage, and export of Green H2 and its derivatives”. This included $2.3bn in incentives and a target of producing 5 million metric tons per year for the domestic market by 2030. The broader goal is to supply 10% of the global demand - or 10 million tons per year - with the growth of export markets.
The Announcements: Over the past 12 months, Indian industrial players across power generation, fuel production, and equipment manufacturing have made a slew of commitments and partnerships focused on green hydrogen. Some other key initial moves (including some in the last two weeks) include: India’s first hydrogen internal combustion engine truck, India’s largest electrolyzer order, and plans for India’s first hydrogen trains by December 2023.
The Roadmap: The near-term priority is to convert India’s existing hydrogen use (~5 mm tons in petroleum refining and ammonia production) to clean hydrogen. Medium term applications including blending hydrogen into urban gas distribution. Longer term applications may be heavy duty road transport, shipping and aviation, along with hard-to-abate sectors like steel.
The Barriers: The largest barriers to further growth include: 1) tech readiness & cost, (2) cheap renewables, (3) land & water access, (4) financing costs, (5) allocating precious renewable capacity, (6) the ‘chicken-and-egg’ problem of lack of supporting infrastructure.
The Players: The largest players in Indian renewable energy have announced their push towards green hydrogen: Reliance, Adani Group, GreenKo, ReNew. They are accompanied in partnership with large fuel producers (Indian Oil Corporation, ONGC) as well as industrial players such as L&T. Some others like Tata Power have initiated their work through pilot projects, to be potentially followed with more substantial commitments.
The Hope and the Hype: Hydrogen anywhere - not just in India - is the subject of intense debate; some say it is the future, others say it is purely futuristic. Those who want to anchor on hope should focus on specific applications and specific locations where hydrogen can be a solution. In the realistic near term, this means projects concentrated in areas that have both the low cost renewables and proximity to industrial clusters like refineries and ammonia plants. Everything else - whether its trucks, cars, planes, trains, or steel mills - will depend on successful pilot projects and slower roll-outs.
The 10 Minute Deeper Dive
For those who want to read deeper, below is a 10 minute version that will tell you a little more about what you need to know.
A Quick Refresher on Green Hydrogen Basics
Hydrogen (H2) is often referred to as the ‘swiss-army knife’ of the energy transition, which highlights its versatility. Hydrogen is already used today around the world, most prominently in industrial applications like petroleum refining and ammonia (a key input for fertilizer) production. Its potential applications can be much wider.
But Hydrogen does not exist on our planet independently in its natural state, it needs to be produced. And how it is produced - whether with coal, natural gas, or renewables - has significant implications for how clean it actually ends up being. The promise of green hydrogen - hydrogen produced by splitting water molecules using renewable energy and equipment called electrolyzers - is to be able to help decarbonize various parts of the economy. Key potential applications for green hydrogen include:
Industry: as fuel for oil refining, ammonia production, methanol production, and hard-to-abate sectors like steel making
Heavy-duty transport: to power trucks that carry large payload over long distances, as well as in shipping and aviation
Power generation: as renewable energy storage (by converting electricity into hydrogen, to convert back into electricity when needed later), and in gas turbines to increase power system flexibility.
Buildings: blended into existing natural gas networks, and used to supply energy needs of buildings.
To learn more about the basics of Hydrogen and its applications, check out the following from: NREL, Bill Gates, the International Energy Agency, and the Hydrogen Council’s 2022 update.
Indian’s National Hydrogen Mission
The Goal
India’s cabinet approved the National Green Hydrogen Mission in January 2023, with the ambition of becoming a “global hub for production, usage, and export of Green H2 and its derivatives”. This Green Hydrogen policy is in line with the broader goal of becoming energy independent by 2047 and achieving Net Zero by 2030. The Mission document from the Government’s Ministry of New and Renewable Energy (MNRE) outlines several key objectives, the most fundamental of which is for India to produce 10% of the global demand for green hydrogen - or 10 million tons - by 2030.
Put in the global context, India’s national declaration follows government initiatives across the EU and the US. Meanwhile China, ever the pathbreaker in the clean energy world, also continues to initiate green H2 projects.
The Approach
As articulated by the MNRE, the National Green Hydrogen Mission has three deceptively-easy-but-operationally-complex components:
(a) demand creation in domestic and export markets,
(b) incentivizing supply through direct subsidies for electrolyzer manufacturing and green H2 production, and
(c) key enablers including R&D, infrastructure, and regulatory support.
The approach for green hydrogen adoption must necessarily be phased, even though the broader decarbonization imperative is immediate and urgent. The first place to look is where hydrogen is already used today. In the case of India, this is the 5.5 million tons of grey hydrogen (i.e. hydrogen from fossil fuels) produced today, almost all of which is used for petroleum refining and manufacturing ammonia. Converting fossil-based grey hydrogen into renewable-based green hydrogen for these industrial applications is most immediately actionable. The next phase would be urban gas distribution where hydrogen can be blended into the gas networks over time. Then some forms of transportation, starting with heavy duty, long distance trucking. And then other forms of transportation (shipping, aviation), and the harder-to-abate sectors like steel manufacturing.
Taking Stock: What’s Already Happening?
There have been a slew of announcements regarding Green Hydrogen projects in India over the past 12 months. Most are still in the realm of ‘talk’ (MOUs, press released targets) while others are starting to ‘walk’ (commitments and actual deployments). Here are some of the greatest hits (though not comprehensive) so far:
European Investment Bank (EIB) agreed to join the India Hydrogen Alliance and provide EUR 1 bn in indicative funding.
Reliance Industries and Adani Group independently signaled broader commitment to Green Hydrogen development in India
Indian Railways committed to become a net zero emitter by 2030, which starts with converting 35 trains along hilly heritage routes to hydrogen by December 2023
GreenKo - John Cockerill Partnership: India’s largest electrolyzer order (140MW from Greenko) for the First Indian Green Ammonia Plant in Himachal Pradesh, India
NTPC Ltd (India’s largest power generator) commissioned India’s first green hydrogen blending project in Surat, Gujarat
ReNew Power strikes JV partnership with Indian Oil Corporation and L&T for green hydrogen projects
Total Energies and Adani Group: Created ANIL, targeting 1mm metric tons of Green H2 per year by 2030, underpinned by 30 GW of new renewable power generation as its first milestone
ONGC partnered with GreenKo to commence development of green hydrogen
GAIL India is setting up green hydrogen plant in Guna, Madhya Pradesh to produce hydrogen this year
Bharat Petroleum signed an MOU with the Odissa government for exploring green hydrogen development
Hindustan Petroleum Corp Ltd setting up a 370 tonnes / yr green H2 plant in Vishakapatnam.
Setting our SIGHTS: What’s on the Horizon?
India’s SIGHT program (short for Strategic Intervention for Green Hydrogen Transition) is a $2.3bn package, that the MNRE is saying will initiate a “wide ranging and expansive bouquet of financial incentives and non-financial measures”. The two biggest components of these incentives will appropriately be focused on (i) support for domestic manufacturing of electrolyzers, and (ii) incentives for production of green hydrogen. Concurrently, the Government is looking to incentivize a series of pilot projects in hard-to-abate sectors such as steel, long-range heavy-duty transportation, shipping, and aviation.
In addition to these incentives and pilot projects, there are also specific usage targets for green hydrogen adoption:
Oil refineries: Replace 30% of their fuel usage with green hydrogen by 2035, starting from 3% in 2025.
Fertilizer-Production: Run on 70% green hydrogen by 2035, starting from 15% in 2025
Gas Distribution: Replace 15% of fuel volume by 2035, starting from 5% in 2025.
Over time, the Green Hydrogen Mission targets becoming an exporter of green hydrogen to countries that may be reliant on imports due to land and renewable resource limitations. With the goal of achieving 10% market share of the global green hydrogen market, India will aim to export ~10 million tons of green hydrogen / ammonia per year.
Climbing Hurdles: What are the barriers?
Tech Readiness & Cost: Green hydrogen development around the world continues to drive towards progress down the cost curve, with mixed results. For India, current costs are estimated to be Rs. 300-400 per kg, which is at least 2-3x higher than desired levels. This compares to Rs. 75-150 per kg for grey hydrogen (using natural gas) and Rs. 40-90 per kg for fuel alternatives like CNG / PNG.
Cheap Renewables: As one of the lowest cost producers of solar in the world, India may be well-suited to domestically supply renewables for hydrogen, but building appropriate scale for renewables at the same location as the hydrogen hubs will be a challenge.
Land & Water: Land acquisition is one of the most significant challenges for any large development project in India, and green hydrogen development is no exception. Continuous access to water (as an input into electrolyzers) at the appropriate scale will also be a hurdle, despite India’s 7,500km coastline. For its ~5mm tons per year of production, EY estimates India will need 50bn liters of fresh water.
Financing: Cost of capital continues to be a barrier for growth - like in all other areas of Indian renewable development. Perceived risk in terms of cost inflation, counterparties, regulatory burden all contribute to inflated financing costs, among other factors.
Precious Renewables: Renewables are precious, particularly for power generation in a country where the vast majority is still derived for coal. The idea of dedicating some of this precious renewable capacity to produce hydrogen requires an element of foresight and belief in the future that might be difficult to stomach.
Infrastructure ‘Chicken-and-Egg’: It’s difficult to make the investment case for hydrogen projects without having supporting infrastructure on the ground. The inverse is equally true, hence creating a classic (and capital intensive) ‘chicken and egg’ dilemma. Hydrogen-supporting pipelines for bulk transport, blending capabilities for city gas distribution, refueling stations for transport, and ports to enable exports are all important parts of hydrogen infrastructure that need to be developed in tandem.
Going Forward: The Audacity of Hope?
Of the many ways to (mis)apply Barack Obama’s famous Audacity of Hope line, I find the application to India’s Hydrogen story to be particularly interesting. First, hydrogen anywhere - not just in India - is the subject of intense debate; some say it is the future, others say it is purely futuristic. I believe there is enough to be hopeful about the future of Hydrogen in India. For those who believe it is more hype than hope, it is worth noting that hype has value in and of itself. Hype attracts attention, attention attracts incentives and investment, investment attracts talent and R&D, talent and R&D build solutions that give us a shot at bending the cost curve. But those who hope must do so cautiously, and focus on specific applications and specific locations where hydrogen can realistically be a solution. Given the variability in renewable energy costs and electrolyzer capex costs across India, and the lack of hydrogen-supporting transportation infrastructure, green hydrogen in the near term is likely to be concentrated in areas that have both the low cost renewables and proximity to industrial clusters like refineries and ammonia plants. Everything else - whether its trucks, cars, planes, trains, or steel mills - will necessitate pilot projects, slow commercial roll-outs, and consistent regulatory support. It is with that audacity and humility that hydrogen in India can perhaps begin to realize its potential.
Other Notes and Citations
In addition to the direct links provided in the write-up, here are some references to works and publications I read and would recommend.
Government of India Ministry of New and Renewable Energy, “National Green Hydrogen Mission”, January 2023, https://mnre.gov.in/img/documents/uploads/file_f-1673581748609.pdf
EY, “How green hydrogen can help India achieve its net zero ambition”, January 2023, https://www.ey.com/en_in/energy-resources/how-green-hydrogen-can-help-india-achieve-its-net-zero-ambition
World Bank Hydrogen Council, “Sufficiency, sustainability, and circularity of critical materials for clean hydrogen”, 2022, https://hydrogencouncil.com/wp-content/uploads/2022/12/WB-Hydrogen-Report-2022.pdf
DownToEarth.org, “National Green Hydrogen Mission will establish India as global market leader: Experts”, ://www.downtoearth.org.in/news/renewable-energy/national-green-hydrogen-mission-will-establish-india-as-global-market-leader-experts-87009#:~:text=Some%20of%20the%20hydrogen%20policy's,15%20per%20cent%20in%202025.
Image used in post thumbnail: Sourced from DXP; https://www.dxpe.com/hydrogen-color-gray-blue-green-hydrogen-production-storage-uses/