India stands at a crossroads to make Green Hydrogen an important part of its energy planning for a clean and secured energy future. India is currently generating RE electricity at least cost. Leveraging the same, India is poised to achieve significant cost reduction in the Hydrogen generation.
Prime Minister Narendra Modi in 2019 had envisioned making India a USD 5 trillion economy by 2024-25. Even though, the progress was hampered due to Covid induced lockdowns, the country is on its path to achieve this target. Recently the IMF projected that India would become a USD 5-trillion economy by 2026-27. Along with economic targets, the Govt of India had set ambitious climate action targets at COP26. To meet the ever-increasing fuel demand and the climate-action targets, it is imperative that the country moves away from fossil fuels to renewable energy (RE) sources.
India has installed massive solar and wind capacities over last decade and targets to achieve 500 GW till 2030. With such RE capacity, India is on its path to decarbonize its electricity generation. At the same time, there is a need to decarbonize energy intensive industries as well. Green hydrogen (GH) can be the missing puzzle piece to decarbonize hard to abate sectors such as fertilizer, steel, cement, transport, and energy supply, while catalysing RE systems. GH is seen as fundamental in the pursuit of carbon neutrality by 2070, as committed by India in COP26.
Status of Hydrogen in India:
As estimated by TERI, in 2020 India had 6 million tons Hydrogen demand predominantly from industry sectors, such as fertilizers and refineries. Currently all the Hydrogen consumed in India is generated using fossil fuels, emitting millions of tons of CO2. India’s demand for Hydrogen is expected to grow by 5X by 20501 reaching around 30 million tons.
Use GH to decarbonize several hard to abate industries:
GH produced in India could be used in hard to abate sectors like transport, chemical industry, refineries, food industry and in metal & steel production. As an immediate opportunity, the current fossil fuel-based Hydrogen used in these industries should be replaced with the GH. Following are the details of uses of Hydrogen across industries:
| Industry | Use of GH |
| Oil Refineries | Hydrogen is used in refineries as a catalyst to convert heavier crude oil to usable form as diesel, petrol etc. (Hydrocracking). Additionally, Hydrogen is used to remove Sulphur from gasoline or petrol, jet fuel, kerosene, diesel fuel, and fuel oils (hydro-desulfurization). Oil refineries are the largest consumer of Hydrogen globally. |
| Fertilizer (Ammonia) Production | Hydrogen is used as a feedstock to produce Ammonia (NH3), which is used to make nitrogenous fertilizers like Urea and DAP (diammonium Hydrogen phosphate). Next to oil refineries, fertilizer or Ammonia production is currently the largest application of Hydrogen. |
| Methanol Production | Methanol is used as a blended fuel with gasoline or diesel for vehicles. It is also used as a clean energy source for electricity production using Direct Methanol based Fuel Cells (DMFCs). |
| Steel Production | Emissions from steel industry contribute around 35% of total greenhouse gas emissions from India’s manufacturing sector. In steel production, GH can play dual role by replacing fossil fuels to generate heat, and secondly act as bridging agent, replacing carbon. |
| Mobility | Hydrogen can be used directly as a fuel in Fuel Cell base Electric Vehicle (FCEVs). GH can be blended with CNG, and the blended fuel (Hydrogen-CNG) can be used as a fuel in CNG based vehicles. |
| Power Generation + storage option | Use of Hydrogen in power generation is limited to distributed power generation using Fuel Cells, mainly for off-grid applications. There is huge potential in fuel-cell based generation for off-grid applications such as mini-grids etc. GH could provide energy systems with a long-term energy storage solution capable of mitigating the variability of RE resources, thus increasing the pace and penetration of RE |
Challenges in deployment of GH
Commercialization of GH on a large-scale faces significant challenge. India has historically been an energy deficit country with marginal surplus power. Currently India is witnessing unprecedented growth in electricity demand mainly driven by early summers and high economic growth. Additionally, India has significantly improved the electrification rate through Saubhagya program, leading to high domestic demand.
With rapid economic growth, India’s electricity demand is expected to increase many folds. A commensurate increase in the generation is unlikely soon. With over two third generation being from coal-based plants and significant challenges in increasing coal production, India’s power mismatch is expected to grow further wider. With the growing electricity demand, it will be challenging to divert the electricity for GH production. To cater to RE electricity demand for GH production, utility standalone RE asset will need to be developed.
Government’s initiatives for developing GH sector
As a major global economy, India’s role in mitigating climate change is critical. Acknowledging the same, Indian government is developing conducive policy environment and collaborating with key global economies and initiatives:
- India GH Mission and Policy : Prime Minister Narendra Modi in August 2021 announced the National Hydrogen Mission and Subsequently GH Policy which sets an annual target of producing 5 million tonnes of GH by 2030. The aim is to turn India into a manufacturing hub of GH.
- India’s cooperation with France on ‘GH’ : France under its GH strategy, dedicated over EUR 7 billion for development of GH and 6.5 GW electrolyser capacity by 2030. Both India and France are considering GH as priority area of cooperation and have agreed on a joint declaration of intent.
- India has joined the First Movers Coalition : A global initiative aimed at decarbonising the heavy industry and long-distance transport sectors responsible for 30% of global emissions. The coalition’s members have committed to meet their industrial materials and long-distance transport requirements from suppliers with near-zero or zero-carbon solutions, despite the premium cost. Coalition’s members will invite companies from their countries to join the coalition and pursue public policies to commercialise the green technologies including GH.
Way Forward Strategy
Ambitious, targeted, and near-term action is needed to overcome the barriers in GH development. We propose following three-pronged strategy to scale up Hydrogen supply and demand, building on existing industries, infrastructure, and policies:
• Include GH in long-term energy planning: Comprehensive long term energy planning should identify the role of GH. Industries should be obligated to have a clear long-term goal to decarbonize using GH. Government has indicated introduction of Hydrogen Purchase Obligation for selected industries. Such measures will help in generating base demand for GH. Governments must build frameworks and provide incentives like viability gap funding to level the playing field for GH development.
• Develop home-grown frugal technologies: There is an urgent need to develop frugal technologies in GH value chain best suited for Indian conditions. Government is already considering to roll-out a Rs 15,000-crore production-linked incentive (PLI) scheme to push for electrolyser manufacturing in India. This will bring down costs and reduce dependency on foreign technologies.
• Attract private investment: GH supply and infrastructure projects, stand at the riskiest point of the deployment curve. Governments must shift subsidies away from fossil fuels to provide low-cost collateral free risk capital to foster the private sector to invest. At the same time, India’s corporate sector must add its full weight to the Government’s efforts to develop GH sector. Bilateral and multilateral agencies like the World Bank, IMF, ADB, AIIB and other DFIs etc. are playing a crucial role in a) creating market for this new technology b) increasing the capacity and c) creating the necessary policy and regulatory environment.
Currently the GH has gained unprecedented momentum due to global focus on climate change. India stands at a crossroad to make GH an important part of its energy planning for a clean and secured energy future. India is currently generating RE electricity at least cost. Leveraging the same, India is poised to achieve significant cost reduction in the Hydrogen generation. The country can position itself as `a low-cost, zero-carbon ‘GH’ manufacturing hub of the world. Progressive policies, adequate financial support like viability gap funding, industry action, market generation and increased investor interest, will ensure that India secures a lion’s share in this growing GH market.
This article is jointly authored by Navdeep Gupta & Sunil Dayal. Both are energy & climate finance experts and have worked with large IPPs, global PE funds, European Utilities, Multilateral Agencies and Government on RE & Power related areas.
Navdeep is an alumnus of IIT Delhi and ISB Hyderabad while Sunil is an alumnus of IIT Delhi and the Said Business School, University of Oxford. Navdeep works as the Head of Market Analysis with Statkraft Markets India Pvt Ltd. Sunil is currently engaged as an Energy Specialist Consultant at the World Bank.
Disclaimer: The views, information or opinions expressed in the article are those of the authors and do not necessarily reflect the views of The World Bank or Statkraft Markets India.
