Among major industrial polluters, cement is one of the ‘hard to abate’ industries as carbon dioxide (CO2) emissions are an inescapable output in the production of clinker from coal, releasing at current levels of efficiency, 576 kg per tonne of cement. Can we think out of the box and transform such adversity to prosperity? With this objective in mind, the contours of a Rural Prosperity Mission (RPM) will include an anchor client (for example, a cement plant), an anchor municipality and numerous villages near the anchor client and innovative technology.

Rajapalayam is a municipality with a population of 184,000 in Tamil Nadu. It has a 1.5 million tonnes per annum (tpa) cement plant and is surrounded by 100 villages within a 15 km radius of the factory.

With current tax revenues of ₹30-35 crore per annum, Rajapalayam municipality cannot adequately support the local community and is perennially cash-strapped for development works. The pressing community needs are: (i) adequate water supply for human consumption and agriculture; (ii) fair priced community selling of agricultural produce; (iii) empowerment of women; (iv) education and skilling; (v) migration to cities; and (vi) CO2 emissions polluting the environment. A significant revenue boost is needed for the municipality.

CO2 emissions from fuel combustion in the cement plant can be eliminated by substituting coal with a carbon-neutral fuel like hydrogen, which has six times the calorific value. A cement manufacturer will substitute coal with hydrogen if the cost of hydrogen, adjusted for the higher calorific value plus carbon tax, is equal to or lower than the cost of delivered coal. There is a growing demand for green cement, for which a premium of 15 per cent may be available. Considering the current landed coal costs of about ₹15,000/tonne, the calorific value of hydrogen at 33,900 Kcal/kg against 5,900 Kcal/kg for coal, and the carbon tax of ₹400/tonne of coal, the levelised hydrogen price would be ₹158/kg, about $2/kg.

Economics of hydrogen

Clean energy input for electrolysis will be met by a 70 MW solar plant at Rajapalayam and a minimum of 2-3 MW in each village. Any additional requirements for 24/7 operation will be wheeled from a remote ‘round the clock’ (RTC) renewable energy plant.

Capital expenditure for Phase-1 (water sourcing and transport piping) is ₹75 crore and Phase-2 (electrolyser and floating solar plant) is ₹336 crore and Phase-3 (village electrolysers) is ₹1,211 crore, aggregating ₹1,622 crore. This will be financed through 60 per cent (₹982 crore) government grants and 40 per cent (₹640 crore repayable in five years) as soft loans and vendor financing.

Annual operating expenses are ₹343 crore, comprising electricity (₹250 crore), operational maintenance (₹56 crore), water (₹6 crore) and interest on loans (₹28 crore).

Sales revenue: Hydrogen will be sold to the cement plant at ₹158/kg (annually reducing by ₹5/kg), plus a subsidy of ₹35/kg from the government . The annual sales revenue is estimated at ₹558 crore (1st year), leaving a surplus of ₹215 crore (over operating expenses), sufficient to service loan repayment instalments of ₹128 crore, and for distribution to the municipality and villages. From the sixth year onwards, post loan repayment, profits will rise to ₹164 crore/year.

As a first step, five new sources of water in Phase-1 were identified for storage in an existing eight-meter deep, 180-acre reservoir that needs refurbishing. This will serve human, agricultural and local industrial needs.

Clean hydrogen will be generated in 180 MW of electrolyser capacity. This will be met by Rajapalayam reservoir-55 MW directly piped to the cement plant (40 km away) and the balance 125 MW at a minimum of 1 MW per village, depending on the available water body in each village, trucked from the 100 villages.

The carbon emissions eliminated will substantially reduce associated social costs. A municipality that annually generates ₹30-35 crore will be able to generate an additional ₹50 crore/year. The project can lift BPL families’ incomes substantially. This concept can be extended to cement factory locations in Tamil Nadu and the rest of India as well as other carbon emission heavy industries.

Raju is Trustee Ramanalayam Trust, Mony is Member PanIIT Alumni India, and Narasimhan is Founder and Director, PlaySolar Systems Pvt. Ltd