From Mukesh Ambani and Gautam Adani to large, medium and small corporates, all are now talking about green hydrogen. While it is good that India has been working towards expanding its energy basket, there are questions about whether the country will be able to achieve its goal of becoming a global hub for green hydrogen. Is it being too ambitious? By jumping from one category of alternative energy source to another, is it not sending confusing signals to the stakeholders?
It all started with the government announcing the Green Hydrogen Policy in 2022, followed by the National Green Hydrogen Mission in 2023. It defined green hydrogen, outlined a demand generation roadmap, and set production capacity targets.
The Mission has set a green hydrogen production capacity target of at least 5 mtpa (million tonnes per annum) by 2030, along with an ambitious export-inclusive target of 10 mtpa. To achieve these targets, it has identified critical ecosystem enablers such as infrastructure and supply chains, government incentives, policy interventions, and areas of research and development.
The government is fostering domestic demand in hard-to-abate sectors — that is, industries that have difficulty reducing their greenhouse gas emissions — and exploring international export opportunities, backed by strategic partnerships with global markets. Investment in hydrogen infrastructure, tax incentives, and ease of land acquisition are creating a favourable ecosystem for growth.
Moreover, India’s geographic advantages, abundant renewable resources, and strong policy support further position it as a competitive player in the global green hydrogen market.
According to RK Malhotra, President, Hydrogen Association of India, since the launch of the Mission several policy decisions have been taken by the government. A PLI scheme for electrolyser manufacturing and an incentive for green hydrogen production have not only been announced but tenders have been called and decided, too. “The R&D incentives scheme has been proposed. Green hydrogen standard has been established, which will ensure quality. And port facilities for export of green ammonia are being developed, which will help India become a global hub,” Malhotra said.
Large consumers
“Refineries and the fertilizer industry are large consumers of hydrogen. PSU refineries are creating facilities to produce or procure green hydrogen which will slowly replace grey hydrogen, which is currently being used. Besides incentives, a mandate for a certain percentage of hydrogen to be green may be required. A slight increase of product prices may not be difficult for oil companies but in the fertilizer industry it may be a little difficult because of the subsidy issue. Besides incentives, carbon credits could be another way to reduce the cost of green hydrogen,” he said.
However, a few issues need to be further addressed to enable the sector to be globally competitive. Achieving a continuous and reliable supply of green hydrogen for hard-to-abate sectors will indeed demand significant progress in renewable energy generation, particularly through solar power combined with storage solutions.
According to experts, since sunshine hours are limited, pairing solar energy with energy storage is essential to ensure round-the-clock power supply, which is critical for production of green hydrogen, which in turn can meet the constant demand in sectors such as steel, chemicals, and heavy industries.
Hence, development of efficient distribution networks will also play a crucial role in ensuring that the green hydrogen produced is consistently delivered to these sectors.
According to Agamoni Ghosh, Managing Editor, Carbon Pricing, S&P Global Commodity Insights, “Indian large-scale projects right now are mainly focused on hydrogen exports in the form of derivatives such as ammonia and methanol as the robust grid connectivity enables them to lower the cost compared to other supply centres. Also, the fertilizer and refinery tenders show the push by the government for adoption in the domestic market.”
The main challenge for India would be no different from the global challenge, of buyers’ willingness to pay a premium for green hydrogen,” she said, adding that “the gap between the market cost to produce and willingness to pay is the biggest blockade in the market right now.”
“Also, since India is focused on green hydrogen, competition with blue hydrogen might be a big challenge especially when demand centres in Asia have limited incentive to switch to low-carbon hydrogen. If there is a push by the government to potentially use green hydrogen by some of the hard-to-abate sectors once the Indian carbon market kicks off we could see some demand emerge. But that’s still a long way,” she said.
However, an issue that is critical besides infrastructure is allowing the sale of excess power from renewable energy (RE) export-oriented units (EoUs)/Special Economic Zones(SEZs) to domestic tariff area (DTA). Production of green hydrogen requires round-the-clock supply of renewable power which can be achieved through a combination of wind and solar projects. To meet the requirements, RE projects would need to be redesigned to produce excess power, which then can be sold in the exchange.
Further, the solar projects to meet these requirements are likely to be in locations different from that of the green hydrogen plants themselves. This will require separate power-only SEZs for such solar projects. However, at present, sale of power in DTA from a power-only SEZ is not allowed and these plants, therefore, are unable to sell the excess power in the exchange. Also, there is the issue of GST.
Catering to a green hydrogen plant round the clock requires over-sizing of RE generation capacity, resulting in excess generation in some hours in a day depending upon season, etc. Excess RE generation in EoU/SEZ must be allowed to be sold in DTA and the implementation procedure needs to be put in place.
Funding challenge
Funding of green hydrogen projects will indeed be a challenge — the cost of land and water availability play a significant role in determining the levelised cost of hydrogen. Additionally, advancing RE capacity alone is not sufficient — cost reductions in green hydrogen production technologies, particularly in electrolysers, are essential to make the process economically viable. These barriers, combined with the need for substantial upfront investments in infrastructure, make securing funding for green hydrogen projects a complex issue.
To address the financial risk associated with large-scale green hydrogen projects, the government has introduced Viability Gap Funding schemes. These help bridge the funding gap for projects that might otherwise be commercially unviable due to high upfront costs.
Simply put, an enabling ecosystem including critical infrastructure creation is the key for supporting India’s ambitions for this sector.