NITI Aayog has published a report titled ‘Harnessing Green Hydrogen - Opportunities for Deep Decarbonization in India’.

The report predicted that hydrogen demand in India could grow more than four-fold by 2050, representing almost 10 per cent of global hydrogen demand.

India has a unique opportunity to become a global leader in the hydrogen energy ecosystem. With proper policy support, industry action, market generation and acceptance, and increased investor interest, India can position itself as a low-cost, zero-carbon manufacturing hub, at the same time fulfilling its goal of economic development, job creation, and improved public health.

The need for transition to hydrogen

• Rise of technologies such as solar and wind, lithium-ion batteries, and alternative fuels have paved the way for decarbonization in various end-use sectors. However, there are certain sectors like industry and heavy transport that are hard to decarbonize using the current low or zero-carbon technologies. Hydrogen promises to address those challenges and contribute to the decarbonization of these hard-to-abate sectors.

• Hydrogen is an energy carrier and can be used for a wide array of energy and industrial applications. The opportunities and challenges of hydrogen emerge from its energy characteristics.

• Hydrogen’s specific energy (energy content per unit of mass) is higher than most hydrocarbon fuels. But its volumetric energy density is the lowest. That means pressurisation or liquefaction is required for hydrogen to be useful as a fuel. These two properties drive the value as well as the applicability of hydrogen for the various possible end-use cases.

• Many sectors such as iron ore and steel, fertilisers, refining, methanol, and maritime shipping emit major amounts of CO2, and carbon-free hydrogen will play a critical role in enabling deep decarbonization. 

• For other high-emitting sectors, such as heavy-duty trucking and aviation, hydrogen is among the main options being explored with an outlook to be the preferred solution for several applications. 

• This has resulted in growing global momentum towards hydrogen in general, and green hydrogen in particular. 

• There is an increased consensus around the world that concerted steps need to be taken to reduce global warming to levels less than 2°C and if possible to cap it at 1.5°C higher than pre-industrial levels. Various countries have pledged their Nationally Determined Contributions to ensure energy transition and reduce emissions.

• Declining prices of hydrogen, coupled with growing urgency for decarbonization means the global demand for hydrogen could grow by almost 400 per cent by 2050, led by industry and transportation.

• At least 43 countries have now set up or are setting up strategies or roadmaps for a hydrogen economy, including financial incentives to accelerate the transition. 

Production of hydrogen 

Although hydrogen is the lightest and most abundant element in the universe, it is rarely found in nature in its elemental form and always must be extracted from other hydrogen-containing compounds. It also means that how well hydrogen contributes to decarbonization depends on how clean and green the method of production is.

Based on the sources and processes, hydrogen can be classified into various colours: 

i) Black/Brown/Grey hydrogen is produced via coal or lignite gasification (black or brown), or via a process called steam methane reformation (SMR) of natural gas or methane (grey). These tend to be mostly carbon-intensive processes.

ii) Blue hydrogen is produced via natural gas or coal gasification combined with carbon capture storage (CCS) or carbon capture use (CCU) technologies to reduce carbon emissions.

iii) Green hydrogen is produced using electrolysis of water with electricity generated by renewable energy. The carbon intensity ultimately depends on the carbon neutrality of the source of electricity. Which means, the more renewable energy there is in the electricity fuel mix, the “greener” the hydrogen produced.

Central to the green hydrogen production process is the electrolyser technology. Alkaline and polymer electrolyte membrane (PEM) electrolysers are two commercially available technologies for green hydrogen production today. Advanced electrolyser technologies like solid oxide and anion exchange membrane are nearing commercial deployment as well.

Other less prevalent sources of production include bio-hydrogen which can either be produced by an SMR process around methane produced by anaerobic digestion of organic waste or through a fermentation process by bacteria.

Challenges to a hydrogen transition

• The emergence of a hydrogen economy has been challenging because of high costs, supply chain complexity, policy, and regulations.

• The cost of green hydrogen production is much higher than what is produced from fossil fuels. Decreasing renewables prices and economies of scale promise to make green hydrogen economical going forward, but much work remains.

• Hydrogen can be produced by a variety of processes and has use in various sectors, making its sourcing and supply chain complicated when compared to oil and gas.

• Storage and transportation of hydrogen have traditionally been difficult due to the unique characteristics of the gas—flammability, low density, ease of dispersion, and embrittlement. Transporting and storing hydrogen will require massive investment in infrastructure upgrades.

• Traditionally, hydrogen has seen minimal policy support from governments across the globe so far. Policy push has been towards other technology options and end uses, even when hydrogen can make a much bigger impact. 

• Lastly, standards around hydrogen use either don’t exist or haven’t been updated.

India’s Green Hydrogen Policy

• Transition to green hydrogen and green ammonia is one of the major requirements for reduction of emissions, especially in the hard to abate sectors.

• The  government of India considered a number of policy measures in order to facilitate the transition from fossil fuel based feed stocks to green hydrogen/green ammonia both as energy carriers and as chemical feedstock for different sectors. After careful consideration, the government of India has framed the policy on green hydrogen.

• The ministry of power unveiled the first part of the Green Hydrogen Policy on February 17, 2022. The policy is one of the key outcomes of the National Hydrogen Mission which was launched by Prime Minister Narendra Modi on India’s Independence Day in 2021. 

• It marks the culmination of months of efforts across multiple ministries and stakeholder groups, and affirms India’s intent to be a global green hydrogen hub.

Growth in hydrogen demand in India

• For India, this current impetus surrounding the hydrogen transition fits well within the context of a low-carbon economy, energy security, and the larger economic development ambition of the nation. 

• India’s distinct advantage in low-cost renewable energy generation makes green hydrogen the most competitive form of hydrogen in the long run. This enables India to potentially be one of the most competitive producers of green hydrogen in the world.

• Green hydrogen can achieve cost parity with natural gas-based hydrogen (grey hydrogen) by 2030, if not before. Beyond cost, since hydrogen is only as clean as its source of generation, green hydrogen will be necessary to achieve a truly low carbon economy. 

• It will also enable the emergence of a domestically produced energy carrier that can reduce the dependence on imports for key commodities like natural gas and petroleum.

• Hydrogen demand in India could grow more than four-fold by 2050, representing almost 10 per cent of global hydrogen demand. Initial demand growth is expected from mature markets like refinery, ammonia, and methanol, which are already using hydrogen as industrial feedstock and in chemical processes. 

• In the longer term, steel and heavy-duty trucking are likely to drive the majority of demand growth, accounting for almost 52 per cent of total demand by 2050.

• From a price parity basis alone, green hydrogen’s share of this demand could grow from 16 per cent in 2030 to almost 94 per cent by 2050. This translates to an implied cumulative electrolyser capacity demand of 20 GW by 2030 and 226 GW by 2050, promising a sizeable opportunity for indigenous manufacturing of a global emerging energy technology. 

• The cumulative value of the green hydrogen market in India could be $8 billion by 2030 and $340 billion by 2050. Electrolyser market size could be approximately $5 billion by 2030 and $31 billion by 2050. 

• Adoption of green hydrogen will also result in 3.6 giga tonnes of cumulative CO2 emissions reductions between 2020 and 2050.

• Energy import savings from green hydrogen can range from $246 billion to $358 billion within the same period.

• Beyond the financial savings, the energy security that green hydrogen provides will translate to less volatile price inputs for India’s industries as well as strengthen India’s foreign exchange situation in the long run. 

National Action Plan on Green Hydrogen

Ten actionable recommendations that can lead to a National Action Plan on Green Hydrogen to guide and enhance the National Hydrogen Mission.

1) A detailed roadmap focused on all aspects of green hydrogen

The recent announcement of the National Hydrogen Mission needs to be complemented with further policy direction in the form of a national roadmap/strategy. A long-term roadmap focused on green hydrogen will improve investors’ confidence and will converge the entire value chain and the various government agencies towards a singular vision.

2) Intervene on the supply-side to reduce the cost of green hydrogen to $1/kg

Similar to other technology deployment and scaling efforts, the government can encourage the cost economics of early producers. The cost of hydrogen from electrolysis today is relatively high, between around $7/kg and $4.10/kg depending on various technology choices and the associated soft costs. The current Green Hydrogen Policy already focuses on measures like waiver of inter-state transmission (ISTS) charges and granting of open access for green hydrogen and green ammonia production. Other measures could include reduction in taxes and surcharges, preferential dollar-based electricity tariff, revenue recycling of any carbon tax, low-emission power purchase agreements (PPAs), and avenues for firming electricity supply including discounted grid electricity to complement variable renewable energy (VRE) generation.

3) Establish mandates and provide incentives to achieve a green hydrogen production capacity of 160 GW

The government can propose clear mandates around hydrogen blending in existing (refinery and ammonia) and potentially future consumption sectors (steel and heavy-duty vehicles). This will provide demand certainty for early green hydrogen projects and encourage market development. For new applications, where the viability of using green hydrogen is still nascent, the government can provide incentives such as a production linked incentive (PLI) scheme for green steel targeting export markets.

4) Build manufacturing capacity totalling 25 GW by 2030 coupled with supportive manufacturing and R&D investments

The roadmap should also identify a timeline and scale of manufacturing support for electrolysers. India may aim for 25 GW of electrolysers by 2030, while also investing $1 billion in R&D to catalyse the development of commercial green hydrogen technologies across the value chain. Radically improving the speed of regulatory clearances coupled with preferential treatment in public tenders will help catalyse local manufacturing. Grand challenges, public-private venture capital and financing test bench infrastructure could be part of the R&D investments.

5) Initiate green hydrogen standards and a labelling programme

Immediate action should be undertaken to further develop standards and a green hydrogen labelling programme.

6) Promotion of exports of green hydrogen and green hydrogen-embedded products through a global hydrogen alliance

The government must explore integrating hydrogen into existing energy and industrial partnerships globally. This should include developing collective frameworks and creating labelling and standards around green hydrogen and hydrogen-embedded products like green steel and green ammonia. The government should explore specific near-term incentives around green ammonia and green steel production.

7) Facilitate investment through demand aggregation and dollar-based bidding for green hydrogen

The government can provide financial certainty to early adopters through investment facilitation measures like demand aggregation, ensuring availability of long-tenor and low interest finance and initiation of a functioning carbon market.

8) Encourage state-level action and policy making related to green hydrogen

States should be encouraged to launch their own green hydrogen-based policies in order to complement efforts at the national-level. This way the champion green hydrogen states could also be identified.

9) Encourage capacity building and skill development

Initiate appropriate and rapid skills development across the ecosystem including government, industry, and academia addressing technologies, business models, policies, and geopolitics.

10) Construct an inter-ministerial governance structure

The government should create an interdisciplinary Project Management Unit (PMU) with globally trained experts. The PMU should dedicate fulltime resources to effectively implement the mission. At the policy level, an inter-ministerial mechanism should be instituted to coordinate across the efforts of the various ministries and departments required to achieve the target of the mission.

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