Over the following ten years, the country’s growing interest in green hydrogen would result in investments totaling nearly 16 trillion rupees across the entire chain. The rising cost of its production, though, might put a damper on things.
Industry experts believe that in order to increase the cost-competitiveness of green hydrogen in the nation compared to other energy sources, a mix of technology improvements and legislative backing is required.
Green hydrogen, which is created by using renewable energy sources like the sun or wind to split water into hydrogen and oxygen, is not currently produced on a large scale in India. Grey hydrogen, on the other hand, which is used in industry, is created from fossil fuels, primarily natural gas.
The main technological challenge is manufacturing hydrogen at a price that is comparable with other energy sources, despite the electrolyzer technology’s extensive testing. Green hydrogen is thought to cost $3 to $6 per kilogram levelized.
According to Naveen Vaidyanathan, director at Crisil Ratings, “the ongoing Russia-Ukraine conflict had spiked the prices of natural gas to a record high level of $30 per metric million British thermal units (mmBtu) in the calendar year 2022, putting grey and green hydrogen almost on a par in terms of cost.
The cost of grey hydrogen, on the other hand, “might average $2-2.5 per kg, much below $3-6 per kg for green hydrogen,” he continued, “on factoring the historical long-term average price of natural gas of $10-13 per mmBtu.
The Union Cabinet approved a ‘19,744-crore ($2.3-billion) incentive scheme in January of this year with the goal of producing 5 million metric tons (MMT) annually by 2030, making India the world’s top producer of the element.
This announcement will give the government’s initial goal of making India a hub for exporting hydrogen more momentum. The development of green hydrogen and the expansion of domestic electrolyzer producers will be the main foci of the investment commitment. Due to a number of factors, including low economies of scale and limited local manufacturing capabilities, the cost of producing electrolyzers in India is currently high, according to Hussain Shariyarr, senior vice president and business head at Godrej Process Equipment, a producer of process equipment for core industries.
“The Indian government has started a number of initiatives to encourage domestic production of electrolyzers and lower their costs. The development of domestic electrolyzer manufacturers has already increased, and numerous businesses are announcing technical tie-ups and partnerships, Shariyarr continued.
Several companies, including Larsen & Toubro (L&T), Reliance Industries, Adani Group, Oil and Natural Gas Corporation, Bharat Petroleum, and Indian Oil, have already made their ambitions for green hydrogen public.
While the cost of green hydrogen continues to be the main barrier to its widespread use, other issues with adoption include the need to upgrade the infrastructure to handle hydrogen and the quick development of electrolyzers, which raises the real possibility of economic redundancy. According to Munish Aggarwal, managing director of investment banking at Equirus, India has limited manufacturing capabilities for the electrolyzer stacks, which account for 40–45% of the total capex for a green hydrogen plant.
The existing capacity for producing green hydrogen or green ammonia in India is practically nonexistent, according to Vish Iyer, global chief commercial officer at Jackson Green. But globally, the entire percentage of green hydrogen production within all hydrogen produced is less than $1. While manufacturers are testing business cases and usability with pilot plants, the majority of reported sizable green hydrogen projects are either in the feasibility or final investment decision stages and have not yet begun to create molecules.
Price is undoubtedly one of the many minor obstacles, but Iyer continued, “That is expected to change with the national green hydrogen mission launching this year driven by procurement mandates and a general transition of the fertilizer, chemicals, process, and refinery space towards green products driven by markets.
“Looking at the numerous avenues that can bring down the cost of green hydrogen, L&T feels that it’s only a matter of time for its full potential to materialize,” said Subramanian Sarma, full-time director and senior executive vice-president (energy) at L&T.
