Hydrogen currently accounts for only 2.5% of total energy consumption, with 99% of this being “grey” hydrogen produced using fossil fuels. Green hydrogen, produced through water electrolysis powered by renewable energy sources, is the subject of growing global interest.
India has recently announced its National Green Hydrogen Mission, aiming to create sufficient supply capacity through incentives for electrolyzer manufacturing and green hydrogen production. With a financial outlay of INR 17,490 crores up to 2030, the mission’s primary goal is to lower green hydrogen production costs to achieve parity with grey hydrogen. This strategic focus is crucial given the significant cost disparity: green hydrogen costs between $4-6/kg compared to approximately $2/kg for grey hydrogen.
While supply-side incentives are a strong start, a clear demand pipeline is essential for directing large-scale investments and creating economies of scale needed to reduce green hydrogen costs. Domestic demand is pivotal, with India currently consuming 6.7 million tons of hydrogen, predominantly in the fertilizer (ammonia) and refinery sectors. However, 90% of this hydrogen is produced using fossil fuels, resulting in a limited merchant market for green hydrogen. Given the cost disparity, large-scale demand generation for green hydrogen within India remains unlikely in the near term, despite some experimental adoption.
The export market, particularly in East Asia, could drive the expansion of local production and reduce green hydrogen costs. Japan and South Korea present significant export opportunities due to their constraints in expanding renewable energy, which could drive up domestic green hydrogen production costs. Both countries are likely to depend on imports to meet their growing hydrogen demand, particularly in heavy industries and transportation.
Japan has demonstrated strong support for green hydrogen through initiatives like the Hydrogen Society Promotion Act, which allocates 3 trillion yen ($1.9 billion) in subsidies over 15 years. Similarly, Japan and South Korea have established a joint supply network for hydrogen and ammonia, supported by state-backed financial institutions. This collaborative approach underscores the potential for India to position itself as a competitive supplier of green hydrogen.
Given the high costs associated with storing and transporting hydrogen, East Asian markets are more viable destinations for Indian green hydrogen exports than distant markets in Europe and North America. India’s exclusive focus on green hydrogen sets it apart, as many countries continue to rely on various forms of clean hydrogen involving carbon capture technologies. This focus on renewables-based hydrogen could give India a competitive edge as global pressure mounts on importing countries to prioritize renewable hydrogen.
Japan and South Korea’s interest in the Indian market is already evident. For instance, Japan’s IHI Corporation has an agreement with India’s ACME for green ammonia supply from Odisha to Japan. Similarly, Singapore’s Sembcorp Industries Ltd is partnering with Japanese firms to explore green hydrogen exports to Japan. In March 2024, a delegation from India, including representatives from the Ministry of New and Renewable Energy (MNRE) and major Indian companies, visited South Korea to discuss hydrogen-related bilateral ties.
To capitalize on these opportunities, India should prioritize Japan and South Korea in its hydrogen strategy. The Central government should implement clear standards and regulations for green hydrogen trade that align with international standards. Establishing green hydrogen hubs, particularly on the East Coast, will reduce transport costs to East Asia. The announcement of a green hydrogen hub in Tamil Nadu is a positive step.
Additionally, setting up an international green hydrogen platform could bring together government and private sector stakeholders, promoting green hydrogen opportunities in India and streamlining foreign investment processes.
