Energy transition is a spectrum which presents diverse opportunities for various fuels and technologies across several use cases. As there is no one-size-fits-all solution, exploring different emerging sources of green energy is likely to play a crucial role in making India’s energy transition a smoother process. Green hydrogen, frequently known as the fuel of the future, is often termed as one of the most important emerging green fuels globally. The global demand for hydrogen is expected to increase by four to seven times to 500-800 mt by 2050. Domestic demand is expected to increase by four times, from 6 mt at present to 25-28 mt by 2050. The share of hydrogen in the transition to a net-zero-carbon economy is expected to increase from near 0 per cent at present to 17-18 per cent by 2050.
Application and use cases
Early green hydrogen use cases are set to emerge within industrial clusters, sharing infrastructure for production, distribution and storage. While ammonia-to-hydrogen conversion incurs expenses and energy losses, international trade via pipelines and ship-borne ammonia transport will be vital. Currently, green hydrogen demand is driven by oil refining (33 per cent), ammonia (27 per cent) and methanol (10 per cent). This demand is predicted to diversify into chemicals, iron and steel, cement, power, transportation and heating.
In comparison to lithium-ion batteries, compressed hydrogen, liquid hydrogen and liquid ammonia boast significantly higher energy densities per volume. Hydrogen’s energy density per kg exceeds that of petrol and natural gas. Its greater energy density per unit of mass makes it attractive for energy-intensive applications such as aircraft, shipping and long-distance transportation. Ammonia, with its higher volume density, is better suited for long distance travel.
Despite energy losses in power-hydrogen-power conversion, green hydrogen remains crucial for large-scale, long-duration energy storage, balancing renewable energy sources on the grid. While batteries are cost effective for energy-intensive sites and shorter storage times, clean hydrogen may trump diesel power generators for longer back-ups. However, green hydrogen’s lower energy efficiency limits its application in transportation, particularly on roads.
Green hydrogen is projected to find long-term use in crude oil refineries (hydrocracking and desulphurisation) and industries needing ammonia for fertilisers, methanol for petrochemicals, plastics, paints and explosives. It could also replace coking coal as a steel production reducing agent, aligning with steel companies’ net zero goals by 2050. Aircraft use is limited to shorter journeys.
Recent policy interventions
The green hydrogen space in India has finally received a concrete plan for electrolyser manufacturing and green hydrogen production incentives. The Indian government had previously approved the National Green Hydrogen Mission with a budget of Rs 197.44 billion till 2029-30. Of this, Rs 174.9 billion has been earmarked for the Strategic Interventions for Green Hydrogen Transition (SIGHT) programme. On June 28, 2023, the Ministry of New and Renewable Energy (MNRE) notified the scheme guidelines for the implementation of both components. Two financial incentive mechanisms have been proposed under the programme, for the domestic manufacturing of electrolysers (Component I) and for the production of green hydrogen (Component II).
Component I has a budget of Rs 44.4 billion. Under this, incentives will be provided in terms of Rs per kW. In the first year, the base incentive will be Rs 4,440 per kW, which will be annually reduced till it reaches Rs 1,480 per kW in the fifth year. These incentives will be provided for five years from the date of commencement of manufacturing. This scheme aims to incentivise the manufacturing of efficient and high quality electrolysers in India. The incentive will be calculated on the basis of specific energy consumption. Another key guideline is that in order to be eligible for incentives, bidders will have to show a minimum local value addition for each year for different technologies. Furthermore, there will be a separate bucket for indigenously developed stack technology. The scheme will be implemented by the Solar Energy Corporation of India (SECI), through a transparent selection process.
Component II, Mode 1
Component II has two modes. Mode 1 covers the competitive selection process based on the least incentive demanded over three years and Mode 2 covers competitive bids post aggregation of demand for green hydrogen and derivatives. The total budget outlay for both modes is Rs 130.5 billion and they will be implemented from 2025-26 to 2029-30. So far, the government has only released guidelines for Mode 1. A direct incentive in terms of Rs per kg of green hydrogen production will be paid under the scheme for a period of three years from the date of the beginning of green hydrogen production. The capped incentives for the first, second and third years are Rs 50 per kg, Rs 40 per kg and Rs 30 per kg respectively. The bidder will be selected based on the simple average of incentives demanded over three years.
In July 2023, SECI issued a tender for the “Selection of Green Hydrogen Producers for Setting up Production Facilities for Green Hydrogen in India under the SIGHT Scheme (Mode-1-Tranche-I)”. The total capacity to be allocated under this tender is 450,000 million tonnes per annum (mtpa) of green hydrogen. This capacity is divided into two buckets – Bucket 1 with 410,000 mtpa under a technology-agnostic pathway and Bucket 2 with 40,000 mtpa under a biomass-based pathway. Bidders may quote capacities in multiples of 500 mtpa only. The minimum and maximum bidding capacities under Bucket 1 are 10,000 mtpa and 90,000 mtpa respectively. In the case of Bucket 2, the minimum and maximum bid capacity are 500 mtpa and 4,000 mtpa, respectively.
To further bring clarity regarding green hydrogen, in August 2023, the MNRE introduced the green hydrogen standard for India, establishing emission thresholds for hydrogen production to qualify as “green”. The well-to-gate emission evaluation encompasses processes such as water treatment, electrolysis, gas purification, drying and hydrogen compression. This definition covers both electrolysis-based and biomass-based hydrogen production methods. Following consultations with various stakeholders, the ministry has determined that green hydrogen is characterised by a well-to-gate emission not exceeding 2 kg of carbon dioxide equivalent per kg of hydrogen. The notification also outlines that the MNRE will establish a comprehensive methodology for measuring, reporting, monitoring, on-site verification and certification of green hydrogen and its derivatives. Furthermore, the Bureau of Energy Efficiency under the Ministry of Power will act as the designated authority for accrediting agencies responsible for monitoring, verifying and certifying green hydrogen production projects.
Major investments by Indian companies
In recent months, several Indian companies have come forward with plans to invest in the green hydrogen economy.
- Reliance Industries plans to invest $10 billion over the next three years to develop low-cost electrolysers with the aim of reducing the cost of green hydrogen production to around $1 per kg.
- Adani New Industries Limited plans to invest over $50 billion over the next 10 years in green hydrogen and its associated ecosystem.
- In May 2023, the ACME Group and Indraprastha Gas Limited, a city gas distribution company, signed an MoU to jointly explore potential business opportunities of green hydrogen.
- Ocior Energy India Private Limited will establish a 1 mtpa green ammonia plant in Andhra Pradesh at an investment of Rs 400 billion. The company will invest Rs 400 billion to establish a 1 mtpa facility for green hydrogen and ammonia in Gujarat’s Kutch district.
- Indian Oil Corporation Limited has set up green hydrogen plants at its Mathura and Panipat refineries. The Mathura plant is the largest in India, with a capacity of 40 MWh, while the Panipat plant has a capacity of 15 MWh.
- GAIL is also setting up India’s largest polymer electrolyte membrane (PEM) electrolyser plant at the Vijaipur complex in Guna district of Madhya Pradesh, with a capacity of 10 MWh. The plant aims to produce 4.3 mt of green hydrogen per day.
- BPCL plans to install a 5 MW electrolyser system to set up a green hydrogen production facility in a phased manner at one of its city gas distribution projects. It also plans to set up a 20 MW electrolyser at its Bina refinery in Madhya Pradesh.
- H2e Power, a Pune-based cleantech start-up, is setting up an electrolyser plant in Pune. The h2e steam electrolysis system, based on solid oxide fuel cell technology, aims to lower on-site hydrogen production costs and maximise efficiency.
- Ohmium International, a green hydrogen company that designs, manufactures and deploys PEM electrolysers, is collaborating with Shell India on green hydrogen applications, markets and project opportunities within India and globally.
Given the cheap cost of renewables, India has the potential to become one of the world’s most competitive producers of green hydrogen and green hydrogen-embedded products such as green steel and green ammonia. Many countries are expected to rely on imports due to land and renewable resource limits that would make it difficult to create green hydrogen domestically. Japan, South Korea and Europe have already expressed an interest in importing green hydrogen. By 2030, the global demand for green hydrogen and its derivatives, such as green ammonia, is estimated to exceed 100 mmt. India has the capacity to export approximately 10 mmt of green hydrogen/green ammonia per year, capturing about 10 per cent of the global market. Exporting hydrogen involves addressing technological and commercial hurdles, such as the lack of pipes. As the infrastructure for ammonia production for the fertiliser business already exists, India might become a major ammonia exporter. The low cost of hydrogen would also enable India to produce green steel at a reduced cost. However, major capital and energy cost reductions will be necessary. Mechanisms such as carbon pricing can also help speed market development.
Furthermore, investment in research, development and commercialisation of low-cost electrolyser technologies requiring a few rare earth metals will be required in the future. It is also vital to establish a reliable metal and mineral supply chain and define electrolyser recycling solutions. On the policy front, the government may offer a target-backed production-linked incentive plan as well as non-fiscal measures such as improved regulatory clearance processes and preferential treatment in public bids. Finally, increasing local demand for green hydrogen through obligations and incentives will be critical to the segment’s growth.