Industry upbeat on green hydrogen, but says cost a key factor | The Financial Express

Industry upbeat on green hydrogen, but says cost a key factor

Experts believe that if the policy calatyses investments, then in the next 5 years, all grey hydrogen produced can be converted to green hydrogen.

green hydrogen, hydroge
India's hydrogen demand is expected to see a five-fold jump to 28 MT by 2050.

By Rajat Mishra

Industry players have called the National Green Hydrogen Mission approved by the Cabinet on Wednesday as the first step towards making a comprehensive ecosystem for the new-age fuel in India. But they remained wary of costs which could still be high in comparison to some other countries that are equally upbeat on the sunrise sector.

This is even as Reliance Industries and and the Adani group have already committed to selling green hydrogen at a competitive $1/kg by 2030.

Varun Karad, Chief Business Officer at GPS Renewables said, though the the first 2-3 years will see slow progress for India’s green hydrogen mission, once it picks up pace, it will be transformational. “Hydrogen, so far has been a neglected molecule, even though it was most used one in refineries and the fertiliser industry,” he noted.

Experts believe that if the policy calatyses investments, then in the next 5 years, all grey hydrogen produced can be converted to green hydrogen. However, the cost differential of green hydrogen in comparison to other renewable and non-renewable energy source would pose a challenge, they added.

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“Cost is the most significant barrier to turning grey hydrogen into green hydrogen and expanding its industrial and commercial use. Currently, green energy is prohibitively expensive compared to grey or blue hydrogen production,” Shailesh Tyagi, partner at Climate Change and Sustainability Services, EY India told FE.

Power minister R.K. Singh said on Thursday huge subsidies announced by some developed countries for their green hydrogen sectors could distort trade and termed it as the only hurdle for the country on its way to become the lowest-cost producer of the benign energy source. The minister said the country would not impose any green hydrogen consumption obligations on the industry.

“Today, because of the huge rise in petroleum prices and natural gas prices, grey hydrogen is more expensive than green hydrogen, so now it makes common sense to replace grey hydrogen with green hydrogen,” he was quoted by Reuters as saying.

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India’s hydrogen demand is expected to see a five-fold jump to 28 MT by 2050. As per International Energy Agency, global hydrogen demand reached 94 million tonnes (MT) in 2021, recovering to above pre-pandemic levels.

Karad noted that consumption of hydrogen is now mostly in the government sector. “Since these are government companies, they can’t take decisions quickly.. It is a long term policy, the pick-up will be slow, but in the medium term, private sector hydrogen consumption will gather great pace, he added.

Reportedly, much of the increase in hydrogen demand in 2021 was met by hydrogen produced from unabated fossil fuels. However, the pipeline of projects producing low-emission hydrogen is growing at an impressive speed. According to an expert, a significant portion of projects are currently in advanced planning stages, but just a few (4%) are under construction or have reached the final investment decision.

“Among the key reasons are uncertainties about demand, lack of regulatory frameworks and of available infrastructure to deliver hydrogen to end users,” an expert said, requesting anonymity.

The technology used in the production and use of hydrogen like Carbon Capture and Storage (CCS) and hydrogen fuel cell technology is at a nascent stage in India. These technologies are expensive, which in turn increases the cost of hydrogen production and will require a lot of investment. In addition to the higher manufacturing cost, there is higher maintenance cost as well. According to Tyagi, three factors that will contribute significantly to reduce the production cost includes evolution of the electrolyser cost, decline in renewables cost and increase in CO2 costs.

Echoing the same sentiment, Deepesh Nanda, CEO, GE Gas Power South Asia said, The challenges associated with the cost of production, storage and transport of Green Hydrogen in addition to the complexity in handling it have muted the commercial application of the carbon-free fuel.

According to Nanda, the products manufactured using Green Hydrogen, like electricity, steel having zero carbon value will come at a premium due to high cost of the production process. ” The industry needs support from the government to create a sustainable market ecosystem for low-to-zero carbon products to compete against carbon-intensive low cost products available today,” Nanda said.

Despite the higher cost, demand is growing for green hydrogen. Based on an EY study, the market size for green hydrogen production by 2030 should reach almost 140 GW of installed capacity.

Adani group has already committed an investments of $50 billion by 2030 in the Green H2 ecosystem, whereas Reliance is targeting to invest over $10 billion in clean energy, which includes solar and green hydrogen.

In fact state run companies like IOCL has also committed to meet 10% of its hydrogen demand via green hydrogen. Indian Oil and Larsen & Toubro and ReNew Power announced the formation of a JV to develop the nascent green hydrogen sector in India. Also, NTPC with GGL has started India’s first hydrogen blending project.

The benefits of green hydrogen are varied, ranging from decarbonisation of industrial, mobility and energy sectors and reduction in dependence on imported fossil fuels and feedstock to development of indigenous manufacturing capabilities.

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First published on: 06-01-2023 at 01:45 IST