The Economics of Green Hydrogen

Green Hydrogen

A BRIEF ON THE PRODUCTION OF GREEN HYDROGEN

  • Hydrogen needs to be produced or separated from other substances such as water, fossil fuels, biomass. Based on the method of extraction of Hydrogen, the produced gas can be classified into ‘grey’, ‘blue’, or ‘green’ hydrogen
  • Currently the user industries as well as refineries have been producing primarily grey hydrogen from natural gas.
      – However, this production involves emission of Carbon Dioxide also,thereby polluting also.
  • Among these three, analysts around the world aggrandized the production and expansion of Green Hydrogen, which shall be a carbon free hydrogen.
    • Electrolysis-This technique is primarily used to produce green hydrogen, which involves ‘breaking’ the water molecules through an electric current in an electrolyzer in order to extract the di-hydrogen from H2O. (For more details, please refer the info-graphic below)
      – Apart from Electrolysis, another technique is being looked into i.e., the Pyro-gasification, which involves heating organic matter or other carbon-containing waste at high temperatures (900-1200oC) in the vicinity of small amount of oxygen.

Amidst all the clamor and buzz around e-vehicles, Hydrogen has turned up as a paramount alternative towards building clean energy solution . Green Hydrogen allows storing of energy from renewables with an added advantage of long-distance transportation. Besides a lot of excitement in the private sector, the Government of India also has yearned on the impact of Green Hydrogen for India’s future energy needs. Some major policy and government actions taken in the recent past can be summed up in the way

  • The Hon’ble Prime Minister announced a ‘National Hydrogen Mission’ on 15th August 2021, towards achieving India’s endeavor to become a Global hub for Gredn Hydrogen Production and Export.
  • The Hon’ble Finance Minister highlighted in the Budget 2022-23 that further action on Green Hydrogen will be taken up.
  • The Union Ministry of Power came up with Green Hydrogen Policy on February 17, 2022. Some of the key features of the policy to promote Green Hydrogen include-
      – Waiver of inter-state transmission charges shall be granted for a period of 25 years.
      – Open Access for sourcing of Renewable Energy within 15 days of receipt of application complete in all respects.
      – Land in Renewable Energy Parks and Manufacturing zones can be allotted for the manufacture of Green Hydrogen.
      – Renewable Energy consumed for the production of Green Hydrogen / Green Ammonia shall count towards RPO compliance of the consuming entity.
      – Distribution licensees may also procure and supply Renewable Energy to the manufacturers of Green Hydrogen / Green Ammonia in their States.
      – Ministry of New and Renewable Energy will establish a single portal for all statutory clearances and permissions required for manufacture, transportation, storage and distribution of Green Hydrogen / Green Ammonia, within 30 days preferably.
      – In order to achieve competitive prices, MNRE may aggregate demand from different sectors and have consolidated bids conducted for procurement of Green Hydrogen/Green Ammonia through any of the designated implementing agencies.

 

India needs to form Green Hydrogen
Corridors: Niti Aayog

  • Niti Aayog highlighted the need to facilitate investment through demand aggregation and dollar-based bidding for green hydrogen
  • As per the body, there should be three hydrogen corridors across the country and Governments should incentivize entrepreneurs through incubators to work in this domain.

 

 

Adani and Total Energies to create the
world’s largest green hydrogen ecosystem

  • It aims to be the largest fully integrated green hydrogen player in the world, with presence across the entire value chain, from the manufacturing of renewables and green hydrogen equipment (solar panels, wind turbines, electrolysers, etc.), to large scale generation of green hydrogen, to downstream facilities producing green hydrogen derivatives

 

 

Amara Raja bags India’s first
green hydrogen fueling station project

  • National Thermal Power Corporation (NTPC) has awarded the project of setting up India’s first green hydrogen fueling station in Leh, Ladakh
  • Green hydrogen will be produced by splitting water into hydrogen and oxygen, using electrolysis process powered by electricity generated by renewable energy sources.

 

OIL sign pact with homi Hydrogen for
green hydrogen

  • homi Hydrogen is a joint venture company established by electrolyser experts from Germany, Switzerland, Italy and Norway to manufacture all the four types of electrolysers under one roof.
  • OIL and homi Hydrogen plan to work together to establish a framework that can enable the parties to study, structure and agree on a possible long-term partnership, which could include manufacturing and packaging of electrolysers in India and become an integral part of the Green Hydrogen value chain.

 

India has scope to produce hydrogen
from domestic coal: Expert panel

  • A Government of India constituted expert panel has put its weight behind India’s potential to general hydrogen from domestic coal
  • It further goes on to propound that infrastructure such as semi-commercial gasifications should be established.
  • Further, the technologies for gasification should be taken up based on their commercial upscaling, option of biomass co-gasification and integration of Carbon Capture Utilization and Storage possibility.
  • Thus, the panel has suggested that both economics and sustainability should be understood to develop viable
    ecosystem around Hydrogen production

 

MoU for joint development of green
hydrogen solutions in India

  • PTC India and Greenstat Hydrogen India (a subsidiary of Norwegian energy company Greenstat ASA) have entered into an MoU with the purpose of “joint development of green hydrogen solutions for Indian power market beneficiaries”.
  • The areas of development shall include feasibility studies and/or project management services for green hydrogen solutions to potential beneficiaries in India. Both PTC and GHIPL will also work towards identifying opportunities for development of a Centre of Excellence for facilitation of green hydrogen
    in India

FINANCIAL MODEL OF A GREEN HYDROGEN PROJECT

As per the latest estimates, India utilizes over $160 billion of foreign exchange every year for energy imports, which is expected to double in coming two decades. As per the Niti Aayog’s Report- ‘Harnessing Green Hydrogen- Opportunities for Deep Decarbonization in India’, India can achieve the following milestones if right steps could be taken and an ecosystem around Green Hydrogen is harnessed –

  • To develop the world’s largest electrolysis (green hydrogen generation) capacity of over 60 GW/5 million tonnes by 2030 for domestic consumption.
  • Able to achieve world’s largest production of green steel at 15-20 million tonnes by 2030.
  • Build the world’s largest electrolyser annual manufacturing capacity of 25 GW by 2028.
  • Become world’s largest producer of green ammonia for exports by 2030 helping India’s allies to decarbonise.

In order to achieve the above targets, India would need largescale investments in the field of Green Hydrogen, which can unlock huge potential available in terms of power generation, transportation, fertilizer, construction among various other fields. Apart from domestic consumption, Indian companies can also tap the widescale markets abroad.

The main cost determinants for the production include the cost of electrolyser, electricity, operation, transmission & distribution, and lastly duties & taxes. Currently, the levelized cost of hydrogen (LCOH) stands between $4.10/kg-$7/kg, however this can be optimized to less than $3.5/kg in very short term, $1.60/kg by 2030 and $0.70/kg by 2050.

cost economics of green hydrogen production in India

India already possesses a distinct advantage in low-cost renewable electricity. The recently unveiled policy has already waived off some duties and charges. Considering a scenario where the Government is to extend other incentives like GST waiver (18% to 5%), Full T&D waiver etc.
and prudent capital expenditure is taken on the electrolyser capacity, the cost of electrolysers can fall from 500 $/kW (2020) to 125 $/kW (2030).

By 2030, if not before, India’s green hydrogen production can be made vis-a-vis fossil-fuel based hydrogen ($3.2/kg) and green hydrogen’s production in other countries.

Cost breakdown of electrolyser (Adapted from IRENA44)

 

The Niti Aayog estimates that apart from the disruption in Green Hydrogen, the electrolyser market itself can be huge in India. It states that India’s  own internal market for electrolysers could be around $31 billion by 2050 representing a demand of 226 GW as compared to 20GW in 2030.


This opens a gigantic domestic manufacturing opportunity in India in the components for electrolysers, which include stack manufacturing, small parts (sealing, frames), stack assembly and end plates among others. In the backdrop of the fact, that power supply, water circulation, and hydrogen processing units account for 50% of the electrolyser costs, which can be further reduced, India can emerge as key player in the global electrolyser market by emulating the progress it is making in the electronics space.

Hydrogen demand outlook and potential green hydrogen share at cost parity

Apart from domestic market, enormous export opportunities can be tapped by India. Japan and Australia are already working on a Hydrogen Energy Supply Chain (HESC) Project, one of the first initiativer to ship hydrogen over the ocean. As per TERI, even by 2030, Indian green hydrogen could be competitive at the margin for select geographies.

Unlocking large-scale production in Green Hydrogen needs upfront investments, given the less dense properties of hydrogen which either mandate its liquification or compression, in order to deliver it as a compressed gas. This preliminary analysis may not adequately capture the specific grounds on individual cost points, but the increasing adoption of Hydrogen around the world, and India’s impending efforts to reduce the dependence on fossil fuels, convincingly paints the potential India can harness in the field of Green Hydrogen

Almost all the major economies around the globe have already placed huge bets by investing heavily in hydrogen-based technologies. India should play to its strengths in terms of growing renewable energy capacity and invest in the right areas to accelerate the economic viability of Green Hydrogen. The Government’s intent has been clear right from the top that it is willing to provide necessary policy support. Thus, investing in Green Hydrogen apart from decoding the clean fuel challenge, can also exacerbate a new sector with abundant manufacturing opportunities targeting both domestic and international markets.