India needs to reduce the cost of producing green hydrogen to less than USD 2/kg to achieve the National Green Hydrogen Mission’s target for the production of 5 MMTPA of green hydrogen by 2030 — equivalent to roughly half of India’s projected overall hydrogen demand of 11 MMTPA at that time, according to a report released by World Economic Forum, today.
The report, titled “Green Hydrogen: Enabling Measures Roadmap for Adoption in India,” by the World Economic Forum, written in collaboration with Bain & Co., suggests that India should focus on reducing costs by addressing renewable electricity expenses, investing in electrolyzer manufacturing, improving infrastructure, and supporting innovative research and development.
The report outlines five key areas where public-private interventions can accelerate the adoption of green hydrogen in the country.
Current Scenario In India
India currently holds the position of being the world’s third-largest economy in terms of energy requirements, and the nation’s demand for energy is anticipated to increase by 35% by 2030. Recognizing the significance of green hydrogen in meeting energy security needs and reducing emissions in challenging sectors en route to achieving net-zero goals, the Indian government initiated the National Green Hydrogen Mission in early 2022. This mission aims to stimulate green hydrogen production and consumption through approximately $2.3 billion in incentive funding, allocated between 2022 and 2030.
Presently, India produces 6.5 million metric tonnes per annum (MMTPA) of hydrogen, primarily for use in crude oil refineries and fertilizer production. The majority of the country’s current hydrogen supply is grey hydrogen, produced through a process involving fossil fuels that results in CO2 emissions. Key obstacles to the expanded adoption of green hydrogen in India include production and delivery costs and the readiness of Indian entities to incorporate green hydrogen into traditional industrial processes.
This report suggests five goals that can accelerate the adoption of green hydrogen in India. These goals aim to enhance the green hydrogen demand-and-supply ecosystem by aiming to achieve a cost of $2/kg of hydrogen, to reach cost parity with grey hydrogen. It also suggests ways to encourage end industries to embrace green hydrogen by creating incentives for its utilization.
The Five Goals to Accelerate Green Hydrogen Production in India
1: Reduce the cost of green hydrogen production to below $2/kg
Currently, the production cost of green hydrogen in India is around $4–5/kg, approximately twice the cost of producing grey hydrogen. The primary cost drivers for green hydrogen (50–70%) are associated with renewable electricity, while the remaining 30–50% is attributed to electrolyzer expenses. Achieving a target cost of $2/kg is essential for a green energy ecosystem to develop in India.
2: Minimize or eliminate expenses related to the conversion, storage, and transportation of green hydrogen
Even with reduced production costs, the infrastructure requirements, including facility expenses for conversion, reconversion, storage and transport, can significantly impact the overall cost of green hydrogen and its derivatives.
3: Support industries most likely to adopt green hydrogen
Certain industries are better positioned to embrace green hydrogen consumption than others. Incentives, subsidies, and other support mechanisms should be directed toward these potential adopters to boost India’s domestic demand for green hydrogen. Stakeholders can encourage the use of domestic green energy among grey hydrogen users through increased direct subsidies.
4: Capitalise India’s export potential for green hydrogen derivatives
Global variance in landed green hydrogen costs provides an emerging opportunity for international trade in green hydrogen derivatives in a non-regulated trade market. Leveraging its low-cost renewable energy, skilled workforce, and ample land for renewable energy expansion, India has the potential to become a hub for exporting green hydrogen derivatives.
5: Disincentivize carbon-intensive alternatives
While incentivizing the adoption of green hydrogen is crucial, supporting the ecosystem also involves discouraging energy sources with higher carbon intensity. To fund a successful green transition in India, stakeholders can redirect subsidies from high-emission energy sources, ensuring citizens’ basic energy needs are met. The Government can also consider implementing a comprehensive carbon tax regime, to use assessed funds to support green energy transition.
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