Hydrogen as an energy source is not new to India. In fact, India is one of the largest hydrogen consumers in the world with a demand share of almost 8-10%. The demand for hydrogen primarily comes from two sectors- Refining and ammonia production with both sectors consuming almost similar quantities of hydrogen. Methanol production and green steel production form miniscule share of hydrogen demand. But it's important to know that India’s current hydrogen demand is fulfilled by gray hydrogen, which is a carbon intensive hydrogen manufacturing process. The Indian Government has announced various policy initiatives under ‘Green Hydrogen Mission’ to shift towards green hydrogen.
India’s Green Hydrogen Opportunity
There are many reasons for intent to shift towards green hydrogen. India relies heavily on energy imports and has a significant impact on its economy. Increasing green hydrogen production could make India self-reliant regarding energy to a certain extent and reduce its import bill. India has also committed to become carbon neutral by 2070, & without a sustainable energy source achieving that target would be difficult. India’s potential to harness cheaper renewable energy and an already established demand base such as refineries, large steel sector and ammonia production makes the green hydrogen ecosystem further viable. The policy aims to expand the green hydrogen user base and extend its applications to heavy duty trucking, city gas distribution (blending hydrogen with natural gas) and most importantly steel sector.
Due to differences in the availability of resources and the consumption of green hydrogen will likely create a global market for green hydrogen as a tradeable commodity. India's advantage lies in its ability to produce green hydrogen at a competitive cost, thanks to its abundant renewable energy resources. This cost advantage is expected to make India a potential exporter of both green hydrogen itself and green hydrogen-embedded products like green steel and green ammonia. Global decarbonisation efforts can be major demand drivers for such products and can help Indian manufacturers to differentiate themselves.
The government is also looking to impose mandates on certain sectors such as refinery and fertilizer. This will provide demand certainty for early green hydrogen projects and encourage early market development. These mandates will extend to all potential sectors such as steel, gas distribution, ammonia and power sector.
Challenges to overcome
Although there are many advantages with respect to green hydrogen, India has to overcome many challenges related to infrastructure, initial investments and green hydrogen pricing. Hydrogen comes with unique technical challenges related to storage and transportation. Hydrogen has low density per unit volume, which leads to larger storage tanks for storage and transportation. Additionally, due to its high flammability and material embrittlement properties, special attention is needed for material selection and design of storage tanks. This drives up its cost compared to competing fuels. Green hydrogen production cost depends on the cost of the electrolyser, considered relatively expensive, and the cost of renewable energy. These costs make green hydrogen expensive compared to gray hydrogen, hindering its adoption. Higher upfront cost is another barrier which limits the number of potential private players participating in the sector. Collaborative approaches involving the government, industry, research institutions, and financial institutions focusing on risk mitigation, project & research financing & demand certainty will help to tackle these challenges.