By Categories: Economy

Energy is a master resource which has the ability to catapult or cripple a growing economy. The rising threat of climate change has transitioned from climate-science conferences to billions being spent on disaster relief expenses. Global markets are increasingly demanding carbon-free products. Realizing the impending threat to their economies, several countries have announced net-zero targets. The top two energy consumers and emitters, the US and China, recently released a joint statement on climate change.

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Electricity dominates the public discourse on the energy economy. However, it accounts for only 18% of India’s total energy demand. The rest 82% comprises other energy sources such as coal, oil and gas, and biomass.

Unfortunately, our energy sector is heavily import-dependent (85% for crude oil, 53% for gas and 24% for coal). The volatility in the prices of these fuels has a huge impact on the import bill, to the tune of $160 billion. These numbers will double over the next decade as demand grows.

India will overtake the European Union as the world’s third-largest energy consumer by 2030, according to the International Energy Agency (IEA). In its recent forecast, India will account for the biggest share of energy demand growth over the next two decades.

This creates challenges but also new avenues of growth. India has the potential to completely re-imagine its energy economy in consonance with demand for clean and sustainable products. This can be achieved by leveraging the results of decades of innovation in the clean energy sector. In the process, India can show the way to developed countries that sustainability and rapid growth can go hand-in-hand.

Green hydrogen (H2) is made by splitting water (H20) via renewable power. Over time, green hydrogen, as an energy carrier, can replace some of our energy imports. This is feasible, given India’s record-low renewable power prices ( ₹1.99/$2.7 cents per kWh).

The Global Hydrogen Council has in a recent study classified India as a net exporter of green hydrogen from 2030, thanks to cheap renewable tariffs. Hydrogen is also a chemical feedstock with an existing global market of about 70 million tonnes. India already consumes about 6 Mt of hydrogen (8.5% of the global demand) annually that is made by reforming 18 Mt of import-dependent natural gas.

More than 25 nations have set up roadmaps for green hydrogen, including mandates and financial incentives to accelerate the transition to it. Wind and solar energy can provide the electricity to power homes and electric cars, but green hydrogen could be an ideal power source for energy-intensive industries like refining, steel, cement, heavy mobility and industrial heating. India is the world’s third-largest emitter, with 3.6 gigatonnes of Co2 equivalent across sectors, and green hydrogen will have to play a role in our development transition.

Globally, governments are pushing to transform the existing hydrogen industry from a dirty/grey hydrogen ecosystem to a clean energy-based green hydrogen ecosystem. Some countries with rich gas and petroleum reserves are also pushing for a blue-hydrogen economy, as it opens up a new market for them. On the other hand, India, with limited local hydrocarbon resources and huge renewable potential, can become a major producer of green hydrogen on account of its low solar prices.

Green hydrogen is critical to meet India’s target of 450 gigawatt of renewable energy by 2030. That target is extremely ambitious. Due to surplus generation of renewables in peak-generation hours, with further addition of renewables to its power grid, India will face a ‘duck curve’, as experienced by California.

To utilize cheap solar power, currently at ₹2.0/kWh, we need to find other uses for solar power during its generation hours. Through the scaling up of green hydrogen from renewables, we will require a significant amount of renewable energy capacity addition to help India march towards its 450 GW target. Electricity typically accounts for 70% of the production cost of green hydrogen. Hence, surplus electricity from India’s renewable plants can augment green hydrogen economics. This will also protect the grid.

West Asian countries, Chile and Australia are aiming to become major players in green hydrogen. An energy consortium in Australia has just announced plans to build a project called the Asian Renewable Energy Hub in Pilbara that would use 1,743 large wind turbines and 30 square miles of solar panels to run a 26-gigawatt electrolysis factory that would create green hydrogen to be sent to Singapore. India can learn from global trends and leverage its vibrant clean energy industry to shape its green hydrogen market.

Green hydrogen is a sunrise industry and will enable Indian entrepreneurs to capture new avenues of growth. Locally-available green hydrogen can attract high-value green industries, like green steel and green chemicals, to shift production to India.

Localization of electrolyzer production and development of Green-H2 projects could create a new green technology market worth about $18-20 billion in India and generate domestic jobs. In addition, there is a massive opportunity to create regional hubs to export high-value green products and engineering, procurement and construction services, given the nascent stage this industry is in.

So what should India do to build a global-scale green hydrogen industry?

First, it should announce ambitious targets for green hydrogen and electrolyzer capacity by 2030 on similar lines as renewables.

Second, mandate blending a certain percentage of green hydrogen with grey hydrogen for existing applications like oil refining and fertilizers, depending on the viability gap, and mandate new greenfield capacities of hydrogen applications like oil refining and fertilizers to use only green hydrogen from a future cut-off date (to avoid long term lock-ins).

Third, India should aim to build a vibrant hydrogen products export industry, such as green steel, using a phased manufacturing programme.

Fourth, India should form a regional alliance with South Korea, Japan and Singapore to export green hydrogen from coastal India to help them reach their net-zero ambitions.

Fifth, capital cost contributes around 30% of green hydrogen costs, and dollar-linked contracts for procurement of hydrogen should be explored in relevant demand sectors, as is done for oil and gas.

Last, India should plan to roll out a production-linked incentive scheme for electrolyzer manufacturing to address the huge global supply bottleneck.

Green hydrogen is the future of energy. It has the potential to radically reduce imports and catalyse India’s transition to climate-action leadership.


 

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