Explained | Blue Hydrogen: What makes it red-hot among Indian power generators

Fuel tank of a Hydrogen powered car (Representative image)

In what could be the biggest disruption in India’s hydrogen processing industry, Reliance Industries has decided to repurpose its Rs 30,000-crore petroleum processing plant to produce vast amounts of blue hydrogen. The move is part of the conglomerate’s plans to become the world’s largest blue hydrogen producer.

Amid the global scramble for new sources of clean fuels, the government announced the National Hydrogen Mission in August 2021. Moneycontrol takes a deep dive into why this latest version of hydrogen is generating interest among Indian Inc and policymakers alike, what the environmental impact will be, and how he size of the renewable energy payoff.

What is clean hydrogen?

Hydrogen is the cleanest-known form of fuel. It is zero-carbon, and when burned with oxygen, provides the same function as petrol or diesel at much low levels of pollution. Hydrogen fuel-based internal combustion engines can be used to run all kinds of vehicles. It is expected to be used in lieu of aviation turbine fuel in few years while Tesla has planned to use it in spacecraft propulsion.

Over the past few years, nations have increasingly turned to it due to its potential to displace fossil fuels in heavily polluting sectors that solar and wind cannot effectively target. Interest in the developing technology has also peaked as countries commit to aggressive decarbonisation targets, which invariably include plans to phase out diesel and petrol vehicles, oil-run power plants and even conventional public transport systems.

So far, much of the focus and the bulk of the hydrogen market has been commanded by green hydrogen, which is produced from renewable energy sources such as solar or wind power, or low carbon power and is known to be the benchmark for clean fuel. Water is split into two hydrogen atoms and one oxygen atom through a process called electrolysis. However, on a commercial scale, it is mostly generated by steam reforming of natural gas.

What is the situation globally?

As with any potentially game-changing technology, countries across the globe have gotten into the race to establish hydrogen production and domestic hydrogen markets.

In 2020, major European companies announced plans to switch their truck fleets completely to hydrogen-based vehicles with the Netherlands and Switzerland already beginning commercial production of hydrogen trucks. Looking to replace costly liquefied natural gas imports, Japan has announced an action plan to set up 10,000 hydrogen refuelling stations over the next decade.

Nations considered traditionally conservative when it comes to energy policy such as Australia, Russia and the United States have also announced projects to tap the fuel. Closer home, China has announced the production of 1 million fuel-cell vehicles by 2030. It has also developed hydrogen fuel cell hybrid locomotives, and a vehicle subsidy policy that focuses on fuel cell tech manufacturing across the whole value chain.

What exactly is blue hydrogen and how is it different from other forms of hydrogen?

Apart from green, hydrogen can also be yellow, turquoise, pink or blue, depending on the production method. Essentially colour codes, these various types of hydrogen vary in their energy payload.

Grey hydrogen is the most common form and is generated from natural gas, or methane, through a process called steam reforming. Pink hydrogen is produced by nuclear power. Blue hydrogen is produced from natural gas with a process of steam methane reforming, whereby natural gas is mixed with very hot steam and a catalyst.

Studies have shown that greenhouse gas emissions from the production of blue hydrogen are quite high, particularly due to the release of fugitive methane. Incidentally, methane is known to be a major destroyer of the ozone layer, Earth’s protective shield that stops radioactive ultraviolet rays from the sun from reaching the surface.

However, it is pegged to be the most commercially viable as production is relatively easier, does not suffer from input shocks, and can be adapted to the technology already available with petroleum refineries, chemical production units and other industries. Since these industries have historically made major investments in their physical infrastructure, blue hydrogen has increasingly become a part of corporate plans.

Overall, hydrogen production suffers from high transportation and storage cost, and leads to higher pricing. As a result, all visions of large hydrogen production mandates that it be co-located on or near-site. For this reason, blue hydrogen has also elicited industry interest.

How has blue hydrogen been received in India?

The overall Indian hydrogen market was valued at $50 million in 2017, and is projected to reach $81 million by 2025, growing at a compound annual growth rate of 6.3 percent from 2018 to 2025, according to Allied Market Research. The Centre’s ambitious National Hydrogen Mission focuses on green hydrogen production and utilisation, and aims to align India’s efforts with global best practices in technology, policy and regulation.

However, as carbon emission reduction goals prove to be a challenge, the government has indicated that it may be open to the production of hydrogen through other means as well. Reliance Industries is now set to repurpose a Rs 30,000-crore plant that currently converts petroleum coke into synthesis gas or syngas, to become a production site for blue hydrogen, the company has said. It has priced the hydrogen at $1.20-1.50 per kg.

Reliance has set a net-zero carbon emission target for its businesses by 2035. It is reportedly planning to turn syngas into blue hydrogen in the interim period, while the cost of green hydrogen reduces.

How will it reduce energy imports?

According to official statistics, India currently spends over Rs 12 lakh crore on energy imports, of which crude oil and allied products make up Rs 7.45 lakh crore. The government has set a target to become energy independent by the time of India’s 100th Independence Day, over the next 25 years. Meanwhile, Indian Railways has plans to go completely carbon-neutral by 2030.

While most government incentives for domestic energy production have revolved around solar and wind power generation, it is currently planning to provide production-linked incentives for hydrogen producers as well. Converting smaller coal-fired power plants into hydrogen-fuelled plants has also reportedly been suggested.

Officials say the largescale switch to green hydrogen would take time as domestic energy producers shift from liquefied petroleum gas to hydrogen. For this, they say blue hydrogen would act as a necessary step.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.