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Green hydrogen policy could become a game-changer for India’s energy security

To unlock the full potential demand for hydrogen, India will have to invest in continuous innovation, by increasing R&D budgets, and support for demonstration projects to make sure key hydrogen technologies reach commercialisation as soon as possible 

February 18, 2022 / 11:07 AM IST
Representative Image (Source: ShutterStock)

Representative Image (Source: ShutterStock)

In 1874, science fiction author Jules Verne in his book, The Mysterious Island, wrote of a world where "water will one day be employed as fuel, that hydrogen and oxygen which constitute it, used singly or together, will furnish an inexhaustible source of heat and light, of an intensity of which coal is not capable."

On February 17, the Government of India unveiled the first phase of its much-hyped Green Hydrogen Policy. The policy offers a range of incentives to entice investors to bet on the development and deployment of green ammonia and green hydrogen — the new age fuel that is made using renewable power from wind or solar sources to split water into hydrogen and oxygen. The policy is designed to aid India’s efforts to meet its climate targets while reducing its dependence on fossil fuels, and positioning itself as the ‘hub of green hydrogen’ in the global hydrogen rush.

Last year at COP26, Glasgow, 32 countries including the United States, China, and India, plus the European Union, joined hands so that “affordable renewable and low-carbon hydrogen is globally available by 2030”.

Already the United Kingdom, Russia, Colombia, Japan, South Korea, Canada, Australia, Chile, Norway, Germany, France, Spain, the Netherlands, and Portugal have announced their national hydrogen plans. China, Brazil, Turkey, New Zealand, Ukraine, and Oman are also working on their own H2 programmes, while the US introduced a preliminary national hydrogen strategy by the back door — buried in the giant 2,702-page bipartisan infrastructure Bill that was passed by the US Senate.

An emerging technology, green hydrogen, is a minuscule industry, of the 90 million tonnes of hydrogen produced in 2020, only about 0.03 percent came from the electrolysis process — which uses electricity to split water molecules into H2 and oxygen — according to the International Energy Agency (IEA)’s recent Global Hydrogen Review. The IEA does not specify how much of that electrolytic hydrogen — from 300MW of electrolysers installed worldwide — was powered by renewable energy, and therefore is “green”.

There is a good reason for this, producing electrolytic hydrogen with renewables cost nearly double the price of using coal, India’s main source of electricity generation. With the rise of renewable energy, and a steep fall in the price of renewable electricity, it is now far more feasible but is still expensive — solar-powered electrolysers can cost as much as six times as those powered by natural gas.

A key challenge has been to produce green hydrogen at affordable costs, and India is relying on private sector companies that have made commitments for working on green hydrogen production. These include Reliance Industries, the Adani group, Larsen & Toubro, and Greenko who are investing in the green hydrogen supply chain. Public sector enterprises such as Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation (BPCL), GAIL (India) Ltd, and NTPC Ltd have expressed interest in the area.

According to the new policy, India will set up separate manufacturing zones, waive inter-state power transmission charges for 25 years, and provide priority connectivity to electric grids to green hydrogen and ammonia producers in a bid to incentivise production. The ultimate aim of the government is to bring down the cost of green hydrogen to $1 per kg from the current $3-6.5, and have five million metric tonnes per annum (MMTPA) green hydrogen capacity by 2030 in India. The five million tonnes production target is half of that of the EU, which plans to produce 10 million tonnes of hydrogen from renewable energy by 2030.

Currently, India’s hydrogen demand is primarily located in the chemical and petrochemicals sector. According to Srinivas Krishnaswamy, CEO of Delhi-based think tank Vasudha Foundation, who spoke to this author, “Accelerated deployment of green hydrogen will be crucial in decarbonising the hard-to-abate sectors such as iron and steel but also the unorganised MSMEs, a cash-strapped sector that continues to rely on old, inefficient technologies and processes. Through green hydrogen and green ammonia, these sectors can initiate their decarbonisation path. However, the policy will have to focus on tracking and tracing green hydrogen and ammonia. One way to do this is by making green hydrogen and ammonia purchase obligations mandatory.”

For a country that imports 85 percent of its oil and 53 percent of its gas, the green hydrogen policy is seen as a game-changer for India’s energy security as well as its ambitious decarbonisation targets. To unlock the full potential demand for hydrogen, India will have to invest in continuous innovation, by increasing R&D budgets, and support for demonstration projects to make sure key hydrogen technologies reach commercialisation as soon as possible.

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

Shailendra Yashwant is a senior advisor to Climate Action Network South Asia (CANSA). Twitter: @shaibaba. Views are personal.