30 May 2022
Green Hydrogen policy

How can India unlock its green hydrogen ambitions?

By Gaurav Moda

EY India Energy Sector Leader

Gaurav Moda is leading the Energy sector at EY in India, which includes EY’s Oil & Gas and Power & Utilities offerings. He is also responsible for driving industry-specific market insights.

30 May 2022

India can learn from the global hydrogen ecosystem as it looks to develop one. 

In brief

  • Hydrogen is a versatile source of energy that can contribute to decarbonization of the global economy if produced using low-carbon emitting sources. 
  • The Government of India recently showed interest and inclination towards developing hydrogen as a future fuel and feedstock.
  • The objective of this thought leadership paper is to bring insights from the global hydrogen ecosystem, their key challenges and recommendations for India.

Hydrogen will act as a critical enabler to achieving the global targets to limit the increase in temperature to 1.5-degree Celsius, adapt to adverse impacts of climate change and foster low greenhouse gas emissions development. In 2020, there was an inescapable excitement around hydrogen. Globally, countries are proposing ambitious targets, pilot projects and huge amounts of investment towards creating a hydrogen ecosystem.

Current demand for hydrogen in India:

  • Industry sectors such as refineries and fertilizers account for major hydrogen demand in India mainly through grey hydrogen.
  • Grey hydrogen is largely produced by natural gas therefore, emitting huge amount of CO2 emissions.
  • Hydrogen can be useful in application that require high temperatures (above 250 degrees Celsius), especially in the chemical, iron and steel industry. In such cases, hydrogen can serve as an excellent alternative to other energy sources.
  • Also, it is essential to promote usage of hydrogen in sectors where direct electrification is not feasible.

Following are the supporting pillars of green hydrogen economy in India:

  • The renewable energy in India is among the cheapest in the world. Hence, renewable LCOE will be minimum.
  • The national targets of achieving 500 GW of RE capacity by 2030 will further complement production cost and volumes of green hydrogen.
  • Despite having “must run” status, there is curtailment of renewable energy causing wastage of energy. This could further increase with increase in number of renewable energy installations in the coming years. This excessive generation of clean energy could either be stored or used for other purposes such as production of hydrogen through water electrolysis process.
  • Government of India’s objective to cut its emission intensity by 33-35% of 2005 levels by 2030 requires a more diversified approach. Sectors such as industries, transportation and buildings need to further reduce their carbon intensity. The techno-economic feasibility of green hydrogen production in the near future will provide a befitting solution to decarbonize hard-to-abate sectors.

Global initiative towards hydrogen economy

Expected Global Investment until 2050

~ US$10.2t

Government support to transition to hydrogen

~ US$70b

Estimated annual sales by 2050

~ US$2.5t

Announced national hydrogens strategy/mission plan

~ 30

countries

Announced sales ban on ICE vehicles before 2035

~ 20

countries

Countries have or plan to set more ambitious targets for cutting emissions:

114

Why is India betting big on hydrogen ?

  • Energy security: The global pandemic has taught nations to diversify their energy demand as well as their geographical availability. The fluctuations in the oil & gas market have disrupted supply-demand chain and cause variations in fuel costs. Developing countries like India needs to find out an alternative to strengthen its national energy security.
  • Emission targets: India is the third largest global CO2 emitter (~7% of global CO2 emission) well below China and the United States. It has also committed to reducing its emissions intensity by 33-35% under the Paris Agreement.
  • Economic dependencies and balance of trade: India is the world’s third largest crude oil importer with import dependency of more than 80%. It also imports 54% of natural gas and 24% of coal requirements which largely affects India’s financial account balance. India’s oil import bill in FY20 and FY19 was approx. US$101.4 billion and US$111.9 billion, respectively.
  • Energy subsidies: Along with the high cost of imported fuel, India gives away overall energy subsidies of approx. US$30b / year on oil & gas, coal, transmission and distribution, renewable energy and electric vehicles. Some proportion of these subsidies can be diverted for the development of a hydrogen ecosystem.

India can grab early opportunities to the capture entire value chain of hydrogen and look out for global exports.

Hydrogen economy in India: road to green could traverse the blue

It is highly debatable to discuss the adoption of fossil fuel based hydrogen rather than green hydrogen. But, both blue and green form of hydrogen will be necessary to drive hydrogen based economy. The path for deployment of hydrogen will require an amalgam of technological maturity and its competitiveness with other existing methods.

The path for deployment of hydrogen will require an amalgam of technological maturity and its cost competitiveness with other existing methods.
Gaurav Moda
EY India Energy Sector Leader

Also, India aims for 100 million tonnes of coal gasification by 2030. Therefore, India has an opportunity to support blue hydrogen using carbon capture, utilization and storage technology. A minimum subsidy can also be allocated for the same and this will create enough hydrogen demand and infrastructure for green hydrogen to enter the market.

Eventually, green hydrogen will become prevalent and utilize existing storage, transmission and distribution infrastructure.

Summary

The global pandemic has taught nations to diversify their energy demand as well as their geographical availability. The fluctuations in the oil & gas market have disrupted supply-demand chain and caused variations in fuel costs. Developing countries like India need to find out an alternative to strengthen its national energy security.

About this article

By Gaurav Moda

EY India Energy Sector Leader

Gaurav Moda is leading the Energy sector at EY in India, which includes EY’s Oil & Gas and Power & Utilities offerings. He is also responsible for driving industry-specific market insights.