India has committed to have 50% electricity capacity from non-fossil sources by 2030. But at the same time an energy shift is needed in the industry. Workers cleaning photovoltaic panels inside a solar power plant in Gujarat. , photo credit: Reuters
TeaRs 19,700 crore has been allocated for the National Green Hydrogen Mission in the Union Budget for 2023. This will set in motion a program that could position India as a green hydrogen (super) power. Why is this important and what will it take?
India has committed to have 50% electricity capacity from non-fossil sources by 2030. But at the same time an energy shift is needed in the industry. Most of the industrial greenhouse gas emissions in India are from steel, cement, fertilizers and petrochemicals.
Green hydrogen holds the promise of reducing industrial emissions as well as boosting industrial growth. Splitting water into hydrogen and oxygen is energy intensive. When this energy comes from renewable/non-fossil sources, we get green hydrogen. It can serve as an energy source (in heavy industry, long-distance mobility, aviation and power storage) and as an energy carrier (as green ammonia or mixed with natural gas).
India is targeting to produce at least 5 million tonnes by 2030, which is bigger than any single economy. This will generate demand for 100-125 gigawatts (GW) of renewable energy, 60-100 GW electrolyzers, investment opportunities worth Rs 8 lakh crore and 50 MMT annual emissions reductions. With abundant sunshine and significant wind power resources, India has become one of the lowest cost producers of green hydrogen geographically.
five priorities
For the vision to turn into reality, government and industry must work in sync with the five priorities. First, domestic demand is important. If we are not a big player domestically, we cannot be a big player in the international market. The mission introduces a strategic intervention for the Green Hydrogen Transition (SIGHT) Fund for five years with ₹13,000 crore as direct support for the consumption of green hydrogen. This would encourage heavy industries to increase demand, offering economies of scale that would allow suppliers to reduce prices.
Blending mandate for refineries could be another demand trigger. Urea plants are exempted. Over time, targets can be met with increased blending mandates (including urea fertilizers). Another approach is to take advantage of government procurement. As the second largest steel producer in the world, can India aspire to become the largest green steel producer? The cost of green steel made from green hydrogen is currently very high, but can be reduced with economies of scale and changes in production techniques. A part of government procurement of steel can be diverted to green steel. India could later establish itself as a green steel exporter.
Second, India can be an attractive destination for domestic and foreign investment. Green hydrogen production projects announced/underway in India are very less as compared to others. Green hydrogen is difficult and expensive to transport. The mission envisages green hydrogen hubs to strengthen production, end-use and exports. A mission secretariat can ensure that project approvals are streamlined and financial risks are minimised.
Third, SITE Fund offers ₹4,500 crore to support electrolyser manufacturing under a performance-linked incentive scheme. Currently, manufacturers are importing stacks and adding them. We must become more competitive – with targeted public funding – in manufacturing the most critical and high-value components of the electrolyzer in India. Not targeting value addition will lead to re-focusing of electrolyser technologies and production. China could control 38% of electrolyzer capacity by 2030. Electrolyzer technology must be improved to achieve higher efficiency goals, specific application requirements, be able to use non-freshwater, and replace critical minerals.
Fourth, establish bilateral partnerships to develop resilient supply chains. Globally, around 63 bilateral partnerships have emerged; Germany, South Korea and Japan have the most. Using yen- or euro-denominated debt for sales to Japan or the European Union, respectively, could lower the cost of capital and help us become export competitive.
Many bilateral deals focus on import-export but some are related to technology transfer or investment. India should collaborate with like-minded countries on trade, value chain, research and development and standards. The mission allocates Rs 400 crore for R&D, which can be leveraged to crowd in private capital in technology co-development. Indian companies should consider joint projects in countries with good renewable energy resources and cheap finance.
Finally, India should coordinate with major economies to develop rules for a global green hydrogen economy. In the absence of common global frameworks, efforts for regulations and standards are being driven by collectives of private corporations rather than through structured intergovernmental processes. There are already signs of conflicting regulations and protectionist measures in key markets. This put India’s ambitions in jeopardy.
India’s G20 chairmanship is an opportunity to set the rules for the global green hydrogen economy. These regulations should address operational threats, industrial competitiveness and strategic threats. India should promote a global network on green hydrogen through which companies can collaborate. Green hydrogen will be an important industrial fuel of the 21st century. India is well positioned to show leadership in our collective interest and the collective interest of the planet.