The effects of climate change are becoming prominent in the form of changing weather patterns, severe storms, draughts and increasing global temperatures. The economies across the globe are striving to reduce their carbon emissions and mitigate the ill-effects of climate change.
The governments have started moving from pledges to strategic physical actions tackling climate change. Hydrogen, one of the simplest elements found in the nature, has the potential to largely solve this complex crisis of climate change, when produced through renewable electricity and electrolysis of water. The use of Hydrogen is not new. It has been traditionally used as a feedstock in fertilizer industry and crude oil refining since long. The global decarbonisation push has invigorated the green hydrogen market, particularly for the ‘hard-to-abate’ sectors, which cannot be electrified easily.
The recent interest in green hydrogen has induced fresh innovation cycle in the electrolyser technologies. Multiple electrolyser technologies exist in the market. These technologies include – Alkaline electrolysers, Proton Exchange Membrane (PEM) electrolysers, Solid oxide electrolyser cells (SOEC) and Anion Exchange Membrane (AEM) electrolysers.
Alkaline and Proton Exchange Membrane (PEM) electrolysers are matured technologies, which are commercially available and other technologies such as Solid oxide electrolyser cells (SOEC) and Anion Exchange Membrane (AEM) electrolysers are approaching fast-commercialisation. The market is expected to see convergence, within a decade, towards one or two dominant technologies, resulting in significant cost reduction and performance improvement.
The cost of Renewable Energy is the other dominant cost-head (60-70%) in the production of green hydrogen. The levelized cost of electricity generated through solar PV reduced by 85% from 2010 to 2020 and the levelized cost of electricity has declined by 48% for offshore and 56% for onshore wind during the same period. The levelized cost of hydrogen production currently has a wide range of US USD 2.38-USD 12/kg and is expected to reach USD 1.01-USD 5.13/kg by 2030 and further drop to USD 0.55-USD 3.04/kg by 2050.
In India, the current cost of production of green hydrogen could be between USD 4 – 5 per kg, which is approximately double the cost of grey hydrogen price, used in refineries and fertilizer production. For applications, such as steel, mobility and power, the breakeven cost of green hydrogen is even lower. Hence, developing a hydrogen economy would require consistent policy attention. Globally, countries have adopted policy initiatives and measures to incentivize both supply and demand of hydrogen.
For example, USA has announced production tax credit of USD 3.0 per kg of green hydrogen under the Inflation Reduction Act, and additional funding of USD 8 billion for hub development; EU has announced European Hydrogen Bank, a Contract for Difference (CfD) subsidy scheme, and public funding support for large scale.
Important Projects of Common European Interest (IPCEI). Germany has also announced separately an auction-based subsidy scheme to create a hydrogen market. Incentives have been announced by other major hubs, such as Egypt and Australia. On demand side, Japan and Korea are promoting use of hydrogen or ammonia in power generation and mobility applications.
Likewise, Government of India has duly recognised the criticality of Green Hydrogen as an agent in enabling deep decarbonisation and achieving India’s ambition of net-zero by 2070 through various policy measures and fiscal incentives, announced as part of the National Green Hydrogen Mission, 2023 and Green Hydrogen/ Green Ammonia Policy 2022.
Interventions pertaining to demand creation could be contemplated. Aggregation of demand at regional or cluster level could be a good starting point to boost domestic hydrogen demand and drive “price discovery” through a competitive bidding process. Industries are likely to prefer “in-situ” production of hydrogen due to inherent challenges of transportation and additional cost involved in ammonia or methanol cracking.
The growing importance of Hydrogen in the energy space is expected to influence the technological, geo-political and socio-economic trends across the globe. Countries with access to abundant low-cost renewable energy could become producers/exporters of green hydrogen. The trends have already started setting in with various corporations signing MoUs on hydrogen and its derivatives trade.
Japan has signed a cooperation agreement with UAE for production, supply, and trade of green or blue H2/NH3. Australia has announced multiple export focused large projects focusing on demand from Japan and Korea. The space has started witnessing emerging laws and regulations imposing new requirement around Green Hydrogen production and methodologies for trade. The EU Delegated Acts for example has suggested on green hydrogen, with temporal correlations – correlating time-blocks for GH production with renewable energy production and additionality – electrolysers producing hydrogen need to be connected to ‘new’ renewable energy assets.
Green Hydrogen can play a pivotal role in the global decarbonisation and net-zero journey. It can be instrumental for a low-carbon, self-reliant economic growth across the globe and India. By focusing on integrated planning, collaboration with diverse stakeholders, public-private partnership, decisive policy support, and adequate reforms, green hydrogen can gain faster acceptance in the industry. With the distinct advantage of having low-cost renewable, India has the unique opportunity to become a world leader in green hydrogen production and emerge as an export hub.
