India, with its ambitious targets for renewable energy capacity and a commitment to reducing carbon emissions, is emerging as a major player in the global green hydrogen market.

 

Green hydrogen, a clean and sustainable fuel produced from renewable energy sources like solar and wind power, offers immense opportunities for India’s energy sector. Several Indian companies, including Reliance Industries, Adani Group, and Indian Oil Corporation, have already announced substantial investments in green hydrogen production.

 

Moreover, with many Indian listed companies entering this space, they have the potential to reward stakeholders due to higher growth and the government’s support in promoting its adoption. Reducing dependence on fossil fuel imports and driving sustainable development are among the many benefits that green hydrogen brings, making it a theme or trend worth  watching.

 

INDIA’S RENEWABLE ENERGY POTENTIAL

India boasts a robust renewable energy sector, positioning it well to harness the benefits of green hydrogen. With abundant solar and wind resources, the country has the capacity to produce green hydrogen at a competitive cost. This aligns with India’s sustainability goals, including its Nationally Determined Contributions under the Paris Agreement and its target of achieving 450 GW of renewable energy capacity by 2030.

By capitalizing on its renewable energy capabilities for green hydrogen production, India aims not only to address its energy sustainably but also to reduce air pollution and improve public health.

 

REDUCING FOSSIL FUEL IMPORTS AND ENHANCING ENERGY SECURITY

India’s heavy reliance on imported fossil fuels comes at a heavy expense, making the nation vulnerable to price fluctuations in international energy markets. By embracing green hydrogen, India can reduce its dependence on oil, gas, and coal imports, thereby enhancing its energy security. The country spends billions of dollars each year on imported oil and gas. 

 

In its report, The Energy and Resources Institute, the authors state, “India currently imports 85% of its oil, 50% of its natural gas, and 30% of its coal. This comes at a significant expense, exposing India to frequent price fluctuations of international energy markets. This improves India’s energy security, thereby reducing commodity price uncertainty for major industries.

By 2050, annual energy imports could be reduced by around 120 Millions of tonnes of oil equivalent (Mtoe) (around 20% of today’s final consumption), reducing import costs by around `1,50,000 crore ($20 billion) each year.” This reduced reliance on imported energy resources would not only bolster the domestic economy but also stabilize the rupee and shield key industries from commodity price uncertainties.

 

A WIDER APPLICATION

Green hydrogen offers a wide range of applications in India. It can be utilized as a fuel for vehicles, a source of electricity, and a reliable heat generator. Moreover, green hydrogen can play a pivotal role in the production of ammonia, a vital component in fertilizers. By integrating green hydrogen into various sectors including transport, power, agriculture and industries, India can pave the way for a low-carbon economy while simultaneously reducing its import bill.

According to The Energy And Resources Institute, hydrogen demand could increase by at least five-fold by 2050, with continued growth in the second half of the century. The current demand for hydrogen, around 6 Mt per annum, comes primarily from industrial sectors such as fertilizers and refineries. This demand is expected to rise to around 28 Mt by 2050, driven by cost reductions in key technologies, as well as the growing imperative to decarbonize the energy system.

 

Most of the demand will remain focused on industrial sectors, expanding in existing areas such as fertilizers and refineries, and branching into new sectors, such as steel. Hydrogen will also play a role in the transport sector, particularly in heavy-duty and long-distance segments, and have a minor role in the power sector as a long-term storage option. Beyond 2050, the report suggests that the demand for green hydrogen will continue to grow,  particularly in the steel and road transport sectors, as well as in shipping and aviation.

To reach a net-zero target by 2060, an estimated 40 Mt of green hydrogen may be required, indicating a seven-fold increase over the current levels.

EXPORT POTENTIAL

Not just the domestic market, but exports also offer great opportunities in the green hydrogen sector. The industry’s growth potential, combined with government support and India’s favourable geographic location, positions the country as a potential export hub for green hydrogen.

Experts suggest that green hydrogen, along with other green fuels, could transform India’s current $200 billion energy import bill into a $300 billion export advantage in the future. This advantage is bolstered by India’s technological expertise, abundant resources, scale, and know-how.

India can also leverage its engineering capabilities in this field. With over 1,000 hydrogen projects underway worldwide, more than 350 of which have been announced in the past year, there is a considerable opportunity for investment. These projects are expected to attract around $320 billion in investments by 2030.

Venture capitalists and buy-out barons have already poured $8 billion into hydrogen ventures last year, a massive increase from just over $2 billion in 2020. Overall, the prospects for India’s green hydrogen industry are promising, and with the right investments and strategies, the country can position itself as a major exporter of green hydrogen while reducing its reliance on energy imports.

GOVERNMENT SUPPORT

The Indian government has implemented several policy measures to foster the growth of green hydrogen. The National Hydrogen Mission, launched in January ‘22, aims to make India a global hub for green hydrogen production and export, with a target of producing 5 million tonnes of green hydrogen by 2030.

Incentives To support the development of green hydrogen infrastructure, the government has provided incentives through the Production-Linked Incentive (PLI) Scheme for green hydrogen electrolysers. This scheme offers incentives to companies setting up manufacturing facilities for green hydrogen electrolysers in India.

Waivers Furthermore, the government has waived inter-state transmission charges for green hydrogen projects, which helps to reduce the cost of transporting green hydrogen  from production sites to consumption centers. Tax Breaks To encourage green hydrogen production, the government has also provided tax breaks, including a 15% tax deduction on capital expenditure for green hydrogen projects.

R&D Funding

In addition to these measures, the government is providing funding for research and development (R&D) in green hydrogen technologies, which accelerates their development and makes them more cost-competitive. The international community is also extending its support to India’s green hydrogen aspirations.

 The European Investment Bank (EIB) has formally agreed to join the India Hydrogen Alliance and increase support for developing large-scale industry hubs with a funding commitment of 1 billion Euros. Similarly, the Asian Development Bank (ADB) has conveyed its intent to provide $20 billion - $25 billion over five years to aid India’s green growth ambitions.

The World Bank has also approved $1.5 billion in financing to support India’s low-carbon transition journey. These combined efforts and investments reflect a strong commitment from both the Indian government and international organizations to promote and foster the growth of green hydrogen in India, making it a pivotal player in the global green energy landscape.

IN A NUTSHELL

To sum it up, green hydrogen presents an enormous opportunity for India’s energy sector, aligning with the nation’s renewable energy goals, reducing fossil fuel imports, and promoting sustainable development. The government’s support through policy measures and investments in R&D is creating an environment conducive to the growth of green hydrogen.

As India strives to achieve a low-carbon economy and reduce its carbon footprint, green hydrogen holds immense promise. It has the potential to transform the energy landscape and is undoubtedly the next big thing in India’s energy sector. Overall, the policy support has been laid out to scale and improve manufacturing, which will boost investments, create jobs, and benefit the entire manufacturing value chain in the coming years.

 

 

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