India Budget 2022 ideas: Options before India to boost Green Hydrogen adoption

Green Hydrogen is a critical piece of energy transition enabling India to achieve its energy security objectives and net zero commitment. As industrial feedstock or process gas, Green Hydrogen can substitute Grey Hydrogen (derived from fossil fuels) used in oil refineries, fertiliser plants, methanol producing chemical plants and treatment of metals. As energy carrier or vector, Green Hydrogen can be used for blending with piped natural gas (PNG) used in domestic, commercial and industrial applications, electrification of heavy-duty long-haul transportation such as trucking and maritime shipping through Hydrogen fuel cells, energy storage coupling with renewable rich power systems etc.

However, the supply chain of Green Hydrogen is complex like any other fossil fuel commodity and includes production from renewable energy sources, storage and delivery (if the production and demand centres are not co-located). Beyond this, many potential end-use applications may need technology and infrastructure to support energy transformations such as Hydrogen to electricity and vice versa, Hydrogen to ammonia, Hydrogen to methanol etc. Green Hydrogen production, storage, and supply needs to meet the purity, pressure, and volume requirements of specific industries and applications.

Key factors that determine the speed and scale of Green Hydrogen adoption?

Grey Hydrogen production costs vary approximately Rs 75-150/kg depending on the price of natural gas in the current scenario. The domestic retail CNG or PNG prices vary approximately RS 40-90 /kg, which translates to approximately 1-2 INR/Mega Joules of energy considering the lower heating value of this fossil fuel commodity. Achieving parity with these prices will determine the speed and scale of Green Hydrogen adoption. This requires boosting demand for Green Hydrogen in a phased manner thereby achieving economies of scale across the supply chain, indigenisation of supply chain and technology improvement to enhance efficiencies of Green Hydrogen production and transformations with earth abundant raw materials. R&D investments and programs are crucial for technology indigenisation across the supply chain.

Much of the debate on reducing the cost of Green Hydrogen is focused on production, particularly electrolyser systems and renewable energy supply. Government intervention and pilot projects must also address and demonstrate the cost effectiveness of Green Hydrogen storage and delivery systems. Our models simulating the techno-economics of Green Hydrogen supply chain indicate that the goal of reducing costs to less than Rs 100/kg cannot be achieved without cost effective storage and delivery systems.

Recommendations for supporting Green Hydrogen economy in the upcoming budget session
The launch of National Hydrogen Mission (NHM) and various Green Hydrogen pilot projects initiated by public sector undertakings are all steps in the right direction. The upcoming budget can provide more clarity on the short-term strategies of NHM to boost demand for Green Hydrogen including but not limited to Green Hydrogen purchase obligations, Green Hydrogen blending targets with piped natural gas, indigenous manufacturing and pilot projects for technology demonstration. However, the primary focus of budget should be towards boosting R&D investment with public private partnerships (PPP) and grand challenges to demonstrate efficient & cost effective Green Hydrogen electrolysers, storage and delivery solutions using earth abundant electrocatalysts and materials. The Council of Scientific and Industrial Research (CSIR) can lead this initiative and design a PPP program to drive R&D investment from India Incorporated in collaboration with premier academic institutes of the country.

The budget should provide a concrete roadmap towards developing testing facilities and certification mechanisms relying on globally harmonised standards & regulations for Green Hydrogen production, storage and delivery. Viability gap funding should be focused on Green Hydrogen projects enabling low carbon steel, cement, trucking and maritime shipping. RE power systems are typically oversized to account for variability in the production of green hydrogen systems. A purchase guarantee mechanism to buy back excess renewable electricity can generate alternate revenues for investors and reduce overall cost of production.

The budget should also focus towards creating world class talent in the value chain of Green Hydrogen by way of introducing dedicated academic programs or degrees and establishment of national research institutes focusing on Green Hydrogen. This is important to kick start the indigenisation of technology development and support the industry ambitions towards R&D, product development and services in the entire value chain.

[This piece was authored by Somesh Kumar, Partner and National Leader – Power & Utilities, and Shuboday Ganta, Vice President – Power & Utilities, EY India]