Asian tycoons lead push to make world’s cheapest green hydrogen in India
When Indian transport minister Nitin Gadkari arrived in parliament in a car fuelled by green hydrogen in March this year, he signalled the country’s big ambition for fuel billed as crucial for the energy transition and the fight against climate change.
“India will soon become a green hydrogen exporting country,” he said.
The government’s vision has captured the imagination of industry players in India, where two of Asia’s richest tycoons, Mukesh Ambani and Gautam Adani, are now racing to produce the world’s cheapest green hydrogen.
If they achieve their goal, the sector could potentially transform the world’s third-largest energy consumer and carbon emitter. But it will likely take at least a decade for India to realise its green hydrogen hopes, analysts say.
On 15 June, Adani announced that it had sold a quarter of the equity in group company Adani New Industries to France’s TotalEnergies and planned to invest $50 billion over the next decade in green hydrogen.
“Our confidence in our ability to produce the world’s least expensive electron is what will drive our ability to produce the world’s least expensive green hydrogen,” Gautam Adani, chairman of Adani Group, said in a statement.
India’s green hydrogen ecosystem could be a 1-2 trillion dollar industry over the next 20-25 years. – Rajat Seksaria, CEO, ACME Group
Reliance Industries’ chief executive, Mukesh Ambani, too, has pledged to produce green hydrogen at $1 per kg — which is about 60 per cent cheaper than today’s price — and plans to invest $75 billion in renewable energy production and equipment.
The plans of the two business groups alone can clean up thousands of tonnes of emissions, because Adani Group owns a chain of coal mines and coal-based power plants, while Reliance boasts of the world’s biggest petrochemical refinery as well as some of the country’s largest oil and natural gas assets.
Analysts expect both Ambani and Adani to not only replace their industrial use and production of fossil fuels at home, but to also target exports of green hydrogen.
Green hydrogen, which is produced by splitting water into hydrogen and oxygen using renewable energy, could replace fossil fuels for a variety of uses including the manufacture of commodities like steel and fertiliser as well as transport fuel.
A lot will depend on government policy support as well as improved technology to cut the high cost of fuel (around $6 per kg) that puts it beyond the reach of the majority of consumers, analysts say.
“I think we are quite far away from what the big majors are announcing and where we are at this point of time,” says Vinay Rustagi, managing director of Bridge to India, a renewable energ consultancy firm.
“Everybody is hoping that green hydrogen will be almost like a silver bullet. But it’s a technology in the nascent stages and there is lack of clarity on the manufacturing plans,” Rustagi said.
There are several key challenges that are looming for the sector.
India will need to build manufacturing capacity for electrolysers, the equipment that splits water into hydrogen and oxygen, which is still a niche market worldwide, notes Thirumalai NC, sector head, strategic studies at Center for Study of Science, Technology & Policy (CSTEP), a Bengalaru-based thinktank.
The capacity to make electrolysers as well as better technology will be crucial to slash production costs by a third to below $2 per kg – a price level at which large-scale industrial demand is likely to kick in, say analysts.
India would also need to set up infrastructure for storage as well as pipelines that are mostly absent except for some ageing equipment, analysts added.
New Delhi would also need to source materials such as iridium, scandium, yttrium, and platinum, which are not easily available in the country and would be needed in abundance.
The federal government has started taking steps and in February announced a National Hydrogen Mission, outlining a program to incentivise the production of green hydrogen such as by offering cheaper land and fee waivers for electricity transmission across provinces.
The government is expected to flesh out the initial announcement with a more detailed program in about a month with specific mandates for sectors such as chemicals, fertiliser and steel to use the fuel.
India plans to produce five million tons of green hydrogen by 2030, which is nearly the same amount as it produces now using natural gas to mainly make fertilisers.
The bold ambitions made by Indian policymakers have convinced several Indian companies besides Reliance and the Adani to make moves to develop green hydrogen.
Renewables energy company ACME Group has already set up an integrated green hydrogen and ammonia plant in Bikaner in the north-western state of Rajasthan, investing about $20 million to produce up to 1,800 tons of green fuel and five tonnes per day of green ammonia that is used to make fertiliser.
The group is also developing one of the world’s largest green ammonia projects in Oman with an annual production capacity of 0.9 million tonnes, which will likely be operational by 2024. The $3.3 billion-facility will cater to European and Asian demand.
A host of state-run oil companies such as Oil India Ltd, the nation’s second-largest oil and gas explorer, Bharat Petroleum Corporation and Indian Oil Corporation, have also announced plans to make green hydrogen as well as develop equipment like electrolysers, which could make the country a large producer over the long term.
The decarbonisation ambitions of other Asian countries such as Japan and South Korea are likely to play into India’s hands, as the country emerges as a low-cost green hydrogen producer, analysts say.
Although Indian companies’ production plans are at an early stage, the country can become a large supplier as it is one of the cheapest producers of renewable electricity, which accounts for up to 80 per cent of green hydrogen’s production cost, says CSTEP’s Thirumalai.
India plans to raise its renewable energy capacity to 500 gigawatts by 2030, up from 110 gigawatts now, could drive down output costs further.
“India will have its own green hydrogen demand as well be a major exporter … This would make the green hydrogen ecosystem in India a 1-2 trillion dollar industry over the next 20-25 years,” according to ACME chief executive, Rajat Seksaria.
Globally, the green hydrogen industry could be worth $12-13 trillion by 2050, according to industry estimates.
Subhalakshmi Naskar, partner at law firm Cyril Amarchand Mangaldas, says that the government’s National Hydrogen Mission is a positive step to incentivise output and encourage investments, but a lot more will be needed.
“The implementation of policy…(including production linked incentives and tax holidays) will need to be put in place without any regulatory or other policy delays,” says Naskar.
Source Eco BusinessJune 27, 2022