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The introduction of green hydrogen into the country’s energy mix could not have been better programmed. Energy demand is expected to double by 2040 and although the country is moving towards harnessing solar and wind power, the limits inherent in expanding these renewable energy sources could mean continued dependence on fuels. fossils. The pace of adding capacity to existing renewable projects has taken a hit due to the COVID-19 pandemic. Adequate site availability also remains a challenge for the development of large-scale renewable energy projects. Adopting green hydrogen could offset these challenges and put the country back on track to meet its renewable energy targets under the Paris Agreement.
However, India’s transition to a Green Hydrogen Economy (GHE) can only happen after certain key issues are addressed. GHE is based on the creation of a supply chain, from the manufacture of electrolysers to the production of green hydrogen, using electricity from a renewable energy source, for its eventual transmission to end users. Each of these activities carries risks that can have a cascading effect across the entire supply chain. For example, a hydrogen plant may have no value unless it is linked to a renewable energy plant that can provide electricity to perform electrolysis, and a buyer to whom the green hydrogen can be delivered for delivery to end users. A smooth implementation of the supply chain may therefore require the development of consecutive projects. To mitigate these risks and increase the financial viability of the green hydrogen sector, pilot projects are being developed in an ecosystem where end use takes place close to the production site. This model was adopted for the development of a project in Puertollano in Spain where green hydrogen, produced from electricity from a solar power plant, will be supplied to an ammonia plant located nearby. The Department of Science and Technology (India) is also working on a hydrogen valley platform to create an ecosystem modeled on the existing hydrogen valleys in Europe, in order to concentrate production, transport and the end use of green hydrogen in a single region. Once the effectiveness of closed-loop pilots is established, these local hydrogen economies will pave the way for supply chain expansion at the macroeconomic level.
It is estimated that around US $ 300 billion will be invested globally in the green hydrogen sector by 2030. However, given the nascent nature of the industry and the extent of the interdependence in the chain supply chain, banks and credit institutions may be wary of financing such projects, unless each link in the supply chain is adequately linked to other links. Green hydrogen is produced using electrolysers, a technology for which performance standards are not yet established. Lenders may perceive this as an additional risk and may require strong manufacturer guarantees, backed by insurance to contain the technological risks associated with a green hydrogen project. The multiple end uses of green hydrogen, such as supplying raw materials to chemical industries or fuel for the transport sector, will further require lenders to develop tailor-made financial packages for each project, based on the ‘end-use project industry risk analysis.
The regulatory support provided by the GoI will be key to the take-off and subsequent scale-up of green hydrogen power in the country. As stakeholders await the formulation of guidelines as part of the National Hydrogen Mission, it is imperative that the measures adopted by the GoI aim to lower the cost of production to enable green hydrogen to compete with fossil fuels and other renewable resources in terms of price. This can be achieved by providing subsidies for equipment to be deployed at each stage of the supply chain, or in the form of tax incentives to foster demand for green hydrogen. Once the necessary infrastructure is in place, a carbon emissions tax aimed at discouraging the use of fossil fuels could also be considered by the Indian government to support the green hydrogen energy sector.
Green hydrogen has the potential to decarbonize sectors, which currently have the largest carbon footprint in the world. Capable of providing a zero-emission fuel, green hydrogen is well positioned to integrate into the transportation sector and replace the use of coal and coke in the industrial sector. India’s transition to a green hydrogen economy can demonstrate to the world the achievement of energy security, without compromising the goal of sustainable development. The GoI must therefore firmly pursue the goal of creating a GHE to make India a global hub for green hydrogen manufacturing and place itself at the top of the green hydrogen export market.
Ajay Sawhney is an ETEnergyworld columnist. His monthly column “Energy Insights” focuses on the conventional and renewable energy sectors where he assesses current issues, legislation and key trends. Sawhney is associated with Cyril Amarchand Mangaldas and has been involved in the infrastructure sector for 17 years. He advises groups of companies on the construction and development of national and international projects, and advises financial institutions on loans to infrastructure projects in the Asia-Pacific region.
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