India will need a combination of technological advancements and regulatory support to boost cost competitiveness in order to compete with other energy sources and to accelerate the government’s National Green Hydrogen Mission.

The Indian government must help cut the cost of Green Hydrogen production to as low as one-third of the current costs, in order to make the industry competitive with other energy sources. It is important that the government take measures to bring down the cost of production from $3-6 per kg currently to less than $2 per kg, Crisil said in a note today. Further, India will need a combination of technological advancements and regulatory support to boost cost competitiveness in order to compete with other energy sources and to accelerate the government’s National Green Hydrogen Mission, the report said, adding that the industry has the potential to transform India from being a net importer of energy to a net exporter in the long run.

Sectors that can be early adopters

While it’s not easy to be able to replace other energy sources with green hydrogen, oil refineries and fertiliser companies could be early adopters of green hydrogen. Oil refineries already use grey hydrogen to cut sulphur in fuel, and fertiliser companies use it to make ammonia. Oil refineries are the best bet since hydrogen constitutes less than 10 per cent of the total cost and so, moving to green hydrogen will not affect the production cost drastically.

However, for use in fertiliser companies, it will require a bit more adjustments. “Considering the historical long-term average price of natural gas, the cost of grey hydrogen could average $2-2.5 per kg, significantly below $3-6 per kg for green hydrogen. Thus, in the absence of demand mandates, prospective customers may think twice before signing long-term contracts for offtake of green hydrogen,” said Naveen Vaidyanathan, Director, CRISIL Ratings.

The ultimate solution

Since the adoption of green hydrogen is  not much or a problem than the cost associated with it and the cost it will add to overall production, CRISIL report said, bridging the cost differential by reducing the cost of renewable power generation and electrolysers will prove to be key to its faster adoption.

Renewable energy prices in India account for 50-65 per cent of the total cost of green hydrogen and it may have to decline from Rs 2.6-3 per unit at present to below Rs 2 per unit, the report said. Further, in addition to the already announced waiver on inter-state transmission charges, a waiver of energy banking as well as transmission and distribution charges will help in cost reduction.

Domestic companies are planning to invest around Rs 16 lakh crore over the next decade across the green energy value chain. While it is mostly the large conglomerates and well-capitalised companies entering this space, since they can mitigate credit risk, technological evolution and policy support will also bear watching.

https://www.financialexpress.com/industry/india-needs-to-cut-green-hydrogen-production-cost-to-one-third-to-be-able-to-meet-green-hydrogen-goal-by-2030/3003856/