India has witnessed an unprecedented rise in fuel prices since June 2021. This has brought the matter of energy security back to the discussion table. The discussion’s central theme has been the ever-increasing fuel demand and dependency on imported crude oil for domestic needs. India’s annual energy import cost was in excess of USD 123 billion in 2019. More than 82% of this cost is consumed in importing crude oil and natural gas. Solar PV and wind have revolutionized India’s green energy story in the past decade. Once struggling to meet the peak electricity demand, the country now has a surplus power scenario. Indian Energy Exchange reported that the availability of sell-bids for the day-ahead market in its system is twice that of demand.
Diversification of electricity sources by integrating renewable energy into its grid is helping India in achieving the Paris agreement targets. The country has pledged to achieve 40% installed capacity from renewable energy sources by 2030. It has also committed to reducing emissions intensity by 33–35% below 2005 levels. These targets are part of its nationally determined commitments to the 2015 Paris Agreement.
Limits of Renewable Energy in Achieving Net-Zero Targets
While renewable energy is undoubtedly a better option than present fossil fuel-based energy, it is not a one-stop solution for all our energy problems. Renewable technology is recommended, but not a sufficient measure to achieve goals as envisaged in the Paris Agreement. Moreover, electricity comprises only around 16.5% of the final energy consumption at the national level. Additional efforts are required to reduce greenhouse gasses (GHG) emitted by the remaining 83.5% energy sector.
The goal post of environment-friendly development has changed from merely reducing GHG emissions to achieving net-zero emissions. Net-zero energy systems are emerging as a sustainable solution to topical energy problems. At least 12 countries have already legislated net-zero emission targets. Forty-one more countries are working on the same. Over the past few years, green hydrogen has emerged as a theoretical game-changer. It has become the latest buzzword among net-zero energy experts.
Hydrogen: Sunrise Sector
Experts see hydrogen as a sunrise technology for achieving net-zero emission targets because it does not emit GHG upon combustion. Its inherent chemical characteristics, multiple end-uses, and harmony with other fuel and energy carriers make it a strong contender in the clean energy transition, apart from electrification, battery storage systems, carbon capture, utilization, and storage (CCUS), bioenergy, etc.
At present, producers primarily use fossil fuels to generate hydrogen for the chemical, steel, and refinery industries. Today, it is possible to produce hydrogen with the help of renewable energy-based electricity. The ‘net-zeroness’ of hydrogen depends on the method of production. Steam Methane Reforming (SMR) produces hydrogen while emitting a significant amount of greenhouse gases; this hydrogen is known as gray hydrogen. In contrast, producing green hydrogen by splitting water with an electrolyzer powered by renewable electricity represents a major step toward sustainable development. It has found relevance in today’s energy policy narrative, given its ability to decarbonize ‘hard-to-abate’ industries. Hard-to-abate sectors (like the steel industry) require a significant investment in green technology compared to existing carbon-based technologies.
Countries pursuing net-zero emission targets have actively explored ways to expand the use of green hydrogen in their economies for decades. Unlike fossil fuels, which are concentrated in specific geographic regions, primary resources for green hydrogen—such as renewable energy and water—are distributed more widely across the globe. Moreover, no single country or group of countries currently holds technological dominance in green hydrogen production, which encourages broader international participation and competition.
Historical Challenges and Emerging Barriers
The reduction in the cost of renewable electricity has fueled hopes for green hydrogen. Interestingly, this is not the first time proponents have projected hydrogen as a solution to contemporary energy issues. Historically, policymakers first included hydrogen in energy policy in the 1970s after the oil embargo. New discoveries of oil reserves dampened these efforts in later decades. Experts saw hydrogen as a solution to climate change in the 1990s and again in the 2000s. However, low oil prices, economic crises, and the rise of solar PV and wind reduced financial support for hydrogen. Today, high technology costs limit the commercialization of hydrogen-based technology. A weak international supply chain also hinders infrastructure development. Lack of awareness further slows demand creation for hydrogen solutions.
The India Story
India’s endeavor in hydrogen technologies dates back to 1976, when the Department of Science and Technology sponsored hydrogen projects in universities and technical institutes. At present, India produces around 6.7 Mt of hydrogen annually. A report published by The Energy and Resources Institute anticipates the demand to reach 23 Mt in 2050. The current price of hydrogen in the country ranges from INR 340 to 400 per kg. (USD 4.5 to 5.3 per kg). Green hydrogen is expected to achieve cost parity when producers can generate it at INR 150 per kg (USD 2 per kg). Refineries, fertilizer, and the steel industry are major consumers of hydrogen in the country. Apart from industries, researchers actively conduct research, development, and demonstrations in electricity production, hydrogen storage, and mobility, including fuel cell-powered cars, rail, trucks, buses, and ships.
High technology cost, risk of undesirable sunk cost, absence of dedicated government policy, and lack of public awareness have been significant barriers in front of India’s hydrogen economy. However, the recent policy developments portray India’s serious intentions in transitioning towards green hydrogen in the long term.
India’s government has proposed spending INR 800 Cr by 2024 in its Union budget for FY 2021-22. It mentions pilot projects, infrastructure and supply chain, research and development, and regulations and public outreach as core focus areas. The Ministry of New and Renewable Energy (MNRE) is planning to launch a policy document for the national hydrogen energy mission, which will act as a primer for the development of the hydrogen ecosystem in the country, and the rationale of the government to be aggressive in green hydrogen development seems to be prudent.
Opportunities and Challenges
It is quite challenging to integrate renewables in the electric grid beyond a point without technological intervention. Higher penetration might result in the duck curve phenomenon, first observed in California, USA. In the duck curve phenomenon, renewable electricity production and peak demand occur hours apart on the daily load curve. Green hydrogen, in conjunction with grid-scale battery storage, can act as a solution to this problem. Such a solution will reduce renewable energy curtailment, allow maximum utilization of renewable energy sources, entrust and protect RE investments against loss of revenue due to curtailment, provide power system operation flexibility, and allow additional capacity for more renewable plants in the electric grid.
India has discovered one of the lowest solar PV generation costs globally through a reverse auction mechanism. While solar PV generation costs as low as INR 1.99 per kWh, developers are installing most projects at costs ranging from INR 2.5 to 4 per kWh. According to the International Renewable Energy Agency’s report, reducing the cost of renewable-based electricity by half can halve the Levelized cost of green hydrogen if other cost components (capital cost, annual load factor of electrolyzer) remain unchanged.
India has the potential to bring down the cost of green hydrogen by using low-cost renewable generating plants and cost-curtailment experience gained through solar and wind reverse auctions. Huge market potential, owing to the young demography and thriving economy, will be a long-term benefit for the government while pushing the application of hydrogen-based technologies.
Constraints and Practical Considerations
Stakeholders should consider hydrogen as a complement to other energy alternatives, rather than viewing it as an ultimate, stand-alone solution, since hydrogen production and use involve inherent constraints. Current storage and transportation technologies for hydrogen remain under development, but experts expect them to mature and become cost-effective by 2030 (Source: IEA). Therefore, promoting hydrogen production and its near-real-time utilization at the same location can help protect investments from potential sunk costs associated with premature infrastructure deployment.
Production of green hydrogen requires water and green electricity as input to the electrolyzer. Each kg of hydrogen uses around 8.92 liters of demineralized water. The availability of sufficient water streams is critical as it is a valuable and limited resource having multiple application areas. Desalination plants can process wastewater or seawater for electrolysis, thereby helping to avoid potential conflicts over freshwater use. When these plants operate in water-scarce regions, they can also supply freshwater to local communities. By optimally utilizing India’s abundant renewable energy sources and available water resources, the country can realistically develop a green hydrogen energy sector.
The Way Forward
The success of government initiatives lies in administering the right mix of intra- and inter-sectoral policies. It is undoubtedly clear that policymakers’ decisions today will have a long-lasting impact on the country’s energy story. The government’s wish and will must align with stable and sustained policies. Stop-go policies should be avoided. This approach ensures a faster and smoother transition to a green hydrogen ecosystem. India’s immediate policy announcements will set the context for hydrogen’s role. This comes amid ongoing hype and hope around green hydrogen.
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Note: This article was originally published on Financial Express Online. Manoj Kumar Upadhyay (Deputy Advisor, NITI Aayog) and Pratik Joshi (PhD Scholar, Centre for Policy Studies, IIT Bombay) coauthored it.
