The Evolving Story of Hydrogen in India and Opportunities for Global Cooperation
Astha Gupta provides an overview of policy developments on green hydrogen in India, key investments by the Indian public and private sectors, and cooperation with international players. She highlights potential challenges for the development of green hydrogen, given the uncertainties of demand, trade, and regulations.
Hydrogen has traditionally been used as a fuel in industries such as petroleum refineries and for production of ammonia for fertilizers. When hydrogen is primarily produced from fossil fuels through steam reforming of natural gas, it is referred to as “gray hydrogen.” As countries make net-zero pledges in response to climate change, there has been increased focus on “green hydrogen,” which is produced from renewable energy (RE) sources. Hydrogen has further gained importance as countries respond to the unprecedented crises from the Covid-19 pandemic and war-associated energy supply shocks, which have disrupted global energy markets and raised pertinent questions around energy security. The decreasing costs of renewables also provide a strong incentive for the production of green hydrogen. Countries such as India that are endowed with rich RE sources have an advantage over other countries. They could produce green hydrogen at lower costs for use in domestic industries and possibly export it to countries that would need green hydrogen in their long-term energy mix.
This essay provides an overview of policy developments on green hydrogen in India, key investments by the Indian public and private sectors, and cooperation with international players. It then highlights potential challenges for the development of green hydrogen, given the uncertainties of demand, trade, and regulations.
Developing a Policy Framework for Hydrogen in India
The prime minister of India announced the National Green Hydrogen Mission in 2021. Since then, several measures have been taken to develop a robust policy framework that enables production and use of green hydrogen. The government of India has approved a budget outlay of around $2.4 billion to enable the National Green Hydrogen Mission to be implemented by 2030. This includes a significant budget for strategic initiatives such as domestic manufacturing of electrolyzers, the demonstration of pilot projects in new applications, and research and development.
India plans to achieve 5 million metric tons (MMT) per annum of green hydrogen production capacity by 2030 and expects capacity to eventually reach 10 MMT per annum, depending on the growth of the export market. The mission is expected to attract around 8 trillion Indian rupees (INR) of investment, create 600,000 jobs, reduce 50 (MMT) of CO2 emissions, and bring 1 trillion INR in savings on fuel imports. Currently, India spends around $160 billion on energy imports. An addition of around 125 GW (gigawatts) of associated RE capacity for green hydrogen production is expected under the mission. Electrolyzer capacity of 15 GW is required to meet the production target by 2030, but the government expects 60 GW of capacity could be added with industry leadership.
Implementation of the mission is underway, and the government has recently formalized two incentive schemes. The first scheme is for electrolyzer manufacturing and offers a base incentive of 4,440 INR per kilowatt in the first year, tapering down in subsequent years (over a period of five years). The second scheme is for green hydrogen production and includes a direct incentive capped at 50 INR per kilogram (kg) for the first year, tapering down in subsequent years (over a period of three years).
The Green Hydrogen Standard for India requires that hydrogen produced from RE, including from electrolysis or conversion of biomass, generate greenhouse gas emissions not greater than 2 kg CO2 equivalent per kg of hydrogen, taken as an average over the last twelve-month period. India’s green hydrogen policy provides several additional incentives for green hydrogen developers. These include 25-year waivers for interstate transmission charges, priority grid access, and options for procurement of RE at concessional prices. While the focus of the mission is to prioritize industrial sectors such as refineries and fertilizer production, where hydrogen is already consumed—Indian industry currently uses about 6 MMT per annum of hydrogen—it could later expand to heavy transport, steel, and power sectors. To this end, pilot projects are planned in the implementation phase for the road, shipping, and steel industries.
In line with the research and innovation component under the mission, the government unveiled the R&D roadmap for a green hydrogen ecosystem in India with a budget of 1 billion INR. The roadmap focuses on developing new materials, technologies for improving efficiency, and cost effectiveness of green hydrogen production, storage, and transportation and outlines recommendations for research and innovation to support the green hydrogen ecosystem. Additionally, some Indian states (Andhra Pradesh, Maharashtra, Rajasthan, and Gujarat) have announced green hydrogen policies to encourage investment in development of green hydrogen or green ammonia projects in their states for either meeting domestic demand or exporting to other countries.
In an endeavor to reduce carbon emissions under Green the Shipping Initiative, the Ministry of Ports, Shipping and Waterways plans to develop three ports as green hydrogen hubs by 2030. Indian coastal states such as Odisha and Gujarat are leading the development of green hydrogen and its derivatives and associated infrastructure.
Investments by the Indian Public and Private Sectors
To achieve India’s ambitious net-zero targets by 2070, significant efforts are required domestically from both the public and private sectors. Public sector enterprises such as NTPC and Indian Oil Corporation Limited (IOCL), which are traditionally focused on coal power plants and oil refining, respectively, are undergoing diversification of their energy portfolio. They have announced joint ventures with Indian private sector companies such as L&T and ReNew Power to manufacture electrolyzers and develop green hydrogen assets.
Leading firms introduced their investment plans for the production of green hydrogen and manufacturing of electrolyzers even before the policy framework in India was formalized. Adani Group joined hands with France-based TotalEnergies and committed $50 billon over the next ten years to green hydrogen and associated ecosystems, proposing to develop hydrogen capacity of 1 MMT per annum through 2030. Reliance Industries Limited, which plans to achieve net zero by 2035, announced $10 billion in investments to build clean energy infrastructure (hydrogen, solar cells, fuel cells, and batteries) by joining hands with Denmark’s Stiesdal A/S for electrolyzer manufacturing.
Furthermore, Indian companies such as PTC India, L&T, Greenko, and Renew Power have signed several memoranda of understanding or joint ventures with international private companies to develop projects for green hydrogen production and export, giga-scale manufacturing of alkaline water electrolyzers, and the development of “center of excellence for facilitation of green hydrogen.” The majority of these Indian companies have partnerships in countries such as Singapore, Egypt, Norway, and Belgium. Greenko’s commitment to produce and supply green hydrogen and ammonia is noteworthy, with targets of around 3 MMT of green ammonia that will cater to both domestic and export demand. Avaada Group has raised around $1 billion from Brookfield Renewable to fund its green ammonia and hydrogen ventures in India.
Several pilot projects have been initiated by public sector enterprises for green hydrogen production and use. NTPC has demonstrated India’s first green hydrogen blending project with natural gas in the piped natural gas network for residential consumption and plans to build green hydrogen fueling stations for cleaner mobility in high altitude areas such as Ladakh. IOCL invited global tenders to set up its first refinery project. Indian Railways anticipates reaching carbon neutrality by 2030 and expects the first hydrogen-fueled train to roll out in 2024.
India is cooperating on clean hydrogen internationally through government-to-government engagement. This has been an important topic in several international groups, such as the Quad’s clean hydrogen strategic initiative. India has engaged bilaterally with the United States and Germany, including through the establishment of hydrogen task forces. Areas of cooperation include creating public-private partnerships on clean hydrogen, developing new technologies, conducting joint studies and pilot programs, driving innovation and R&D, and harmonizing regulations, codes, and standards for clean hydrogen.
The European Investment Bank plans to support the green hydrogen ecosystem in India with a loan of one billion euros. Beyond the European Union, Japan, Singapore, and South Korea are some of the primary export destinations for green hydrogen. India is also exploring bilateral agreements with the EU for 10 MMT per annum of green hydrogen and with Singapore for 5 MMT per annum of green ammonia.
Challenges for Hydrogen Development, Use, and Trade
Around the globe, low-emission hydrogen production and trade are limited, though production is expected to grow to 20–30 MMT by 2030. While India has the advantage of using low-cost renewables for hydrogen production, the cost of electrolyzers is quite high. Currently, green hydrogen production in India costs around 350–400 INR per kg but is expected to drop below 150 INR per kg by 2030. Electrolyzer manufacturing capacity globally is concentrated in China and Europe but is expected to expand in Australia, India, and Latin America by 2030. Although alkaline technology is most widely used in electrolyzers, other technologies such as polymer electrolyte membrane, solid oxide electrolyzers cells, and anion exchange membranes are expected to be commercialized soon. The electrolyzer market in India could reach approximately $5 billion by 2030, and the Indian government plans to support electrolyzer manufacturing through a production linked incentive scheme. Investments in electrolyzer manufacturing and production of hydrogen will be important as India strives to meet both domestic and export demand. India could consider levying a low import duty on electrolyzers until the domestic manufacturing market flourishes.
Apart from production costs, India has prioritized industrial sectors like petroleum refining and fertilizer production, where clean alternatives do not exist for the uptake of green hydrogen. Even though the Indian oil and gas public sector units have announced plans for green hydrogen production, with a collective target of 0.831 MMT per annum by 2030, it will be necessary to create sufficient demand through mandates and incentives to promote the use of green hydrogen (replacing gray hydrogen) in refineries and fertilizer sectors. India’s rapid rate of urbanization and industrialization will result in high demand for building materials such as steel and cement in the infrastructure sector. For example, demand for steel is expected to double and reach 200 MT by 2030. Green hydrogen has significant potential to decarbonize these hard-to-abate sectors. India has the largest direct reduction iron production for steelmaking, and green hydrogen could be a cleaner alternative to expensive imports of coal and natural gas. Furthermore, India is pursuing the concept of “hydrogen hubs and valleys” to facilitate hydrogen production close to demand centers. For effective cultivation of the hydrogen ecosystem, a national regulatory framework needs to be established, and federal and state governments must coordinate on timely clearances and permits.
As the global demand for green hydrogen grows, there will be an urgent need to develop standards and common rules to facilitate trade and interoperability between regulations. Currently, there is no globally agreed-on framework or standard to define hydrogen based on its emission intensity, and the lack of a common standard restricts trade and investment for green hydrogen. International cooperation on this front will be essential to ensure the availability of green hydrogen at an affordable and sustainable rate. As noted earlier, India aspires to become a global export hub for green hydrogen. Given that the country could face trade barriers as the United States and the EU announce huge subsidies for production of green hydrogen, the Indian government should emphasize that common rules of hydrogen trade must be established.
In times when countries are facing energy security issues and supply chain disruptions, the world needs stronger international trade agreements and rules, common methodologies for determining the emissions intensity of hydrogen that ensure comparability between different certification systems and regulatory frameworks, and secure transportation routes and fuel supplies. During its G-20 presidency this year, India identified green hydrogen and its derivatives as one of the priorities for international cooperation. The G-20 countries affirmed the high-level voluntary principles on hydrogen produced from zero- and low-emission technologies. In the G-20 New Delhi Leaders’ Declaration, countries pledged to build a sustainable and equitable global hydrogen ecosystem that benefits all nations, highlighting the support for developing voluntary and mutually agreed-on harmonizing standards as well as mutually recognized and interoperable certification schemes. An initiative of the Indian presidency is the establishment of the Green Hydrogen Innovation Centre steered by the International Solar Alliance.
As India implements major commitments to green hydrogen production, it also needs to strengthen its RE supply chain, which is ramping up slowly with an increased focus on domestic manufacturing of solar photovoltaic. Similarly, while the country builds its domestic electrolyzer manufacturing capacity, levying low import duty on electrolyzers could accelerate green hydrogen production in the country.
Although India plans to export hydrogen to other countries, there could be substantive demand for hydrogen catering to domestic industrial sectors (especially those hard to electrify). Therefore, mandates and quotas that create demand would further accelerate the offtake of green hydrogen in the country. While policies in India support the production and use of hydrogen in different parts of the country, transportation costs could be avoided with the concept of hydrogen valleys, which would enable the development of hydrogen projects from renewable sources in the vicinity of industrial clusters.
India’s leadership on green hydrogen has been impressive and noteworthy. However, issues of creating domestic demand, increasing the affordability of hydrogen production, building electrolyzer capacity, and negotiating trade agreements and regulations still need to be addressed and will require collaboration across different state and international actors.
Astha Gupta is an India consultant for the International Energy Agency, where she focuses on clean energy transitions in India and other South Asian countries. She is also a Nonresident Fellow at the National Bureau of Asian Research.
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