Making green hydrogen viable demands financial, tech support to lower costs

Mukesh Ambani’s call to bring down green hydrogen costs to less than a fifth of present levels has brightened the spotlight on this clean fuel. Speak­ing earlier this month, the Reliance Indus­tries top boss said he sees green hydrogen costs coming down to a dollar per kg in a decade. But Ambani’s clarion call will not be enough to reach those levels; a mix of financial and technological interventions will be needed.

Much like any other fuel, hydrogen, when burnt, can be used for industrial purposes. But the by-product of burning hydrogen is water, making it the most environmentally friendly fuel. Green hydrogen is hydrogen produced using renewable energy through electrolysis. This method uses an electrical current to separate the hydrogen from the oxygen in water. This approach enhances its sustainability but drives up costs. According to The Energy and Resources Institute (TERI), the cost of green hydrogen production is $5-6 a kg, approximately thrice the cost of predominant technology that uses fossil fuels and is called “grey hydrogen”.

But green and grey are not the only two colours of hydrogen. According to a compilation by the Scientific Information Re­so­urce Division at the Bhabha Atomic Re­search Centre, most of the world’s hydrogen production is grey.

But there is blue hydrogen too (see box) that captures the carbon dioxide produced in this process. “The carbon can then be sequestered or otherwise used for other purposes. This lowers the carbon footprint. Depending on the process, blue hydrogen can be produced from fossil fuels, but it can also be produced from nuclear power,” the compilation said.

Over 95 per cent of global hydrogen production uses the steam methane reforming process (SMR), where natural gas is reacted with steam at high temperature. This method is cheap but has a high carbon footprint.

According to the International Renew­a­ble Energy Agency’s World Energy Transi­tions Outlook report, globally, 120 tonnes of hydrogen is produced annually and less than one per cent is green. Investments are under way to ramp up green hydrogen manufacturing. In December 2020, seven companies — ACWA Power, CWP Re­n­ewables, Envision, Iber­drola, Ørsted, Snam and Yara — announ­ced a global coalition to acce­lerate the production of green hydrogen 50-fold in the next six years. 

These companies have targeted the deployment of 25 Gw thro­u­gh 2026 of renewab­les-based hydrogen production.

An analysis by the Hyd­rogen Council, a Belgium-headquartered initiative to promote hydrogen adopt­ion, found that it will be feasible for steel and fertiliser production, power generation and long-range shipping to adopt green hydrogen if it is available at $2 per kg price. This is broadly the near-term target that is globally being worked to­wards, and Ambani’s goal goes a step ahead.

Meanwhile, India is taking its first few steps. According to NTPC officials, only a handful of Indian companies produce electrolysers, which means most of these are imported, making the cost of production prohibitive. But there has also been much talk and progress. IndianOil recently anno­unced that it is setting up the country’s first green hydrogen plant at its Mathura refinery. IndianOil’s research and development centre has been working since the early 2000s to explore the use of hydrogen as a fuel by mixing it with compressed natural gas (CNG) to make H-CNG.

In November 2020, Prime Minister Narendra Modi had announced the launch of the National Hydrogen Energy Mission. This was reiterated in the Union Budget 2021-2022 and repeated by Modi in his Independence Day address to the nation.

In terms of government support for green hydrogen, a cabinet note proposing to make it mandatory for fertiliser plants and oil refineries is in the works. The government also aims to extend the production-linked incentive (PLI) scheme for manufacturing electrolysers to produce green hydrogen.

According to industry body India Hyd­rogen Alliance (IH2A), the annual demand for hydrogen in the country is around six million tonnes (MT), mostly from fertiliser plants and refineries. “It needs to go up to 28 MT by 2050 and 40 MT by 2060 if the net-zero carbon target is to be achieved. However, by 2050, nearly 80 per cent of India’s hydrogen is projected to be “green” — produced by renewable electricity and electrolysis,” a spokesperson from IH2A told Business Standard.

IH2A’s members include Reliance Indust­ries and JSW Steel. Think tanks TERI, Council on Energy, Environment and Water (CEEW), and World Resources Institute are partners.

According to Ashish Lele, director at National Chemical Laboratory, Council of Scientific and Industrial Research (CSIR), building a green hydrogen ecosystem in India will require considerable support. For instance, he said, indigenous development of critical materials and local innovation for components can help reduce electrolyser capital expenditure to below $300 per kilowatt.

“Such innovation, coupled with attractive financial incentives like the PLI scheme for electrolysers, can make green hydrogen available below $2 a kg and open up enormous opportunities for local consumption and exports,” he added.

“India should create a national H2-themed Energy Transition Fund, with co-funding partnerships with sovereign partners, multi-lateral agencies, clean energy funds and industry, with the aim to raise $1 billion by 2030 for deployment towards national hydrogen projects of a certain scale,” the IH2A spokesperson added.

Steel-making is one industry where the transition to green hydrogen is being studied. “However, we see that a 100 per cent green hydrogen operation will only become viable in the next two decades. We also find that access to favourable renewable resources is critical towards achieving an early break-even,” a CEEW report said.

According to CEEW, producing green steel using only solar resources (which is true for most locations in the country) will push back the breakeven period to 2050.

“An overnight transition to fossil-free steel-making will be highly expensive. In 2030, the lowest cost of producing green steel is still 22 per cent higher than the blast furnace process,” the report added.