WEF calls for increased subsidy to help lower cost

Green hydrogen production needs to reach a cost-parity with grey hydrogen in India to meet the target outlined in the National Green Hydrogen Mission of producing at least 5 million tonnes of green hydrogen per annum by 2030. 

Today, the production costs of green hydrogen amount to roughly $4-5 per kilogramme, equivalent to approximately double the price of grey hydrogen. About 50-70 per cent of expenditure is allocated towards round-the-clock (RTC) renewable electricity and the remaining 30-50 per cent is for electrolyser costs.

Electrolysers are devices that use renewable electricity to split water into hydrogen and oxygen, which are in limited supply globally. The report recommends rapidly bringing down electrolyser costs by increasing the subsidy significantly. Currently, the Centre provides a subsidy of $54 / kW under the mission for manufacturing electrolysers. 

A new report Green Hydrogen: Enabling Measures Roadmap for Adoption in India by the World Economic Forum along with Bain & Company highlighted that green hydrogen production cost needs to be reduced to less than or equal to $2 per kg. The authors recommend increasing the direct subsidy provided so far as the $0.50 / kg is insufficient for early adopters to help offset the cost.

The national programme launched in 2022 is aimed at decarbonising the hard-to-abate sectors with an outlay of Rs 19,744 crore, ultimately reducing dependence on imports. The intended outcome is to abate at least 50 million tonnes of greenhouse gas emissions cumulatively.

While grey hydrogen requires carbon combustion, green hydrogen is produced using electrolysis of water with electricity from renewable energy sources. 

The mission is required to provide incentives, boost pilot projects in the steel, mobility and shipping sectors as well as support research and development. Its other goals include installing 60-100 gigawatts of electrolyser capacity, providing 125 gigawatts of renewable energy and creating 600,000 new green jobs.

“However, there is limited on-the-ground traction for green hydrogen in the country, and interviews with important players indicate that most are in a ‘wait-and-watch’ phase,” the authors of the report noted. “Many expect sizeable production of green hydrogen to take effect beginning in 2027 and after.” 

The experts added: 

India should work to reduce the cost of green hydrogen by lowering the associated renewable electricity expenses and investing in advances in electrolyser manufacturing, infrastructure, and innovative R&D.

According to reported plans, 8 GW of electrolyser capacity is in the pipeline. This is below the baseline requirement of 35-40GW required to meet the 5 million tonnes of green hydrogen annual target by 2030, according to the report. The authors suggested the development and testing of indigenous electrolyser technology.

International trade of green hydrogen derivatives such as methanol and ammonia currently operates in an unregulated market, which India could use to its advantage, establishing itself as an export hub.

Other costs that have to be borne include storage and transport. To mitigate this, the report suggests developing green hydrogen production clusters where a collaborative environment for production and offtake occurs nearby and investing in creating a pipeline network for transporting green hydrogen throughout the country.

India recently launched standards for green hydrogen production, which allows for less than 2kg carbon dioxide emissions per kg of hydrogen produced over a 12-month average. Establishing precise definitions, setting emission thresholds and developing a methodology for monitoring and measurement of carbon emissions to define “green steel” or “green cement” more accurately would help achieve Net Zero emissions by 2070, the authors said.