The cumulative value of the green hydrogen market in India could be US $8 billion by 2030 and US $340 billion by 2050
Hydrogen can play a critical role in India’s energy transition by enhancing its industrial competitiveness in an increasingly decarbonizing world. The long term impact means heightened economic development, reduced CO2 emissions, and improved public health, and quality of life. The biggest value proposition of hydrogen is in decarbonizing the hard-to-abate sectors. Historically, these sectors have been difficult to address because of a lack of technically and economically feasible technologies. Hydrogen can address many of these challenges and play a complementary role to other efficiency measures to effectively decarbonize these sectors.
With major countries around the world placing big bets in hydrogen based technologies, India too can play a leadership role in moving forward the hydrogen economy. For India, this current impetus surrounding the hydrogen transition fits well within the context of a low-carbon economy, energy security, and the larger economic development ambition of the nation. The country is prioritizing green hydrogen as a potential solution to decarbonize hard-to-bate sectors such as refinery, ammonia, methanol, iron and steel, and heavy-duty trucking. Prime Minister Narendra Modi recently announced the National Hydrogen Mission with the aim of making India the world’s largest hydrogen hub. The efforts of the Mission have resulted in the recently approved Green Hydrogen Policy. India’s distinct advantage in terms of low-cost renewable electricity, complemented by rapidly falling electrolyzer prices, can enable green hydrogen to be not just economical compared to fossil-fuel based hydrogen but also compared to the green hydrogen being produced around the globe.
Adoption of green hydrogen can enable India to abate 3.6 gigatonnes of CO2 emissions cumulatively between now and 2050. This can be a significant lever for the nation to contribute towards its recently announced climate targets and net-zero vision. This enables India potentially to be one of the most competitive producers of green hydrogen in the world. Green hydrogen can achieve cost parity with natural gas-based hydrogen (grey hydrogen) by 2030, if not before. Beyond cost, since hydrogen is only as clean as its source of generation, green hydrogen will be necessary to achieve a truly low carbon economy. It will also enable the emergence of a domestically produced energy carrier that can reduce the dependence on imports for key commodities like natural gas and petroleum.
India’s Green Hydrogen Mission takes off
India is at a crucial juncture in terms of its energy landscape and green hydrogen has a critical role to play to make the nation self-reliant and energy-independent. Hydrogen can be an energy molecule that is truly ‘made-in-India’ and that can contribute to the country’s energy security and long-term economic competitiveness. India has the unique opportunity to capitalize on this new technology and become a world leader in green hydrogen production and its applications. To make it happen, the Government has approved National Green Hydrogen Mission with an initial outlay of Rs. 19,744 crore, including an outlay of Rs. 17,490 crore for the Strategic Interventions for Green Hydrogen Transition Programme (SIGHT) programme; Rs. 1,466 crore for pilot projects; Rs. 400 crore for R&D; and Rs. 388 crore towards other Mission components.
From a price parity basis alone, green hydrogen’s share of this demand could grow from 16% in 2030 to almost 94% by 2050. This translates to an implied cumulative electrolyzer capacity demand of 20 GW by 2030 and 226 GW by 2050, promising a sizable opportunity for indigenous manufacturing of a global emerging energy technology. The cumulative value of the green hydrogen market in India could be US $8 billion by 2030 and US $340 billion by 2050. Electrolyzer market size could be approximately US $5 billion by 2030 and US $31 billion by 2050. Adoption of green hydrogen will also result in 3.6 giga tonnes of cumulative CO2 emissions reductions between 2020 and 2050. Energy import savings from green hydrogen can range from US $246 billion to US $358 billion within the same period.
Beyond financial savings, the energy security that green hydrogen provides will translate to less volatile price inputs for India’s industries as well as strengthen India’s foreign exchange situation in the long run. While the prospects for domestic demand and exports are enticing, it’s also important to achieve the expected decline in price. In the near-term, it’s crucial to focus on domestic demand creation efforts, cost reduction pathways, and early pilots, as well as to learn by doing competitive manufacturing of electrolyzers. Limitation of storage and the high cost of transportation means that early market development should centre on identifying clusters of industrial demand that could be served by localized generation of hydrogen.
Challenges and Solutions
The unfavourable cost economics, lack of harmonized standards and regulations, supply challenges, and costly enabling infrastructure have thus far held back the replacement of fossil fuels and fossil fuel-based feedstock with green hydrogen or its derivatives. However, the technology advancements, reduction in costs of renewable energy and electrolyzers and aggressive national strategies are likely to make hydrogen cost-competitive within a short span.
Decreasing costs and an increase in renewable electricity, along with high-scale manufacturing and technology improvements in electrolyzers will bring the cost of green hydrogen down in the near future, making it cost competitive with existing technologies and fuel options. With increased pressure on industries such as steel, refining, and ammonia to reduce their carbon footprint and de-risk their investment, hydrogen’s importance and scale are bound to increase.
At the same time, policy push is needed both on the demand and supply side. Demand incentives to ease the barriers of high cost can enable initial market creation and can be phased out as the market matures. Simultaneously, there must be a push on the supply side, combined with infrastructure, to provide green hydrogen at scale. This can be achieved with a combination of production-linked incentives for electrolyzers and fuel cells, and requirements for the industry and private players to deploy these technologies.
The Road Ahead
Hydrogen demand in India could grow more than fourfold by 2050, representing almost 10% of global hydrogen demand. Initial demand growth is expected from mature markets like refinery, ammonia, and methanol, which are already using hydrogen as industrial feedstock and in chemical processes. In the longer term, steel and heavy-duty trucking are likely to drive the majority of demand growth, accounting for almost 52% of total demand by 2050.
India has a unique opportunity to become a global leader in the hydrogen energy ecosystem. With proper policy support, industry action, market generation and acceptance, and increased investor interest, India can position itself as a low-cost, zero-carbon manufacturing hub, at the same time fulfilling its goal of economic development, job creation, and improved public health. Key actions are required by policymakers, industry players, and financial institutions to enable a hydrogen economy in India. Significant R&D funding geared towards hydrogen production and applications can help in technology improvements and reduce costs. A public private partnership using these resources to conduct high quality research, develop pilot projects, test feasibility, and finally scale deployment can be a first key step towards widespread adoption of hydrogen.
Transitioning to green hydrogen economy
• Near-term and long-term policy pathways to reduce the cost of green hydrogen
• A cost-competitive green hydrogen is bound to lead to market creation
• Opportunities around R&D and manufacturing of components such as electrolyzers and fuel cells
• High prospects of exporting green hydrogen and hydrogen embedded low-carbon products such as green ammonia and green steel
Mission green hydrogen outcomes by 2030
• Green hydrogen production capacity of 5 MMT per annum
• Renewable energy capacity addition of about 125 GW
• Over eight lakh crore in total investments
• Creation of over six lakh jobs
• Cumulative reduction in fossil fuel imports over Rs. one lakh crore
• Abatement of nearly 50 MMT of annual greenhouse gas emissions
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