India should assess the competitive advantage that it offers global H2 players and investors that would encourage them to bring technology and investments to India
India has been supporting R&D efforts on hydrogen (H2) consistently for the last two decades, with a national network of experts, institutions and the H2 Centre of Excellence at IIT-Kharagpur, with public funding for pilot-stage projects. The last H2 and Fuel Cell Roadmap was an aspirational document that was backed by H2-Internal Combustion Engine (ICE) transport applications, with proof-of-concept H2 vehicles by Auto Original Equipment Manufacturers (OEMs). Some applications for H2 power (off-grid power for telecom towers) relied on natural gas as input and were rendered economically unviable as gas prices fluctuated. The result was that despite consistent efforts, we have numerous small R&D pilots some of which incorporate indigenously developed technology but untested at scale.
In the interim, H2 technology developed has advanced rapidly – with large scale demonstration projects in different use cases (transport and industrial uses), supported by national-level policies and public funding in the developed markets. While the cost of H2 is still prohibitive and economically unviable for deployment, this has not stopped private capital flows to early-stage H2 companies (some of which are publicly traded companies with enviable valuations) and projects, enabled by matching public climate change funding in developed economies. Access to funding has meant growth in H2 infra and large-demonstration stage projects in developed markets and has led to most H2 technological know-how and Intellectual Property (IP) residing in EU and US jurisdictions. Most electrolyser manufacturing technology and IP in both these jurisdictions, including at least two high-profile listed H2 companies founded by Indian-origin persons.
Asian attempts to catch-up to the H2 developments in Western Europe and the US provide some interesting perspectives. Japan and South Korea have embraced all-in strategies for developing the national H2 infra. Both countries are betting on building a global supply chain capability on transport use cases and relying on sea-borne H2 from Australia and other parts of Asia, given their weak renewable energy generation position. Interestingly, both countries have prioritized the building of expensive national H2 infrastructure as a prerequisite for their H2 transport focus in the following decade i.e. 2030-40. This is counter to what the EU and US have done – the public effort has moved towards H2 industrial clusters rather than building out infrastructure over a large geography. In other parts of Asia, China has focused on Alkaline Electrolyser manufacturing to drive low-cost commercialization of H2 systems and government mandates that may be difficult to replicate outside China.
India’s choices in this context are framed by internal and external considerations. Internally, India needs to articulate the appropriate H2 commercialisation strategy that it wants to adopt. This could take the shape of three questions that need to be answered.
1. Should India embark on a national (as Japan and South Korea are doing, with a strong emphasis on transport use-case) or a cluster/regional approach (as is the case in the US and EU) towards H2 commercialisation?
2. Should India be technology agnostic or should we focus on specializing in specific H2 technologies e.g. Polymer Electrolyte Membrane (PEM) or Solid-Oxide (SO) electrolysers for H2 production (or Alkaline Electrolysers as China has done), and accordingly take a lead on building a specific set of standards and certifications for commercialization of that particular technology or systems?
3. Given interlinkages between Renewable Energy (RE), Battery Technologies and Electric Vehicles (EV) and Hydrogen (H2); and India’s energy diplomacy imperatives, should India wait for another decade for H2 commercialization to achieve maturity, or should it play an active role in building local capability and supply chains, with an eye on the following decade. This has economic and geopolitical implications and could mean few concentrated (and collaborative) efforts rather than multiple small single-entity experiments.
Externally, India should assess the competitive advantage that it offers global H2 players and investors that would encourage them to bring technology and investments to India. This is an opportunity that should be viewed with the following perspectives:
a. Can India provide scale deployment opportunities that help bring down H2 production and usage costs faster than they would in developed markets – telecom markets are a worthy example where India has demonstrated the economies of scale admirably.
b. Can India provide a blank slate to create a collaborative public-private H2 blueprint and economy – with an enthusiastic government, poor air quality urban as a key public concern and climate impact pressures on infra/sectoral investors bringing investments to modernize India’s industrial systems.
Negotiating a higher share of global clean energy funding
The year 2021 appears to be the perfect moment for India to make the case for a stronger flow of climate change funding to large emerging markets and climate champions such as India, to fuel a green economic recovery and negotiate multilateral and G2G funding mechanism that allow the creation of H2-dedicated Energy Transition Funds, beyond the current Adaptation and Mitigation funds that flow to India. Interestingly, the Climate Policy Initiative (CPI) analysis on climate impact funds deployment points to the fact that private and public sectors contribute about equally to fund flows, and that most of the financing remains in its country of origin. This is a climate funding diplomacy opportunity for India to leverage. The creation of an H2-dedicated Energy Transition Fund could address the resource allocation question as well as make a meaningful and targeted policy intervention to build large-stage national H2 demonstration stage projects that help develop a local H2 supply chain in India. Just as the National Infrastructure and Investment Fund (NIIF) has created dedicated infrastructure investment funds (with sovereign participation) for logistics and supply chain, India should co-create an H2 Fund with Global Multilateral Agencies and European Sovereigns.
The creation of collaborative consortiums that bring together multiple players, to pool resources and expertise to participate in the large national demonstration-stage projects is another enabling requirement. This is the practice in Japan, South Korea and the EU – and it should provide the template for India as well. Rather than building five separate H2 FCEV platforms, India’s truck manufacturers should be collaborating to create an H2 Bharat Trucking Consortium that pools resources and shares risk to build a single, scalable H2 Bharat Trucking System and Standard. This may sound unique but is par for the course in other sectors and other parts of the world. There could be multiple such collaborations in end-use sectors such as steel, fertilizer or cement – all of which are actively considering H2 to decarbonize quickly. There seems to be little reason to delay the development of a Bharat H2 Green Steel standard and similar standards for other sectors, other than competitive pressures.
For early technology adoption and building the H2 eco-system, companies need to come together to build such coalitions and consortiums. This is happening faster than one imagines – with the first such coalition that brings global and Indian players together expected to be announced in the next 30 days. These are the sort of developments that will attract more private investments into building the H2 infrastructure, systems and the economy – with attendant impact on the creation of new jobs, cleaner and decarbonized industrial systems, higher air quality and local H2 supply chain development.
On the policy side, India should prioritise enabling policy environment by establishing a public-private taskforce (together with the coalitions or consortiums coming together), co-develop a policy roadmap together with industry, scope large demonstration-stage project that will bring private and multilateral investments that are necessary for build H2 systems at scale and those that deploy at least US $100 million over the next five years, scaled to US $500 million in next 5-10 years, to build H2 systems and projects. This is the sort of ambition that is required for the proposed Green Hydrogen Mission that will help build a meaningful domestic H2 economy at scale.
Green-DMIC - India's national RE-EV-GH2 Demonstration Projects Cluster
The India Green Hydrogen Policy Roadmap paper launched last December by FTI Consulting, after consultation with industry, identified DMIC as a potential industrial cluster with multiple H2 use cases along a RE-rich industrial corridor that is a focus of Indian as well as global investors. The paper identified four types of aspirational national large-scale H2 demonstration projects, along the DMIC. These are Long-haul, heavy-duty H2Bharat Trucking project - 10,000 H2 truck fleet and infrastructure on DMIC; Four H2Bharat Port and Logistics clusters, linked to IndiaH2 Trucking project; Four H2India Industrial projects, in high-priority sectors (steel, fertilisers and cement); and Municipal level H2Maharashtra/H2Gujarat Urban Bio-Gas projects – with urban (solid waste), dairy cluster linkages.
The advantage of a cluster and defined-geography approach, rather than taking a national approach, would enable the costs of H2 infrastructure to be shared by multiple use-cases and make the most expensive part of the H2 supply chain (other than production cost which is liked to RE input costs) affordable. This mirrors the EU approach of coupling green hydrogen demonstration use cases with renewable energy corridors; acknowledging the high cost of hydrogen infrastructure and transport networks and draws synergies with national decarbonizing initiatives.
As the global green hydrogen ecosystem matures, the cost of hydrogen production is expected to come down and become comparable with fossil-fuels. By the end of this decade, green hydrogen winners and losers will emerge, placing hydrogen importing economies next to low-cost ones (those who leverage national renewable energy and local manufacturing to make green hydrogen affordable). Building an H2 economy is a logical next step for India and complementary with its climate change and decarbonization objectives.
This is the hydrogen-focused energy transition pivot necessary for India’s COP 26 position in Glasgow later this year and in the run-up to India’s Presidency of the G20 Summit in 2023.
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