How can green hydrogen decarbonize the Indian Journey
The green hydrogen market in India is expected to reach $340 billion by 2050, according to initial estimates. Accelerated decarbonization is crucial to India's goal of zero emissions by 2070. India has proposed, in its revised Nationally Determined Contribution (NDC) to the United Nations Framework Convention on Climate Change (UNFCCC), to create an additional carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent through increased forest and tree cover by 2030 and reduce the emissions intensity of its GDP by 45 percent from 2005 levels.
In order to accomplish this, it is making it easier to adopt solar and wind energy technologies, energy efficiency measures, the implementation of circular economy principles in production and supply chains, the creation of mass transit systems, and the commercialization of alternative fuels. However, the new energy paradigm necessitates the rapid development and implementation of cutting-edge industrial technologies to significantly reduce carbon emissions, particularly in difficult-to-abate industries like fertilizers, heavy-duty trucking, marine shipping, and aviation. In empowering this profound decarbonisation, green hydrogen can assume a basic part.
A fuel for the future: The electrolysis of water is the basis for the production of green hydrogen, which is powered by electricity from renewable energy sources. The cost of electrolyzer technology, the levelized cost of electricity, the costs of transmission and distribution, and taxes (GST) all have an impact on this process's economics. In addition, the peculiar properties of hydrogen, such as its flammability, low density, ease of dispersion, and embrittlement, necessitate a complicated and costly supply chain for its transportation and storage. In the current scenario, this makes green hydrogen production less competitive with natural gas-based blue hydrogen and coal-based grey hydrogen.
In spite of these difficulties, realizing India's green hydrogen opportunity is crucial to accelerating the decarbonization of difficult-to-abate industries and advancing India's net-zero goal. This is due to initial estimates that the green hydrogen market in India will reach $340 billion in value by 2050. The country could save between $246 and $358 billion in net energy import costs as a result, and it could also contribute to the removal of 3.6 gigatonnes of carbon dioxide from the atmosphere. In addition, it is uniquely positioned to benefit from being an early adopter in the global green hydrogen economy due to its favourable geographical conditions for the generation of renewable energy and its goal of installing 500 GW of capacity by 2030.
Over three-quarters of the world's annual demand for hydrogen is met by natural gas, which accounts for 70 million metric tons. Less than 2% of the total production is green hydrogen. In 2020, India's own demand for hydrogen, which is primarily utilized as a feedstock in the fertilizer, refining, and chemical industries, was 6 million metric tons. National energy security must be strengthened once more in light of the aftermath of the Covid-19 pandemic and the fluctuation in energy prices brought on by the ongoing conflict between Russia and Ukraine. India's high dependence on fossil fuel imports increases its energy vulnerability. To replace the country's conventional fuel mix with green hydrogen and improve its industrial competitiveness in a world that is becoming increasingly decarbonizing, a robust policy framework, the necessary financial support, and an enabling ecosystem for technology development are necessary.
By 2030, India intends to have 500 GW of renewable energy capacity in its hydrogen economy. It already has one of the most competitive solar and wind tariffs in the world, with a total installed capacity of 118 GW. In addition, it is anticipated that the domestic electrolyzer market will reach approximately $31 billion by 2050 and $5 billion by 2030. India's commitment to combating climate change has received a welcome endorsement with the introduction of the Green Hydrogen Policy. A number of enabling provisions are included in the policy, such as a one-stop shop for all statutory clearances and permissions required for hydrogen production, transportation, storage in bunkers near ports, and distribution as well as the waiver of interstate transmission charges for green hydrogen projects. It is likely to influence the country's demand outlook and improve the economics of green hydrogen production in the near future.
However, there is a need to move beyond the specific strategy for the short term and broad strokes principles for long term in order to encourage the growth of a competitive market for green hydrogen. A showing of green hydrogen in specialty applications like long stretch cargo, power modules in flight and beginning phase commercialisation of advances that lessen the expense of conveyance and apportioning is important to encourage request creation and motivate financial backer certainty. For instance, heavy-duty vehicles account for 60% of India's road freight carbon emissions. By 2050, electrification of diesel-powered trucks could reduce shipping and logistics costs and reduce carbon emissions by as much as 2 gigatonnes.
By rationalizing taxes (GST and custom duties) imposed at various stages of the value chain, green hydrogen production's cost structure can become more competitive. Furthermore, technology development and commercialization are fundamentally dependent on the mobilization of long-term financial resources. Public finance institutions are best positioned to address early-stage risk investment shortfall and crowd in private investment through interventions like providing grant support and long-term debt on concessional terms because of the high economic costs, long gestation periods, and uncertainty associated with new technology. The government can use multilateral finance institutions like the World Bank to implement credit guarantee mechanisms and risk-sharing facilities for this purpose. In later stages, it can expand the pool of funds available by leveraging private capital through blended financing strategies.
Utilizing dollar-linked tariffs as a means of hedging the risk of an unanticipated rupee depreciation is one more financial innovation that could be used to attract long-term capital from abroad. The government can direct the Petroleum and Explosives Safety Organization (PESO) to develop standards to harmonise the carbon intensity definitions of various types of hydrogen in order to guarantee that the capital raised for green hydrogen is used for project development. This will likewise forestall the possible gamble of greenwashing the hydrogen created and conveyed on the lookout, both homegrown as well as worldwide.
