The updated edition of Fossil Free by Sumant Sinha brings readers up to speed on the latest developments in India’s decarbonisation journey
Fossil Free is an Indian account of the global clean energy transition. The revised and updated edition, launched on August 22, 2023, explores the challenges, realities, and complexities of the global and local energy industries. The book examines critical aspects of the energy-use chain: extraction, conversion, transmission, distribution, and end use. It also captures the India green hydrogen story with precision and detail. Discover how sustainability and green energy are essential in combatting global warming and climate change.
Extract from Fossil Free
India and the global picture
According to the Hydrogen Council, as hydrogen garners more acceptance throughout industries and sectors, the costs of hydrogen production are expected to decrease by up to 50 per cent by 2030. For green hydrogen, though, the way forward might be more complicated. While the costs associated with renewable energy have been significantly decreasing globally and will continue to do so as renewables scale up and there is more grid demand, the same cannot be said for the cost of electrolysers and fuel cells, which form an essential part of green hydrogen production and usage. Currently, in India, green hydrogen costs anywhere between INR 320 to INR 330 per kg. However, KPMG estimates that these costs could reduce to half, i.e., about INR 160 to INR 170 by 2030, bringing them on parity with grey hydrogen costs.
India currently imports more than 40 per cent of its basic energy requirements, costing the country around $160 billion annually. Estimates show that there would be an additional increment in energy consumption by at least 25 per cent by 2030. The Ministry of New and Renewable Energy (MNRE) has been exploring various aspects of hydrogen, which include its production from renewable sources, safe and efficient storage, pilot projects of transportation of hydrogen, and development of fuel cells. The National Green Hydrogen Policy launched by the government aims to make India a hydrogen export hub by 2030 by increasing domestic production of green hydrogen to 5 million tonnes per annum (MTPA). According to the India Hydrogen Alliance, this could mean an investment of $4−5 billion in electrolysers. The green hydrogen produced will primarily be used in sectors such as oil refining, fertilizer, city gas distribution and mobility. These sectors are expected to have green hydrogen purchase obligations set forth on them as per the National Hydrogen Mission. A total of INR 25,245 crore (~$4 billion) financial support is also expected to be provided by the government till 2030, distributed across various schemes like PLI of electrolyser manufacturing, green hydrogen manufacturing projects, and R&D. However, the plan to manufacture and export faces a hurdle. Recently, the EU Parliament endorsed the ‘Carbon Border Adjusted Mechanism’ (CBAM) or EU Carbon tax in June 2021, which advocated taxing imported goods at the borders. In 2020, the EU, India’s third-largest trading partner, accounted for €62.8 billion ($74.5 billion) in goods trade, or 11.1 per cent of India’s overall international commerce. The value of India’s exports to the EU in 2020–21 was $41.36 billion. According to the EU’s March resolution, the CBAM would first encompass energy-intensive industries like cement, steel, aluminium, oil refineries, paper, glass, and chemicals in addition to the power sector by 2023. This levy might reduce demand by making Indian products less appealing to consumers and raising their prices in the EU. This can eventually backfire if it discourages sectors and industries such as hydrogen production that are already implementing cleaner technologies, adding yet another procedural and regulatory burden. I believe the Indian government should consider providing incentives for promotion of green ammonia and green hydrogen projects along with waiving of import duties and GST on import of equipment for export-oriented green hydrogen and green ammonia projects.
It is evident that hydrogen presents us with a novel opportunity. It can single-handedly catalyse our efforts towards net zero transition and help mitigate climate change.
Globally, according to estimates, hydrogen could make up 12 per cent of energy use by 2050.6 Hydrogen export facilities are already being set up in regions with rich renewable energy resources such as the Middle East, Australia, Chile, Southeast Asia, North Africa, the US, and China. They are aiming at potential importers, such as Japan and Korea, which have space constraints for adding renewable capacity, and countries in the European Union that are struggling to survive the sanctions put on Russia in the background of the Ukraine war. In fact, more than twenty-six countries have already formulated policies to produce green hydrogen covering the entire value chain. Additionally, the commercial viability of green hydrogen production has increased due to the declining cost of renewable energy sources, decreasing electrolyser costs, and increased efficiency brought on by technological advancements. Bloomberg New Energy Finance estimates that by 2050, green hydrogen may be produced for $0.70 to $1.60 per kg in most of the world, making it competitive with natural gas if these costs continue to decline. Governments must also establish legal and policy frameworks that encourage investment. The development of these policies and guaranteeing their enforcement and compliance depend heavily on enhancing government capacity and offering technical support, particularly to governments in emerging markets and developing economies. Additionally, there is a need for means to ensure and authenticate the fuel’s origin as well as an internationally accepted definition of ‘green hydrogen’. Helping workers acquire the skills necessary for this burgeoning economy is also crucial, particularly in light of the Just Transition agenda.
According to IRENA, the rapid growth of hydrogen production and consumption at a global level, driven by climate urgency compulsions and the race to net zero, could bring about a new economic balance of power, and lead to new shifts in geo-economics. This, in turn, could create new interdependencies between nations, alliances, and regions across the world in the coming years and decades.