THE CONTEXT: India’s commitment to achieving net-zero emissions by 2070, announced at COP26, has identified green hydrogen as a solution for industrial decarbonization. It has set a target of producing 5 million metric tonnes (MMT) of green hydrogen annually by 2030.
The National Green Hydrogen Mission
It was launched in January 2023 with an outlay of ₹19,744 crore and aims to position India as a global hub for green hydrogen production, usage, and export. This initiative is part of India’s multi-pronged approach to achieve its climate goals, which include:
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- Installing 500 GW of non-fossil electricity capacity by 2030.
- Meeting 50% of energy requirements from renewable sources by 2030.
- Reducing total projected carbon emissions by 1 billion tonnes from 2021 to 2030.
- Reducing the carbon intensity of the economy by 45% by 2030.
CURRENT SCENARIO AND CHALLENGES:
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- Cost Comparison of Green vs. Grey/Blue Hydrogen: Green hydrogen production costs range from $5.30-$6.70 per kg, significantly higher than grey hydrogen ($1.9-$2.4 per kg) and blue hydrogen ($1.8-$4.7 per kg). However, projections indicate that green hydrogen could undercut grey hydrogen by 18% in some markets by 2030, signaling a potential paradigm shift.
- Factors Affecting Production Costs:
- Levelized Cost of Electricity (LCOE): The average cost of generating electricity over a project’s lifetime. Renewable electricity prices are the largest cost component, significantly impacting green hydrogen economics.
- Electrolyzer Costs: The cost of equipment used to produce hydrogen through water electrolysis. Currently ranging from $500-1,800/kW, these costs need to decrease by 40% in the short term and up to 80% in the long term to achieve cost parity.
- Capacity Utilization: Higher utilization rates are crucial for amortizing capital costs and improving overall economics.
- Impact of Weighted Average Cost of Capital (WACC): The average rate a company pays for its capital, including debt and equity. Higher perceived risks in emerging markets like India lead to elevated WACC, significantly impacting project economics. Studies indicate that an increase in WACC from 10% to 20% can trigger up to a 73% surge in the levelized cost of hydrogen.
- Gap Between Announced Projects and Final Investment Decisions: Despite the announcement growth, less than 10% of announced clean hydrogen projects worldwide have reached FID. This gap highlights the persistent challenges in project financing and risk mitigation.
- Integrated Infrastructure Development: The hydrogen supply chain requires comprehensive infrastructure for production, transport, storage, and use. Challenges include handling high-pressure storage and transport (over 700 bar for transportation) and developing specialized compressors and storage containers. Addressing safety concerns related to hydrogen’s flammability and potential leaks. Ensuring durability of infrastructure to reduce maintenance costs and improve end-user safety
- Current State of Electrolyzer Technology: Alkaline and Proton Exchange Membrane (PEM) electrolyzers are commercially available, while Solid Oxide Electrolysis Cells (SOEC) and Anion Exchange Membrane (AEM) technologies are maturing. Innovation in critical materials intensity reduction is progressing, and catalysts with 25 times less iridium and platinum are being developed compared to traditional PEM designs.
INTERNATIONAL BEST PRACTICES:
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- UK’s Low Carbon Hydrogen Standard Certification: The scheme will be voluntary in 2025, allowing producers and end-users to adapt to its requirements gradually. To qualify as “low-carbon hydrogen,” hydrogen must meet a stringent emissions intensity threshold of 20g CO2e/MJ LHV or less. The scheme applies to both domestic production and imports/exports of hydrogen.
- United States: The U.S. Department of Energy invests in Regional Clean Hydrogen Hubs to enable large-scale clean hydrogen production close to high-priority users. These hubs aim to share critical infrastructure, drive production, distribution, and storage scale, and create place-based opportunities for equity, inclusion, and sustainability.
- Japan and Australia: The Hydrogen Energy Supply Chain (HESC) project demonstrates international collaboration in developing hydrogen supply chains. It includes an AUD 500 million pilot project (2018-2021) to assess the feasibility of liquid hydrogen supply from Australia to Japan. In March 2023, the Japanese government’s Green Innovation Fund provided JPY (approximately AUD 2.1 billion) for the commercial demonstration phase.
THE WAY FORWARD:
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- Comprehensive Policy Framework: India needs a robust and integrated policy framework that includes demand creation, supply chain development, and export facilitation. As the National Green Hydrogen Mission outlines, policies should mandate minimum green hydrogen consumption in hard-to-abate sectors like steel, fertilizers, and refineries.
- Regulatory Sandboxes: These create experimental zones for testing innovative business models and technologies under relaxed regulations. The Reserve Bank of India introduced regulatory sandboxes that successfully scaled India’s fintech sector.
- Innovative Financing Products: Develop specialized financial instruments like green bonds, blended finance, and concessional loans to reduce the cost of capital for hydrogen projects. Anchor customers (e.g., refineries or steel plants) underwrite base capacity while additional capacity is financed flexibly as demand grows. Transform capital-intensive electrolyzer investments into manageable operational expenses through leasing models.
- International Collaboration: To facilitate exports and establish globally recognized standards for carbon intensity and hydrogen origin. Develop export-oriented trade corridors with strategic partners like Japan, Germany, and Australia. The Australia-Japan Hydrogen Energy Supply Chain (HESC) demonstrates the potential of cross-border collaboration in green hydrogen trade.
- Strategic Industrial Development: Focus on developing industrial clusters linked to renewable energy sources in states like Gujarat, Maharashtra, and Odisha. Create “hydrogen valleys” where production, storage, distribution, and end-use applications co-evolve—link industrial hubs with renewable energy zones through dedicated pipelines and transport infrastructure.
- Technological Advancements: Allocate funds for research on reducing electrolyzer costs and improving efficiency. Promote domestic electrolyzer manufacturing under the Production Linked Incentive (PLI) scheme.
- Capacity Building: Launch large-scale skilling programs in collaboration with public-private partnerships. Promote awareness about green hydrogen technologies among industries and policymakers to drive adoption. Gujarat will require nearly 3 lakh skilled workers in 2030 for green hydrogen operations (GERMI Report).
THE CONCLUSION:
By leveraging abundant renewable energy resources, India can reduce green hydrogen production costs to less than $2/kg. It can attract investments worth ₹8 lakh crore by 2030 while creating over 6 lakh jobs, as projected under the National Green Hydrogen Mission.
UPSC PAST YEAR QUESTION:
Q. Explain the purpose of the Green Grid Initiative launched at the World Leaders Summit of the COP 26 UN Climate Change Conference in Glasgow in November 2021. When was this idea first floated in the International Solar Alliance (ISA)? 2021
MAINS PRACTICE QUESTION:
Q. “Green hydrogen is a crucial pathway for India’s net-zero emissions target by 2070, but it faces significant economic, technological, and infrastructural challenges.” Discuss.
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