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India Needs To Form Green Hydrogen Corridors: NITI Aayog

Opportunity India Desk
Opportunity India Desk Jun 30 2022 - 3 min read
India Needs To Form Green Hydrogen Corridors: NITI Aayog
With proper policy and fiscal support and taking advantage of the low-cost renewable energy, almost 94 per cent of the hydrogen demand in the country can be met by green hydrogen by 2050, up from 16 per cent in 2030, NITI Aayog said in a report.

NITI Aayog said that cumulative value of the green hydrogen market in the country could be USD 8 billion by 2030 and USD 340 billion by 2050 and suggested a production-linked incentive scheme for electrolyser and fuel cells, two crucial components for the development of the domestic green hydrogen industry.

While India consumes around 6 million tonne (MT) of hydrogen annually mostly from ammonia plants and refineries; the consumption might go up 5-10 times led by demand from heavy-duty trucking and steel sectors by 2050.

Green hydrogen comprises a negligible part of the total consumption now. A vibrant green hydrogen market can lead to a reduction in India’s energy import bill which is currently pegged at over USD 160 billion and its decarbonisation target.

The think-tank, in a report on “harnessing green hydrogen – opportunities for deep decarbonisation in India”, said with proper policy and fiscal support and taking advantage of the low-cost renewable energy, almost 94 per cent of the hydrogen demand in the country can be met by green hydrogen by 2050, up from 16 per cent in 2030.

“This translates to an implied cumulative electrolyser capacity demand of 20 GW by 2030 and 226 GW by 2050, promising a sizeable opportunity for indigenous manufacturing. Electrolyser market size could be approximately USD5 billion by 2030 and USD31 billion by 2050,” it said.

While a target-backed government incentive can greatly accelerate manufacturing, it said, “investment in larger equipment, advancement in manufacturing operations, better utilisation of machinery and aggregated procurement are the biggest factors to reduce manufacturing costs related to fuel cells.”

Manufacturing costs dominate the total cost of fuel cells, whereas the share of materials cost is much lower. An increased scale in production can bring the manufacturing costs down dramatically. RMI, an independent think-tank that supports India’s clean energy transition, estimates that fuel cell demand through heavy-duty trucking alone presents a USD 4 billion market opportunity by 2050 in India.

“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 electrolysers and fuel cells, and requirements for the industry and private players to deploy these technologies,” the Niti Aayog said.

While initial deployment can happen in certain end uses that use hydrogen as a feedstock such as ammonia, methanol, or refining, it’s important to expand the applications into other sectors to achieve bigger scales. The country should set an aspirational cost reduction target of USD 1 per kg by 2030 and bring it at oar with another form of hydrogen.

For demand creation, it suggests the government can propose clear mandates around hydrogen blending in existing (refinery and ammonia) and potentially future consumption sectors (steel and heavy-duty vehicles). This will provide demand certainty for early green hydrogen projects and encourage market development.

“For new applications, where the viability of using green hydrogen is still nascent, the government can provide incentives such as a production linked incentive (PLI) scheme for green steel targeting export markets,” it said.

 

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