On 30th Sep, MEC Intelligence (MEC+) hosted a virtual session in partnership with Solar Quarter and Asia Pacific Hydrogen Association on ‘India Hydrogen & Fuel Cells Show: Policy, Partnership & Business Strategy”. In this session, we discussed the opportunities and gaps in India for its hydrogen-based energy transition. Key stakeholders from across the hydrogen value chain- hydrogen producers and suppliers, government officials & regulators, fuel cell companies, and component manufacturers joined us for the session.
India recently announced a Green Hydrogen Task Force, and since then there is an increasing interest in its demand and technology supply chain. Technological developments and the decline in the cost of renewable power are the key drivers behind the interest and the growth of the hydrogen sector globally in the past three years
India annually uses approximately 6 million tonnes (MT) of hydrogen. Refineries, chemical and fertilizer manufacturing sectors consume 80% of this volume. Fossil fuels are used through steam methanation reforming (SMR) process to produce hydrogen in India. Fossil based grey hydrogen is four times expensive than fossil fuel in energy terms. Therefore, using grey hydrogen as a fuel replacing the conventional fossil fuels does not make sense economically.
However, electrolyzer technology which enables the conversion of electricity to hydrogen molecules is emerging. The recent decline in the cost of renewable electricity as well as the CAPEX of the electrolyzer, promises a use case for green hydrogen compared to blue or grey hydrogen produced from fossils. Renewable prices have reduced by 50% in the past five years and 75% in the past seven years. Renewable power prices are likely to drop further by 50% to 90% in the next ten years. Similarly, the electrolyzer CAPEX has reduced by 50% in the past three years and expected to reduce 70-90% in the next five years. As the cost of hydrogen reduces, new applications such as fuel, energy carrier & storage will emerge.
To put things in perspective, Europe annually consumes 9 million tonnes of hydrogen, similar to India’s annual consumption at 6 million tonnes. However, Europe projects an 86% increase in its hydrogen demand by 2030, driven by its use in new sectors like heating, transport, and power. To meet this new demand, Europe plans to increase the amount of green hydrogen in its energy mix. Green hydrogen will meet almost all of this new demand, 4.4 million tonnes domestically produced, and another 3 million tonnes imported from Africa, Ukraine, and other nearby geographies. To support this, the European Commission plans to deploy 40 GW of renewable hydrogen electrolyzers by 2030 in Europe and another 40 GW in Africa and Ukraine.
These ambitious targets by Europe open two avenues of opportunities for India- a) setting a similar hydrogen target for itself and b) targeting the opportunities in Europe through technology and supply chain collaborations.
COVID has increased the need for cleaner energy solutions. Hydrogen is one of the greener solutions which enables energy independence and security for India. The government is also focusing on hydrogen deployment in India along with the private energy leaders such as Indian Oil Company Ltd, Adani, Reliance etc. Following are the opportunities and challenges across the hydrogen value chain:
- Hydrogen Production- Currently, refineries produce and supply hydrogen. As the hydrogen demand increases, existing refineries have the opportunity to scale supply and distribution of hydrogen to emerging applications like fuel cell vehicles. But challenges related to the cost of hydrogen production from existing fossil fuel sources and new technologies like electrolysis exist.
- Hydrogen Transmission and Distribution-Hydrogen can be transmitted and distributed via pipelines, ships, cylinders/containers/tankers. Transportation can be through natural gas pipelines or dedicated new pipelines. However, due to low energy density by volume and high-pressure requirements, transport through gas pipelines is not easy. Therefore, decentralized reformers or electrolyzers are more suitable to meet niche demand segments.
- Hydrogen storage-Hydrogen is either stored as a compressed gas or in a liquidized form in pressurized tanks for small-scale mobile and stationary applications. 85% of the hydrogen today is produced and consumed on-site while 15% transported via trucks or pipelines. Other hydrogen storage mediums are also available such as materials-based storage, geological storage etc. Demand for storage capacity will increase as the demand for hydrogen increases.
Mr Bart Biebuyck highlighted that hydrogen is likely to meet about 25% of Europe’s energy demand by 2050. To reach the intended energy mix, Europe has laid down a three-phased plan. The Fuel Cells and Hydrogen Joint Undertaking (FCH-JU) is on bringing investments, fostering demand, developing an active market enabled by incentives and credits, and leading & supporting the R&D. FCH-JU and European Commission place hydrogen high on their strategy for bilateral and regional cooperation and in international markets.
The conversion of electrons to hydrogen molecules offers long term flexibility to the energy system since hydrogen can be stored compared to charging a battery cell. Hydrogen molecule does not degrade over time and can be easily transported or converted back to electricity with a fuel cell.
Hydrogen-based standalone power system (SAP) is a way to use renewable energy 24*7, especially in isolated locations like in Ladakh or North-east Indian states. Hydrogen based SAPs can support off-peak energy use and reliable local power. Hydrogen can also simplify energy-related issues in India such as electrification of villages, storage of renewable energy sustainably, and support a challenged electricity grid.
Hydrogen R&D goes back to 2005 when MNRE developed the National Hydrogen Roadmap (NHER) to accelerate the development and commercialization of hydrogen technologies in India. India has developed and demonstrated many Hydrogen-CNG and HICE (Hydrogen Internal Combustion Engine) vehicles midway before the transition to hydrogen-powered vehicles. Some industry updates:
- Mahindra & Mahindra has developed a HICE Minibus and H2-Diesel Dual Fuel Vehicle.
- Tata Motors has developed a fuel cell-powered bus.
- IIT-BHU has developed and demonstrated 2W and 3W hydrogen-powered fuel vehicles in Varanasi.
Ms Eva Hennig presented the updates on the German project to use hydrogen in the gas distribution grid. The project aims at making the grids hydrogen ready.
In this project, 30 MW electrolyzer plant at a refinery produces hydrogen. Hydrogen is fed in the local gas distribution grid. The key customers using this hydrogen-blended-gas are residential customers and the nearby airport, as green jet fuel. The by-product of the electrolyzer is oxygen which is used to produce green cement.
Currently, 50 MW of electrolyzers are in operation in Germany. There are plans to install 5-10 GW electrolyzer capacity in the next 5-10 years.
To get access to our session material, please click here.
Trend 1 # Hydrogen is currently very expensive but there is potential for cost reduction
- In India, grey hydrogen costs today 150-200 INR/kg (2 USD/kg + significant transportation cost). Therefore, it is economical to use in an on-site location.
- Green hydrogen costs around 350 INR/kg with the cheapest renewable power available today in India.
- To reduce the cost of green hydrogen cost of electricity and electrolyzer need to be reduced since these are the two critical components of green hydrogen.
- Electrolyzer costs are coming down as the market is gaining volume demand. It can further go down using high-volume automated production of the electrolyzer. Enapter, a leading hydrogen electrolyzer manufacturer in Europe, supports the cost reduction trend. The cost of their 2.4 KW electrolyzer unit has reduced from 15000 EUR to 9000 EUR in three years. Their target is to bring it down to 1000-2000 EUR in the next few years.
- Green hydrogen will not be able to compete with fossil fuels or grey hydrogen even over the next five years since the renewable power will be high priced at INR 4/kWh (with ISTC). The cost of renewable electricity needs to come down to 1.5 INR/kWh, to make green renewable competitive to grey hydrogen from SMR from natural gas.
- Similarly, Europe has a target to bring down the cost of green hydrogen to 2 EUR/kg in the next ten years, from a current price of 4-5 EUR/kg.
Trend 2 # Political and regulatory clarity is critical for the hydrogen energy transition
- The Indian government has a policy in place for R&D and demonstration of hydrogen technology, but clear and long-term policies are required for deployment and end-use applications of hydrogen. Some of the points to be considered:
- Clarify the role of blue hydrogen in the hydrogen economy. While it is cost-effective to produce and use blue hydrogen, it is still not as environment friendly as green hydrogen. Europe plans to use blue hydrogen only as a transitional fuel in phase 1 of its hydrogen plan. Its end objective is to use green hydrogen only.
- However, policies and incentives should be planned for a limited time and revised periodically to prevent the lock-in effect of subsidized blue hydrogen. The growth of blue hydrogen will affect the interest in green hydrogen.
- Given the current high cost of hydrogen, financial incentives will instigate the demand from new applications.
- Regulatory and financial support to establish indigenous production of hydrogen fuel cell stacks, electrolyzers to reduce the cost of FCV
- Establish globally at-par codes and standards for production and supply of hydrogen and HFVs
- Purchase obligation mechanism to mandate the use of blue or green hydrogen RPO type. Promotion of green hydrogen in steel and other metallurgical industries
- US-India Strategic Partnership has launched Hydrogen Task Force which is going to bring out the document for Hydrogen Vision for India this year. It will address all the policy issues such as the focus of hydrogen development in India.
Trend 3 # Hydrogen will make sense in niche applications only
Hydrogen can compete with batteries only when the cost of the fuel cell comes down. At the same time, the cost of batteries is also reducing. Therefore, at different point of time in the future, either of the two options could economically make sense. However, their applications will be limited by their physical and technical limitation. E.g. batteries are more relevant for short-range or inter-city vehicles but not for the long route heavy-duty transport since the volume and weight of batteries will reduce the carrying capacities. Therefore, hydrogen might prove suitable for all long-range transportations- heavy-duty trucks, aviation, ships.
Trend 4 # Enormous growth in renewable is imperative for green hydrogen transition
- Europe’s goal is to become carbon neutral by 2050 and green hydrogen has a significant role to play in the plan. Despite the high renewable share in the electricity mix of north-western European countries, the current share is not enough for producing hydrogen at scale. Therefore, to support the green hydrogen transition, Europe plans to increase its renewable share in its electricity mix.
- Till the time new renewable capacity comes online, Europe plans to use blue hydrogen or flow carbon-hydrogen as a transitional fuel until 2030.
Similarly, demand for large capacity of additional renewable power plants will emerge if India pushes towards green hydrogen.
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