India is poised for a significant surge in demand for green hydrogen, with projections indicating a near doubling to approximately 12 million tonnes per annum (mtpa) by 2030. This growth isn’t simply a trend; it’s a fundamental shift in India’s energy landscape, driven by key industrial sectors and bolstered by ambitious government initiatives. A recent sector update by Nuvama Institutional Equities, based on analysis from the Council on Energy, Environment and Water (CEEW), paints a detailed picture of this evolving market and the factors influencing its trajectory. The report highlights a promising future where falling production costs could unlock the commercial viability of both green hydrogen and its derivative, green ammonia, within the decade.
The Rising Demand for Hydrogen in India
Currently, the majority of hydrogen used in India is “grey hydrogen,” produced from fossil fuels, a process with a substantial carbon footprint. However, the pressure to decarbonize is mounting, and industries are actively seeking cleaner alternatives. The CEEW analysis, as cited by Nuvama, reveals a clear demand profile.
Sector-Specific Consumption
- Fertilisers: Expected to be the largest consumer, accounting for around 51% of India’s total hydrogen demand by 2030. This is due to hydrogen’s crucial role in ammonia production, a key ingredient in fertilizers.
- Refining: Will likely represent 38% of demand, as refineries increasingly utilize hydrogen for desulfurization and other processes.
- Petrochemicals: Forecast to contribute 11% to the overall hydrogen consumption.
Beyond these established sectors, new opportunities are emerging. The report anticipates growing demand from industries like steel manufacturing, long-haul transportation, shipping, and even power generation as hydrogen fuel becomes more affordable and the necessary infrastructure develops. This expansion signifies a broader adoption of hydrogen as a versatile energy carrier.
Green Ammonia: A Close Second in Commercial Viability
While green hydrogen is grabbing headlines, green ammonia (GNH3) is rapidly approaching commercial feasibility. Recent tender prices for GNH3 have been surprisingly competitive, ranging from USD 594 to USD 774 per tonne, with a weighted average of approximately USD 637 per tonne. This is remarkably close to the five-year weighted average landed cost of imported grey ammonia, which stands at around USD 676 per tonne.
This price convergence suggests that green ammonia could displace nearly one-third of India’s current ammonia imports in the medium term. Green ammonia is particularly attractive as it’s easier to store and transport than hydrogen, making it a viable option for long-distance energy transfer and export.
The Cost Challenge and Path to Affordability
Despite the promising outlook, the widespread adoption of green hydrogen faces a significant hurdle: cost. Currently, green hydrogen production in India costs between USD 3.5 and USD 4 per kg, substantially higher than the USD 2.2 per kg price of grey hydrogen. This cost disparity limits large-scale implementation.
However, the report is optimistic, predicting that policy support and technological advancements could reduce green hydrogen costs to around USD 1.6 per kg by 2030. Several factors are expected to contribute to this decline:
- Policy Incentives: Government measures like waivers on power banking charges and open-access fees will lower the operational costs for green hydrogen producers.
- Renewable Energy Costs: The continued decline in the cost of renewable energy sources, such as solar and wind power, is crucial, as these are the primary energy inputs for green hydrogen production.
- Electrolyser Price Reduction: Electrolysers, the devices used to split water into hydrogen and oxygen, are a major cost component. Significant price reductions are anticipated through technological improvements, material optimization, and increased domestic manufacturing.
Localizing the Electrolyser Supply Chain
A key focus for cost reduction lies in establishing a robust domestic electrolyser manufacturing base. CEEW estimates that India has the potential to localize 82-88% of the entire electrolyser supply chain. This would not only lower production costs but also strengthen India’s energy independence and create new manufacturing jobs.
The report highlights that electrolyser stacks, accounting for approximately 40% of production costs, are prime candidates for substantial price reductions – potentially up to 75% – through innovation and localized production. This indigenization effort is central to India’s hydrogen economy ambitions.
Government Support and Key Players
India’s commitment to green hydrogen is underscored by the National Green Hydrogen Mission, which allocates roughly USD 2.5 billion to support the development of the sector. This is further augmented by estimated state-level incentives totaling nearly USD 61 billion. This substantial financial backing is expected to accelerate the adoption of green hydrogen technologies and infrastructure.
According to Nuvama, companies like Reliance Industries and Waaree are well-positioned to benefit from this burgeoning market. Their existing infrastructure, financial resources, and strategic investments in renewable energy and hydrogen technologies make them likely frontrunners in India’s green hydrogen revolution. These companies, along with others, will play a vital role in scaling up production and driving down costs.
In conclusion, India’s journey towards a hydrogen-based energy future is gaining momentum. Driven by industrial demand, supported by strong government policies, and fueled by technological advancements, the country is on track to significantly increase its hydrogen consumption, with green hydrogen leading the charge. The potential for cost reduction, particularly in electrolyser manufacturing, is substantial, paving the way for widespread adoption and a cleaner, more sustainable energy system. Keep an eye on this space – India’s green hydrogen story is just beginning to unfold.
