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India Makes $2.3 Billion Green Hydrogen Push to Meet Climate Goals

FILE- Smoke rises from a coal-powered steel plant at Hehal village near Ranchi, India, in eastern state of Jharkhand, Sept. 26, 2021.
FILE- Smoke rises from a coal-powered steel plant at Hehal village near Ranchi, India, in eastern state of Jharkhand, Sept. 26, 2021.

India has announced a $2.3 billion plan to promote “green hydrogen” -- hydrogen produced with renewable energy -- which experts say could be the clean fuel of the future.

The initiative could help the world’s third-largest emitter of greenhouse gases reach its goal of net zero carbon emissions by 2070.

A series of incentives are aimed at making green hydrogen affordable by bringing down production costs of a technology that has yet to become commercially viable.

While India has been rapidly expanding renewables such as solar energy, these will not be enough to meet climate goals in a country whose energy needs are expected to grow more than anywhere in the world over the next two decades. India’s current reliance on carbon-emitting coal, its primary source of electricity, has raised concerns on how it will switch to clean energy.

The government is hoping that investments under what is called the National Hydrogen Mission, will provide the answer.

“For lot of heavy industries like steel, cement and oil refining, green hydrogen can be a better solution to make them cleaner. Their massive energy requirements cannot be met by other renewable sources such as solar and wind,” Vibhuti Garg, South Asia director at the Institute for Energy Economics and Financial Analysis, said.

“But much will depend on the cost economics” he said.

Green hydrogen is made by using electricity from renewable sources to split hydrogen from water. The energy it produces creates no carbon emissions. But in an industry still in its infancy, the key lies in significantly lowering production costs.

“The goal is to bring down its cost over the next five years,” Information and Broadcasting Minister Anurag Thakur said this week while announcing the initiative. He said it will also help India reduce its emissions and become a major exporter in the field.

Some experts are optimistic. “In the last one year there has been a drop in green hydrogen prices from roughly $4 per kilogram to $3 now,” said Hemant Mallya at the Council for Energy, Environment and Water, a public policy think tank in New Delhi.

He said increased use will bring down costs further. “The eventual target is $1 per kilogram because that is when you start becoming competitive with coal. But even before that if we can hit $2 per kilogram, it will compete with gas currently imported from Russia and that is pretty much achievable with scale and technological advancement.”

The hope is that just as costs for solar power have dropped substantially in recent years and are now lower than that of electricity generated by coal plants, the cost of producing green hydrogen will also reduce over time.

India’s goal is to produce 5 million tons of green hydrogen per year by 2030. Experts call it an “ambitious” target and point out that at the moment India only has a handful of pilot projects in the sector.

However, India wants to ensure that it is not left behind in a technology that is now being looked at with much more hope as the world grapples with a climate crisis. In giving a push to green hydrogen, India is following other countries like the United States and those in the European Union that have also approved incentives worth billions of dollars for its development.

“I think India does not want to miss the bus and is putting the building blocks in place,” said Garg. She pointed out that in the solar energy sector for example, China took the lead in manufacturing the most cost-competitive components for solar panels, leaving most countries, including India, dependent on Chinese imports. “In green hydrogen, India wants to be a pioneer and not wait for other countries to become the lead players.”

As the government offers financial incentives, some of India’s biggest firms have made commitments to invest in green hydrogen. They include conglomerates like the Adani Group and Reliance Industries and state-owned energy companies.

Still, experts say there are many challenges ahead in developing the nascent industry. India will have to scale up domestic manufacturing of electrolyzers, which are a key component to develop green hydrogen and also ensure that there is enough renewable energy available to make it. The investments needed will be huge. Domestic industries might have to be incentivized to switch to using green hydrogen.

India is also eyeing exports of green hydrogen by becoming a cost-competitive source.

“Our aim is to establish India as a global hub of green hydrogen,” Thakur said. "We will make efforts to get at least 10% of the global demand for green hydrogen.”

Hopes that export markets will emerge if green hydrogen becomes viable have risen after the disruption in global energy markets in the wake of Russia’s invasion of Ukraine. “We need to broaden the horizon and look at exports because the premium on the price of green hydrogen might be a problem domestically, but internationally it is not that much of a challenge for someone in Europe to pay it. And because of the Ukraine crisis for example, countries in Europe, will want to transition quicker than anticipated from natural gas,” according to Mallya.