INTERVIEW: Renewable hydrogen projects face hurdles despite global tenders, says ReNew chairman

Renewable hydrogen projects worldwide face significant delays as developers struggle to secure the long-term offtake agreements needed to justify major capital investments, according to Sumant Sinha, chairman and CEO of Indian firm ReNew.

The disconnect between developers requiring decades-long revenue certainty and potential buyers who are accustomed to shorter-term purchasing models has created a bottleneck for the industry, stalling projects that have completed initial development, according to Sinha.

"The first port of call for all green hydrogen developers today is to get some offtake somewhere. It's only once that is done that it makes sense to go ahead," Sinha said. "...what people have today is often only MOUs -- they're not firm binding contracts."

This structural mismatch between business models is impeding the industry's growth, as projects remain in limbo in the absence of long-term time frames typically needed for renewable energy investments.

"Green hydrogen is positioned between the electricity industry, where you have long-term offtake contracts, and the gas industry, where we have literally year-on-year contracts," Sinha explained. "The buyers are often gas industry purchasers used to short-term contracts. Here, you're trying to push them to 20-25-year contracts, and that's a bit of a stretch too far for them."

With a renewable energy portfolio of 17.4 GW as of December 2024, including 10.7 GW of commissioned capacity, ReNew has a 100,000-mt/year renewable ammonia project in the eastern Indian state of Odisha where FEED study is nearing completion.

Market evolution

Despite these challenges, ReNew remains actively engaged with future off-takers globally, including H2 Global in Europe and buyers in Japan and South Korea, helping to shape tender structures.

"We were involved with H2 Global for almost a year before that first bid came out," he said. "We try to tell them what the right structure of the bids is, the PPAs, [and] who should take what risk."

Different regions are taking varied approaches to hydrogen adoption. European subsidy allocations have come with "onerous" conditions, while Japan and South Korea are initially focusing on 'blue' or low-carbon hydrogen rather than renewable hydrogen that India wants to produce.

"In Europe, they decided to go down the subsidy path, but those subsidies have been moving very slowly. For example, in the German auction, they were giving PPAs only for seven years," he said. "Seven years is not sufficient because ultimately, you're making an investment for 20-25 years," he said.

Despite current delays, Sinha remains optimistic about the industry's long-term prospects, predicting that by 2030, "there will be a few projects out there that would have got done" with greater uptake following as costs decline.

Regarding potential impacts from US trade tariffs on renewable equipment, Sinha expressed little concern for India's position, noting the country's self-sufficiency drive for renewable energy components.

"I don't think we get impacted at all, simply because all the wind turbines are already made in India. All the solar modules and solar cells are also now being made in India," he said, adding that electrolyzer demand remains limited globally as renewable hydrogen deployment lags earlier commitments.

Varying cost of renewable hydrogen

Sinha emphasized multiple factors determine the final cost of production of renewable hydrogen. "Today, solar energy costs about Rupees 2.5/kWh ($0.03/kWh) and wind about Rupees 4/kWh, but the cost of renewable hydrogen is primarily determined by its production location," he explained.

Production costs vary significantly depending on proximity to demand centers, transmission infrastructure requirements, and whether 24/7 supply, necessitating storage is needed. "I don't think that $2/kg is any sort of sacrosanct, magic number," he added, rejecting the notion of a universal price point.

For India to achieve its ambitious 500 GW renewable capacity target [217 GW currently] by 2030, Sinha identified several critical challenges: "The grid has to be built out fast. The transmission infrastructure and the distribution infrastructure, grid management in terms of storage has to be also built out."

He also highlighted the significant physical work required to secure land and build solar farms and wind turbines, calling it, "not an insignificant task."

On whether India will meet its renewable hydrogen targets, Sinha remains cautiously optimistic but acknowledged the uncertainty around project timelines and government initiatives.

As for ReNew, "we intend to be very constructive participants in the green hydrogen space," he concluded.

Platts, part of S&P Global Commodity Insights, assessed Oman hydrogen produced via alkaline electrolysis -- including capital expenditures -- at $5.00/kg on April 23, down 4.21% month over month.

Japan hydrogen produced via alkaline electrolysis -- including capex -- was assessed at $5.90/kg on April 23, up 25% month over month.