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Analysis: For green hydrogen to catch up with blue, it's a long ride in India

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Singapore — India has unveiled a national hydrogen mission to accelerate plans to generate the carbon-free fuel from renewables, but analysts said that green hydrogen will struggle to compete with fossil fuel derived hydrogen at least until the end of the decade on cost, potentially creating challenges in lifting demand.

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However, they added that the recent allocation of hundreds of millions of dollars in the federal budget for fiscal year 2021-22 (April-March) to push renewables is a signal that New Delhi is keen to speed up the process to embrace hydrogen as a fuel in a country which imports 80% of its crude oil requirements.

"The new mission will help to give a big push to green hydrogen. But as far as I can see, it will be a combination of blue and green hydrogen for many years," R. K. Malhotra, president of the Hydrogen Association of India, told S&P Global Platts.

"Until such time green hydrogen processes are fully developed, blue hydrogen can supplement overall hydrogen supply," he added.

In the federal budget, New Delhi pledged to focus on generating hydrogen from green power sources as well as build a more diverse and efficient energy infrastructure. It also said it would allocate an additional $344 million to institutions pushing solar and other renewable forms of energy.

Roman Kramarchuk, head of scenarios, policy and technology analytics at S&P Global Platts, said that from a cost perspective, S&P Global Platts Analytics saw solar PV in India being priced in the $30-$40/MWh range in the 2020 auction. At the lower end of that range, and assuming electrolyzer costs going down to $600/KW and running at 90% capacity factor, this suggests green hydrogen to be at $2.40 per kg.

"Taking our future expectations based on Platts West India Marker gas prices, the result would be that blue hydrogen costs would be below those levels. However there would be concerns about where to store CO2 produced from blue hydrogen," he added.

And from a decarbonization perspective, greater CO2 reductions can be achieved from having incremental renewable power displace coal-fired power on the grid than from using that power to produce hydrogen for other uses, he said.

Cost competitive

Hydrogen is produced predominantly through Steam Methane Reforming, or SMR, which utilizes fossils fuels, such as natural gas or coal, and through Proton Exchange Membrane Electrolysis, which splits water into hydrogen and oxygen using a current of electricity.

The Energy and Resources Institute, or TERI, based in India said in a recent report that currently all hydrogen consumed in India comes from fossil fuels. However, by 2050, nearly 80% of India's hydrogen is projected to be green – produced by renewable electricity and electrolysis.

"It is clear that green hydrogen will become the most competitive route for hydrogen production by around 2030," TERI said.

This would be driven by dramatic cost declines in key production technologies such as electrolyzers and solar PV. For example, the cost of alkaline electrolyzers is projected to drop from around Rupee 63 million/MW ($866,000/MW) currently to around Rupee 28 million/MW by 2030.

TERI said that hydrogen should be targeted at those sectors where direct electrification is not well-suited. Renewable electricity will be low cost but the speed of its deployment may be constrained by land acquisition. So it is important that it is used in the most efficient way possible.

And in the transport sector, battery electric vehicles would be competitive across all segments, limiting the role of hydrogen to long-distance and heavy-duty applications, TERI added.

Early mover advantage

Some of the biggest private sector energy firms such as Reliance Industries and Adani Group, are pushing ahead with their plans to make hydrogen a part of their portfolio.

Even India's biggest state-run refiner IOC is also nurturing a dream to make it big in hydrogen. The company is working on technology to develop hydrogen-spiked compressed natural gas, or H-CNG, which would involve partly reforming methane and CNG. Under this process, the entire CNG of a station passes through this new reforming unit and part of the methane gets converted into hydrogen, with the outlet product having 17%-18% hydrogen.

And to give a further boost to plans on hydrogen-based mobility solutions, IOC has invited bids to procure 15 PEM fuel cell buses, an effort to address all aspects of the hydrogen value chain.

For this project, the fuel cell stack technology would be indigenously developed and manufactured, which would accelerate the creation of a local ecosystem. To facilitate the hydrogen supply for refueling these buses, IOC is also setting up demo units of about one mt per day production capacity for different pathways to produce hydrogen at its research center at Faridabad.

"The focus now is how to create demand for hydrogen. But I can say that so much has happened on the hydrogen front last year and so much will happen this year -- we had not seen anything like that in the past 20 years," Malhotra said.