The production of green hydrogen is rapidly gaining momentum as countries around the world are striving to decarbonize their economies. In India, the government has set a target of producing 10% hydrogen from renewable sources by 2030. To achieve this target, the government is actively promoting green hydrogen production and has announced several policy initiatives to support the development of this sector.
Recently, the Rocky Mountain Institute (RMI) published an analysis on the economics of green hydrogen production in India, which highlights the potential for producing price-competitive green hydrogen and creating a market for it. The RMI analysis suggests that green hydrogen production in India is more beneficial than the production of grey or blue hydrogen due to India’s competitive levelized cost of electricity (LCOE) for solar and wind power.
The report also points out that the cost of hydrogen from electrolysis today is relatively high, ranging from around $4.10/kg to $7/kg depending on various technology choices and associated soft costs. The cost of hydrogen is mainly determined by the cost of electrolysers and electricity. Other factors such as operating costs, transmission and distribution costs, specific local duties and taxes, supply chain model, distance to demand center, system design, and utilization factor also significantly influence the delivered cost of hydrogen.
However, the RMI analysis suggests that soft cost elements, such as duty waiver and reduction of goods and services tax (GST) and transmission and distribution (T&D) charges, can help reduce green hydrogen production costs today, spurring market development. The report proposes that reducing renewable power tariffs for hydrogen production can also help reduce production costs.
The report further projects the expected price decline for both electrolysers and renewables, indicating that in the best-case scenario, the cost of green hydrogen can fall to approximately $1.60/kg by 2030 and $0.70/kg by 2050. The conclusion is clear: green hydrogen can become competitive with grey hydrogen by 2030, if not earlier.
The analysis by RMI also compared the economics of green hydrogen production with natural gas-based and coal-based hydrogen production. The report found that green hydrogen is cost-competitive with natural gas-based hydrogen today, while coal-based hydrogen production is not economically viable due to high carbon dioxide emissions and associated costs. The report highlights that while natural gas-based hydrogen production is currently the most cost-competitive, the carbon footprint associated with it makes it an unsustainable option in the long run.
The report also suggests that renewable-to-chemical (RTC) renewable arrangements are cost-competitive today and in the near-term, but there is a longer-term potential for green hydrogen generation from standalone renewables.
In conclusion, the RMI analysis presents a compelling case for the economic viability of green hydrogen production in India. The report highlights the potential for reducing green hydrogen production costs through soft-cost elements, such as duty waiver and reduction of GST and T&D charges, and suggests that reducing renewable power tariffs for hydrogen production can also help reduce production costs. With the government’s support and the potential for green hydrogen production to become cost-competitive with grey hydrogen by 2030, India is well on its way towards achieving its target of producing 10% hydrogen from renewable sources by 2030.