India's Green Hydrogen Mission: High On Ambition, Low On Resources
India”s green hydrogen mission is indeed ambitious, but it currently faces resource constraints that need to be addressed for it to reach its full potential. The Indian government”s vision to transform the country into a global hydrogen hub, producing 5 million tonnes of green hydrogen annually by 2030, is an admirable goal. However, several challenges need to be overcome.
The first federal-level green hydrogen tender, initiated under the National Green Hydrogen Mission, aims to incentivise green hydrogen production. While this initiative is commendable, the subsidies offered per unit of green hydrogen output are significantly lower than what Western countries provide. The Indian government”s tender has faced repeated delays and lacks the financial incentives needed to drive domestic demand and fuel investment across the green hydrogen value chain.
In comparison, countries like the United States offer substantial tax credits, and their bipartisan infrastructure law allocates significant funds to develop regional hydrogen hubs. This approach results in competitive production costs for green hydrogen, making the U.S. a major player in the global hydrogen market. Similarly, Europe offers attractive incentives for green hydrogen production.
The Indian industry body India Hydrogen Alliance (IH2A) has called for price support of $2 per kilogram for first-generation green hydrogen projects and $360 million in state support to establish national green hydrogen hubs across several states. While India may not match the financial prowess of Western nations, it could consider offering higher subsidies for lower production volumes to stimulate the green hydrogen industry.
The demand for hydrogen in India is expected to grow significantly, with green hydrogen potentially accounting for 80% of the total by 2050. Meeting this demand will require substantial investment in renewable energy capacity, particularly in electrolyzers for hydrogen production.
Although green hydrogen”s current production cost in India is around $3.50 per kilogram, the risk premium and market dynamics can drive the final price up to $6-$7 per kilogram. Overcoming these economic challenges and achieving the ambitious hydrogen production targets will be a multi-year effort.
To succeed in its green hydrogen mission, India needs to introduce additional support mechanisms such as procurement mandates and carbon taxes. Mandating industries to purchase green hydrogen can stimulate demand and ensure a return on investments. While there were initial plans to mandate green hydrogen purchases by key sectors, these mandates have been retracted, hindering the industry”s growth.
The focus on exporting green hydrogen should not come at the cost of domestic growth, where subsidies may ultimately benefit consumers in other nations. Striking the right balance between incentivising domestic and global markets is essential.
India”s green hydrogen mission is a worthy endeavour, but it requires significant enhancements in subsidies, mandates, and other support mechanisms to achieve its ambitious goals and secure a prominent position in the global green hydrogen landscape. Addressing these challenges will be crucial for India”s transition to a green energy future.
