Green Hydrogen: Overview of Benefits to the Economy and Environment 

Published in February 2023 issue of Chemical News

Background

In recent decades, with economic development and the rapid increase in the demand for energy, global climate change is becoming the biggest challenge that the world faces.  The solution lies in the reduction of carbon emissions.  In order to achieve this on a long-term basis, various measures are taken at the global level such as improvement in energy efficiency, increased share of renewable energy, carbon capture and increased carbon utilization.  With increasing importance attached by the international community to fighting climate change amidst pressing energy revolution, green hydrogen and its derivatives have become vital in this decarbonisation drive.

Many developed countries including the United States and the European Union have already formulated relevant policies and plans for using and developing hydrogen energy.  The energy transition policies and carbon neutrality goals of various countries clearly indicate that the pace of the global transition to clean and low-carbon energy is significantly accelerating. Supported by the global consensus and efforts of the international community, Germany France, the United States of America and the United Kingdom amongst others, have incorporated carbon neutrality into their national legislation. Japan, South Korea, Singapore and Australia have also made strategic commitments to carbon neutrality.

India, too, formulated its Green Hydrogen Mission policy in January 2023, wherein emphasis is given to the domestic manufacturing of electrolysers and the production of green hydrogen. A budget of over US$ 2 billion is reserved for this initiative. This move is a step towards making India a global hub for green hydrogen production, which will not only be a step towards clean energy transition and India’s goal of achieving net Zero by the year 2070 but will also boost the Indian economy through the creation of jobs for a large population in the entire green value chain from renewable power generation to green hydrogen to green ammonia (energy carrier for green hydrogen).

As a result of various policies related to green hydrogen being announced by different countries, the energy sector is expected to witness a paradigm shift in the near future. The modern coal and chemical industry is accelerating its greening and energy transformation has become a top priority. 

Introduction

Hydrogen can be consumed through either direct combustion, electricity generation through fuel cells or is used in industrial processes as a chemical feedstock. Direct use includes industrial processes in iron and steel plants and refineries; transportation fuel for light-duty vehicles, buses, trucks, trains, and potentially shipping and aircraft; power sector storage and grid balancing and for co-firing in thermal power plants. Hydrogen is essential as a chemical feedstock for the production of ammonia (used in the fertiliser industry), in refineries in various hydrotreating/de-sulfurisation processes of crude oil to make petrol and diesel, and in methanol production.

Its industrial chain can broadly be divided into three segments: upstream hydrogen production, midstream hydrogen storage and downstream hydrogen use. In view of the different hydrogen production pathways, hydrogen sources can be divided mainly into ‘‘grey hydrogen”, ‘‘blue hydrogen” and ‘‘green hydrogen”. The main energy source for ‘‘grey hydrogen” is fossil fuels and the hydrogen production process is accompanied by the production and emission of carbon dioxide. In a modification of the ‘‘grey hydrogen” production method, if the by-product carbon dioxide is captured, used or stored, then the resultant process is termed ‘‘blue hydrogen” production. If hydrogen is obtained by electrolysis of water through renewable energy sources, such as wind energy, solar energy, biomass energy and other green sources, then it is classified as ‘‘green hydrogen”.  Table 1 shows the classification of hydrogen based on colour coding and also clarifies the other information that includes the method of production, Green House Gas (GHG) emissions, carbon capture, and cost of production.  The estimated cost of grey hydrogen in India is around ₹150–200/kg and with the cheapest renewable power; the cost of green hydrogen is around ₹350/kg

Green hydrogen is a critical piece of the energy transition to achieve economy wide net zero emissions. As industrial feedstock/process gas, green hydrogen can substitute grey hydrogen (derived from fossil fuels) used in oil refineries, fertiliser plants, methanol-producing chemical plants, and the treatment of metals. As an energy carrier, green hydrogen can also be used for blending with piped natural gas (PNG) used in domestic, commercial and industrial applications, electrification of heavy-duty long-haul transportation such as trucking and maritime shipping through hydrogen fuel cells, energy storage coupling with renewable rich power systems etc.

Hydrogen Demand in India

Approximately 5.5 million tons of grey hydrogen was consumed in 2018-19 for various industrial purposes like petroleum refining, manufacturing of ammonia for fertilisers, methanol production, treatment and production of metals etc. Most of this hydrogen is currently sourced from fossil fuels through the process of steam reforming of natural gas, naphtha etc. The chlor-alkali industry also produces hydrogen gas as a by-product. Some hydrogen is produced by the electrolysis of water using grid electricity for specific applications.

Table 2 indicates the industry-wise break-up of hydrogen consumption in 2018-19.

Figure 1 gives the projected demand for hydrogen for Ammonia Products in Fertiliser Industry in India. It is expected to grow at a rate of approximately 3% per annum over the next 3 decades.  Out of the expected demand in the 1^st decade, it is estimated that ~0.2 million ton will come from green hydrogen out of an incremental increase of ~1.5 million tons.

Figure 2 provides a demand forecast from the oil refining Industry in India for the desulfurization of fuels.  It is expected to grow at approximately 2.2% over the next 3 decades. Out of the expected demand in the 1^st decade, it is estimated that ~0.2 million ton will come from of green hydrogen out of an incremental increase of ~0.6 million ton.

A small quantity of hydrogen, amounting to 0.3 million ton, is already being consumed for steel production.

Green Hydrogen Demand Outlook

National Hydrogen Mission targets the production of 5 million tons of green hydrogen with a possibility to double the capacity by 2030.  Purely based on cost-competitiveness, green hydrogen is expected to dominate the hydrogen market in the long run. Even in the 2030 timeframe, green hydrogen can play a significant role in both existing brownfield consumption and new greenfield investments. Almost 94% of hydrogen demand in 2050 can be met by green hydrogen, up from 16% in 2030. The cumulative value of the green hydrogen market in India could be $8 billion by 2030 and is expected to rise rapidly in the subsequent 2 decades.  Figure 3 shows the industry-wise demand forecast for green hydrogen in India.

Industrial Sectors

Going forward, industrial sectors will drive the demand for green hydrogen in the long term.  The industrial sectors that are likely to adopt green hydrogen as feedstock and drive demand in the long term are:

·         Ammonia production

·         Iron and steel production

·         Crude oil refining

·         Methanol production

Price parity between green and grey hydrogen production will determine the speed and scale of transition.

Process Heating

Another application for use of green hydrogen is in process heating such as blending in piped natural gas grids (~15%), industrial boilers, furnaces and heating applications, domestic cooking and other commercial end uses.

The demand for green hydrogen as an energy carrier for process heating applications will depend on the economics of appropriate blending concentrations in existing pipelines and the creation of dedicated infrastructure in the long term. Any introduction of a hydrogen blend concentration in existing gas grids would require extensive study, testing, and modifications to pipeline integrity monitoring and maintenance practices. Additional costs incurred must be weighed against the benefit of providing a more sustainable and affordable energy carrier to end users. The benefits of blending, the extent of the natural gas pipeline network, the impact on end-use systems, safety, material durability, and integrity management, leakages, and downstream extraction need to be studied thoroughly before taking decisions. 

Significant investment in hydrogen transportation and distribution infrastructure will be required. Hydrogen embrittlement is a major technical challenge for the durability of blending in existing pipelines.  Technical and regulatory barriers need to be addressed with the adoption of robust standards.

Transport Sector

Transport sector demand for green hydrogen will be limited to long-haul heavy-duty trucking, maritime shipping, and high-speed long-haul passenger ferries, boats, and cruising applications. Development work is also going in hydrogen-powered Fuel Cell Electric Vehicles (FCEV) passenger cars, which are now available in the market.

Green Hydrogen – Economic Perspective in Indian Context

Cost of Green Hydrogen

For India, the momentum currently surrounding the hydrogen transition efforts needs to be situated within the context of a low-carbon economy, energy security and the larger economic development ambition of the nation.  India’s thrust towards a low-carbon economy currently hinges on an accelerated transition towards a higher share of renewables in the electricity grid complemented by electrification of end uses such as transportation. But there is a tacit recognition that sectors critical to industrialisation and urbanisation such as steel, ammonia, cement and plastic have no substitutes and cannot be decarbonised with electricity alone. Green hydrogen is a necessary lever to achieve a truly low-carbon economy.

For India, this transition can be synergistic with the scale, ambition and economic competitiveness of its renewable industry. Unlike fossil fuels which have resource and geography constraints, green hydrogen can be produced anywhere there is ample renewable potential. India is blessed in that aspect and already enjoys the advantage of one of the lowest-cost renewable energy generators in the world.  This will enable the emergence of an energy carrier that is domestically produced, reducing the dependence on imports for key energy commodities like natural gas and petroleum.

Green hydrogen prices are determined largely by the cost of electrolysers and electricity. Beyond that, there are the operating costs, transmission and distribution (T&D) costs, and wheeling charges for electricity as well as specific local duties and taxes like the goods and services tax (GST) in India. As a part of the green hydrogen mission, the Indian Government has announced the waiver of T&D and wheeling charges as well as allowed banking of renewable energy, which will help in bringing down the cost of production of green hydrogen. The supply chain model, distance to the demand centre, system design, and utilisation factor are additional factors that strongly influence the delivered cost of hydrogen.

The cost of hydrogen from electrolysis today is relatively high, between around $4/kg and $7/kg depending on renewable energy prices and various technology choices and the associated soft costs. Renewable energy contributes to 70% of green hydrogen costs. With an expected price decline for both renewable energy as well as electrolysers, NITI Aayog analysis indicates 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.  Figure 4 provides the projected price trajectory of green hydrogen production-based solar power and decline in electrolyser and renewable costs.

The conclusion is clear. Green hydrogen can become competitive with grey hydrogen by 2030, if not earlier. Additional factors such as a potential carbon price on fossil fuels could also aid in the cost competitiveness of green hydrogen.

Domestic Manufacturing Opportunity in India

The global market for electrolysers is dominated by alkaline and polymer electrolyte membrane (PEM) technologies as well as other technologies like solid oxide and anion exchange membranes nearing commercial deployment. Research is also going on to utilize seawater directly for green hydrogen production, however this is at a very nascent stage at this moment.

The fundamental components of the electrolyser consist of the stack and a large array of balance of plant (BoP) components. The actual splitting of water into hydrogen and oxygen occurs at the stack level and is supported by the various systems that fall collectively under the BoP.  Although the stack contributes close to 50% of the total cost of both PEM and alkaline electrolysers, the balance of plant (BOP) remains the predominant cost contributor for both electrolysers.  The stack, power supply and water circulation system make up more than 80% of the cost. Power supply alone accounts for 20–30% of the total system cost of electrolysers today.

a. Stack Manufacturing

When it comes to stack manufacturing, India’s initial positioning is limited by import dependence for metals like platinum, iridium and even nickel. Even for new technologies like solid oxide electrolysers, critical materials are in short supply globally and almost 95% comes exclusively from China. This import dependency reduces near-term competitiveness, challenging private sector interest in developing stack manufacturing capabilities within the country. In the longer term, the country can still leverage its expected growth in domestic green hydrogen demand to encourage private sector interest. There are already partnerships being formed by few of the Indian companies for technology development and manufacturing of hydrogen electrolysers in India at competitive prices.  

b. Balance of Plant

Given that power supply, water circulation and hydrogen processing units’ account for 50% of the electrolyser costs and with the potential for further cost reduction, India still can grow its position in the global electrolyser market by emulating the progress it is making in the electronics space. Efforts are being made for development of fully integrated solar photovoltaic manufacturing facilities to be built in India as well as advanced energy storage systems e.g. Sodium ion batteries vis-à-vis lithium ion batteries are also being explored.

Benefits to Indian Economy

The National Green Hydrogen Mission will lead to economy-wide benefits through the decarbonisation of industrial, mobility and energy sectors; reduction in dependence on imported fossil fuels; development of indigenous manufacturing capabilities; creation of employment opportunities across the value chain and development of cutting-edge technologies and innovation ecosystem in the country.

When looked at from an energy security perspective, domestically produced green hydrogen can translate to a net energy import savings of $246–$358 billion cumulatively between 2020 and 2050 ($3–$5 billion between 2020 and 2030 alone). This is on account of a reduction in both natural gas imports as grey hydrogen is replaced with green hydrogen and oil imports as long-haul freight transitions to hydrogen fuel cells trucks.

As per the aim of the Green Hydrogen Mission, it is estimated that the ecosystem for green hydrogen will create substantial investment and employment opportunities. The production capacity targeted by 2030 is likely to leverage over 8 lakh crore in total investments and create over 6 lakh jobs.

Further, government must explore integrating hydrogen into existing energy and industrial partnerships globally. A global demand of over 100 million tons of green hydrogen and its derivatives like green ammonia is expected to emerge by 2030. Many countries are likely to rely on imports due to constraints on land and renewable resources required to produce green hydrogen domestically. Aiming at about 10% of the global market, India can potentially export about 10 million tons green hydrogen/green ammonia per annum.

Benefits of Green Hydrogen to Environment

Transition to green hydrogen has significant impact on the greenhouse gas emissions of the hard-to-abate sectors. Cumulatively, between 2020 and 2050, India can abate 3.6 giga tons of CO₂ emissions compared with a limited hydrogen adoption case. While industrial feedstock is an easier market, the majority of long-term decarbonisation potential lies in steel followed by heavy-duty trucking, since their scale of demand is much higher.

Refinery

India’s refinery sector is the fourth largest in the world in terms of capacity, processing almost 250 million tons of crude oil yearly, accounting for almost 3 million tons of hydrogen demand, representing 46% of the total hydrogen demand in the country. The majority of this hydrogen is generated from on-site SMR plants, which amount to 27 million tons of CO₂ emissions currently, which are expected to rise to 47 million tons by 2050.  However, the refinery sector can witness a dramatic decrease in CO₂ emissions through a higher uptake of green hydrogen. As per NITI Aayog Report, Green hydrogen uptake in the refinery sector is estimated to start around 2024 at a 1% share, which can reach 24% by 2030 and 100% by 2050. This will enable close to zero CO₂ emissions from hydrogen production by 2050 and cumulative CO₂ emissions savings of 820 million tons between now and 2050.

Fertiliser

With a growing need for fertiliser in the future, ammonia demand is set to double in the next three decades, increasing from 17 million tons in 2020 to 35 million tons by 2050. This directly translates to CO₂ emissions of 40 million tons in 2020, increasing to 62 million tons by 2050.  As per NITI Aayog’s Report, in the efficient scenario with a higher uptake of green hydrogen, India can abate around 550 million tons of CO₂ emissions cumulatively between 2020 and 2050.

Iron and Steel

India is currently the second largest producer and consumer of steel, after China. With India witnessing rapid growth in urbanisation, infrastructure buildout, economic growth, and demand for cars and trucks in the coming decades, steel demand is expected to increase fivefold between 2020 and 2050 (93 million tons in 2020 to 528 million tons in 2050). Currently, emissions from steel production account for a significant share of 11% of total CO₂ emissions and 45% of industrial CO₂ emissions in India. With an increasing demand for steel and use of carbon-intensive processes and rising exports, emissions from the steel sector in India will rise from 269 million tons in 2020 to 951 million tons by 2050.  Using green steel can help India abate 1.4 giga tons of cumulative CO₂ emissions between 2020 and 2050. Green steel will account for 20% of total steel demand and can substitute 98% of natural gas-based Direct Reduced Iron (DRI) steel demand by 2050.

Long-Haul, Heavy-Duty Road Freight

Road freight is an essential pillar of the overall freight transport sector, contributing to 71% of freight movement and 95% of freight-related CO₂ emissions. Although heavy-duty vehicles (HDVs) represent only 20% of total freight vehicles on the road, they are the biggest contributor towards India’s road freight movement, hauling over 74% of road freight. They are also the biggest emitter, producing 60% of road-freight CO₂ emissions, which is expected to increase to 66% by 2050.  Electrification of HDVs can help reduce shipping and logistics costs, improve air quality, and reduce carbon emissions. Between 2020 and 2050, India can abate 2 giga tons of CO₂ emissions (0.7 giga tons from fuel cell electric trucks and 1.3 giga tons from battery electric trucks) and save $208 billion on oil import bills by transitioning to electric.

Figure-5 summarises reduction in CO₂ emissions in 2050 due to uptake in green hydrogen in various industrial sectors.

Conclusion

India has a large growing population and economy, but has limited availability of fossil fuels to fulfil its energy demands. The consumption of fossil fuels also contributes to the heavy emission of greenhouse gases. A large number of vehicles that are based on petroleum are the major reason for increased oil imports in India. To reduce the environmental pollution and oil mports in India, there is a need to look for an alternate fuel for the transport sector. Considering the need to search for an alternate fuel, the context focuses on the opportunities offered by green hydrogen economy and related challenges. 

While the use cases for hydrogen are not a new revelation, the emerging momentum is a recent phenomenon and hinges on hydrogen’s role as an energy carrier crucial for achieving deep decarbonisation of hard-to-abate sectors. Existing low-carbon technologies and techniques such as solar, wind, Li-ion batteries and energy efficiency are contributing to the decarbonisation of various sectors such as power generation, buildings, and light transportation. However, carbon-free hydrogen will play a critical role in decarbonising certain end-use sectors such as iron ore and steel, fertilisers, refining, methanol, and maritime shipping, which emit major amounts of CO₂. For other high-emitting sectors, such as heavy-duty trucking and aviation, hydrogen is among the main options being explored with an outlook to be the preferred solution for several applications.

The concept of green hydrogen economy brings many opportunities for India to become energy independent. For the last decade, India is constantly focusing on growing its renewable energy capacity by taking advantage of its geography. Integrating hydrogen production with these renewables can scale up the green hydrogen production in India. India can take the advantage of its renewable energy scenario and can scale up its hydrogen production facilities. The mass production offers India an opportunity to export green hydrogen and hydrogen-embedded products like green steel, green ammonia and biomass gasification based green methanol to other nations. Green hydrogen when used with fuel cells can help India significantly reduce its oil imports and environmental pollution. Renewable energy in India provides the opportunity to produce green hydrogen and develop hydrogen infrastructure, but many challenges still need to be solved for adoption. These challenges include hydrogen production cost, storage, transportation, policies, regulations, public awareness etc. 

REFERENCES

1.      “National Green Hydrogen Mission”; Government of India - Ministry of New and Renewable Energy; Jan. 2023.

2.      “Harnessing Green Hydrogen Opportunities for Deep Decarbonisation in India”; Kowtham Raj (NITI Aayog), Pranav Lakhina (RMI) and Clay Stranger (RMI); Niti Aayog-RMI Report, June 2022.

3.      “A Green Hydrogen Economy for India - Policy and Technology Imperatives to Lower Production Cost”; Tirtha Biswas, Deepak Yadav and Ashish Guhan Baskar; Council on Energy, Environment and Water (CEEW) Policy Brief; December 2020.

4.      “Significance of Hydrogen as Economic and Environmentally Friendly Fuel”; Shashi Sharma, Shivani Agarwal and Ankur Jain; Energies 2021, 14, 7389.

5.       “Accelerating Green Hydrogen Economy”; Report prepared by SED Fund and EY India; June 2022.

6.      “Green hydrogen economy and opportunities for India”; Ujwal Sontakke and Santosh Jaju; IOP Conf. Ser.: Mater. Sci. Eng.; 1206 (2021) 012005.