Ey Unlocking Indias Green Hydrogen Ambitions
Ey Unlocking Indias Green Hydrogen Ambitions
Ey Unlocking Indias Green Hydrogen Ambitions
green hydrogen
ambitions
Shifting global focus towards hydrogen
Hydrogen is a versatile source of energy that can contribute in decarbonization of global economy if produced using
low-carbon emitting sources. The Government of India has recently shown interest and inclination towards
developing Hydrogen as a future fuel and feedstock. The objective of this point of view paper is to bring insights
from global hydrogen ecosystem, their key challenges and recommendations for India.
Hydrogen – the missing link: It has been realized that hydrogen will act as a critical enabler to achieve the global
targets to limit the increase in temperature to 1.5-degree Celsius, adapt to adverse impacts of climate change and
fostering low greenhouse gas emissions development. In 2020, there was an inescapable excitement around
hydrogen. Globally, countries are proposing ambitious targets, pilot projects and huge amount of investments
towards creating hydrogen ecosystem.
~ US$70b ~ 20 countries
Government support to Announced sales ban on ICE
transition to hydrogen vehicles before 2035
8 projects
5 projects
24 projects
228
Total projects
u Decarbonization targets: Under the Paris agreement, u Energy security: The global pandemic
countries have pledged to reduce national emissions and has taught the nations to diversify
impact of climate change through “Nationally determined their energy demand as well as their
contributions (NDCs)” targets. It will help limit global geographical availability. The
temperature rises to 1.50C. However, to meet such ambitions fluctuations in the oil & gas market
targets, countries will have to install large number of have disrupted supply-demand chain
renewable energy systems. It is also essential to find an and causes variation in the fuel cost.
alternative fuel for applications where direct electrification is Developing countries like India needs
not feasible. Hence, hydrogen could be a viable fuel with huge to find out an alternative to strengthen
potential to achieve global decarbonization targets. it’s national energy security.
u A complementary solution to renewable energy: Renewable u Emission targets: India is the third
energy technologies have witnesses tremendous growth both largest global CO2 emitter (~7% of
in terms of technical and financial feasibility. It is required to global CO2 emission) well below China
store and utilize excessive energy produced during generation & United States. It has also committed
hours. Hydrogen can be the missing piece to complement to reduce its emissions intensity by
renewable energy systems. 33-35% under the Paris Agreement.
u Supporting grid load management via storage solutions: The u Economic dependencies & balance of
grid load requirements and better grid resiliency due to trade: India is the world’s third largest
increasing distributed renewable energy installations can be crude oil importer with import
managed with green hydrogen based energy storage system. dependency of more than 80%. It also
imports 54% of natural gas and 24% of
u Decarbonization of hard-to-abate sector: Hydrogen is a coal requirements which largely
potential fuel and feedstock to reduce carbon intensities of affects India’s financial account
sectors such as transportation, industrial and residential balance. India’s oil import bill in FY20
applications. and FY19 was approx. US$101.4
u Technological advancement: There is a significant billion and US$111.9 billion,
improvement in the efficiency of electrolyzer and fuel cells respectively.
technologies. u Energy Subsidies: Along with the high
u Falling technology cost: The cost of hydrogen produced from cost of imported fuel, India gives away
the electrolysis has fallen by ~ 60% since 2010. Also, the price overall energy subsidies of approx.
of Fuel Cell Electric Vehicles has declined by ~ 65% over the US$30 bn / year on oil & gas, coal,
past 10 years. transmission & distribution, renewable
energy and electric vehicles. Some
proportion of these subsidies can be
diverted for the development of
hydrogen ecosystem.
Water electrolysis, 4%
Coal gasification, 18%
Insights
u Hydrogen can be obtained from fossil fuels, biomass, as well as a combination of water & renewables.
u Natural gas is now the most common source of hydrogen generation, accounting for roughly three-quarters
of the total dedicated hydrogen production of around 70 million tonnes per year.
Color
Type Black/brown Grey hydrogen Blue hydrogen Turquoise Pink hydrogen Green
hydrogen hydrogen hydrogen
Currently, most of the world’s hydrogen is being produced from natural gas and coal. When hydrogen is produced
using renewable energy sources, it is termed as green hydrogen. Water electrolysis is most matured technology
to produce green hydrogen.
Process input f or
iron reduction
Iron and 1.3 Gt
Ship steel
Solar
energy Process input
Petrochemical f or f eedstock 0.6 Gt
and chemical production
Conv ersion
industries
Train
Electricity Flow of pure H2 Flow of converted H2 Fuel cell Direct combustion Feedstock
Current hydrogen demand in India
6 Mt
0.9 0.9
1.5 1.5
Grey
3.6 3.6 hydrogen
Insights
u Industry sectors such as refineries and fertilizers accounts for major hydrogen demand in India mainly
through grey hydrogen.
u Grey hydrogen is largely produced by natural gas therefore, emitting huge amount of CO2 emissions.
u Hydrogen can be useful in the applications that require high temperatures (above 250 degrees Celsius),
especially in the chemical, iron and steel industry . In such cases, hydrogen can serve as an excellent
alternative to other energy sources.
u Also, It is essential to promote usage of hydrogen in sectors where direct electrification is not feasible.
NDC’s on Target
87%
2%
9% 2%
of total H2 of total H2 of total H2 of total H2 Estimated H2 demand
demand by 2030 demand by 2030 demand by 2030 demand by 2030 and probable
Electrolyser Capacity
by 2030
Industrial Energy Pow er Transport Residential and Buildings
H2 demand
and Feedstock 15- 20 MT; 50% export
It can be utilized as the energy It an be transported as a FCEV and H-CNG as f uel
potential
Use of Hy drogen as
Feedstock and f uel f or carrier f or generating electrical pressurized gas or a cry ogenic f or transport
industrial applications power with hy drogen f uel cells liquid and can be combined in Heating and cooling Electrolyser capacity
and hy drogen combustion an absorbing metallic alloy applications in buildings 120-150GW
engines matrix.
Production cost for green hydrogen is projected to
decline rapidly over the next decade
212
143 153
128 146
110 103
80 89
66 58 56 71
51 45 58 59 1.99
23 27 29 29 29 32 35 37 39 48 52 56 58 58 70 73 75
U.S.A
Australia
Indonesia
China
Brazil
Philippines
Japan
S.Korea
Mexico
Vietnam
Spain
Germany
Thailand
Malaysia
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
India
U.A.E
Chile
Falling price of electrolyser Reducing renewable LCOE Probable Green Hydrogen cost
Optimistic scenario
Electrolyzer Cost (USD mn/kw)
Basecase scenario
1800 60
production costs (US$/kg)
Solar LCOE (USD/MW)
+
Green hydrogen
50
3.5
45 2.5 2.5
400
2
1.4
2021 2030 2021 2026 2030 2021 2026 2030
Since, India has cheapest renewable LCOE, It is essential to drive down the LCOH through capacity building of below
mentioned points :
1. Enhance domestic manufacturing: To support domestic manufacturing, government should come up with policy
interventions and provide incentives and subsidies for electrolyser manufacturing. The manufacturing scheme
such as production-linked incentives can be extended for localized manufacturing of electrolysers in a phased
manner.
2. Economies of scale: It is very essential to create enough hydrogen demand so that, the supply-side will
penetrate at a much faster rate. It will require mass-production of electrolyser that can help in driving down its
price and reaching at cost-parity with fossil fuel-based hydrogen.
Challenges
u Levers for commercial affordability of
green hydrogen can be achieved by
reducing the cost of electrolyser
Cost of green hydrogen production (economy of scale), improving utilization
(economic feasibility) (through incentivizing and aggregating
demand reducing input cost of electricity
(by ensuring availability of low-cost
renewable power)
Recommendation
Insights
3 u 85% Hydrogen is produced and
consumed on-site globally.
u In India, Hydrogen delivery can be
mainly by two modes of transportation,
Cost (US$/kg)
u Pipelines are the cheapest option for hydrogen distribution in local or regional networks (up to 5,000 km):
u Retrofitting is likely the cheapest option, but will depend on existing technical capabilities.
u Transmission will play a critical role in determining where hydrogen is produced:
u In case of an on site installation, transmission takes ~20% of the total price of supply.
u For regional distribution, the infrastructure can represent up to ~50% of the total cost.
u For long range distribution, the infrastructure can represent up to ~75% of the total cost.
Challenges Recommendations
u Hydrogen can be a new commodity for trading in the same way as oil &
Financing & Trading
gas are traded today
Transport
Forklift and Equipment
Cars
Trucks and Buses
Metro and Railway
Marine
Air
Industry feedstock
Refining
Ammonia
Petrochemicals
Steel
CHP
Blended Hydrogen Heating / Cooling
Pure Hydrogen Heating / Cooling
Industrial energy
High Grade Industry Heat
Medium – Low Industry Heat
Power generation
Renewable Energy Generation Areas
It is highly debatable to discuss the adoption of fossil fuel based hydrogen rather than green hydrogen. But,
both blue and green form of hydrogen will be necessary to drive hydrogen based economy. The path for
deployment of hydrogen will require an amalgam of technological maturity and its cost competitiveness with
other existing methods. Electrolysis is a matured technology but, the cost associated with production of green
hydrogen is many times higher than blue or grey hydrogen. This will impact its deployment at an early stage of
value chain development.
Also, India aims for 100 million tonnes of coal gasification by 2030. Therefore, India has an opportunity to
support blue hydrogen using carbon capture, utilization and storage technology. A minimum subsidy can also be
allocated for the same and this will create enough hydrogen demand and infrastructure for green hydrogen to
enter the market.
Eventually, Green hydrogen will come and utilize existing storage, transmission and distribution infrastructure.
Short-Term Long-Term
2021
Grey Hydrogen
2025
Blue Hydrogen
2030
Green Hydrogen
It is required to analyze the entire green hydrogen value chain before transitioning towards a new fuel type. Following
are the key factors that are required to be considered with reference to green hydrogen penetration in India :
Hydrogen production
Skill development
1 pathways and
infrastructure
development
6 2
Value
chain
5 3
Industry partnership Regulatory & policy
and pilot programs support
4
Developing domestic
applications
5 u
PPP
Identify hydrogen valleys, initiate and
u Tata motors, in collaboration with Indian Oil
Corporation, developed country’s first
implement pilot projects and demonstrations hydrogen fuel cell powered bus
u Tata Motors bags order for 15 hydrogen-
based fuel cell buses from Indian Oil
6 u Skilling and training for people in the related
industries Corporation.
Ernst & Young LLP is one of the Indian client serving member firms of EYGM
Limited. For more information about our organization, please visit
www.ey.com/en_in.
Ernst & Young LLP is a Limited Liability Partnership, registered under the
Limited Liability Partnership Act, 2008 in India, having its registered office at
22 Camac Street, 3rd Floor, Block C, Kolkata – 700016
EYIN2201-009
ED None
AGK