India has targeted a leading role in the green hydrogen market, which could result in exports worth $3-5bn and import substitution worth $7-15bn over the next ten years, according to a report by Alvarez & Marshall.
The move is part of the country’s plan to reduce its reliance on imported liquefied natural gas (LNG) and boost domestic GDP growth through sustainable energy sources.
“For India, the case to aggressively support green hydrogen is strong,” said the report. “By moving early, we can stake a claim to a larger share of the global energy trade, substitute some of our imports, especially LNG, and spur domestic GDP growth.
“By 2030, this could lead to $3-5bn of exports and $7-15 of import substitution, opening the doors to a much larger opportunity in the decades ahead.”
However, India could need to scale up its outlay to $4-12 cumulatively in the run up to 2030, depending on how quickly costs fall.
“While this figure is large in absolute terms, it is small in the context of our economy and our oil import bill, which is estimated at a staggering $1-1.4 trillion over the same period.”
The global green hydrogen trade is expected to be worth between $24-34bn by 2030, led by export-focused countries equipped with ample supply of renewable resources such as Argentina, Australia and Chile.
The report also highlighted the focus on green hydrogen imports within the EU as part of its REPowerEU plan, a strategy which targets the import of ten million tonnes of green hydrogen from other countries in 2030.
Together with South Korea and Japan, Europe is expected to import 12m tonnes of low-carbon or green hydrogen by 2030.
The US and China are expected to have over 14m tonnes of low-carbon and clean hydrogen demand by 2030. However, due to their significant internal demand, neither country is expected to play a major role in the hydrogen export market by 2030.
According to the report, the green hydrogen suppliers countries will be key to bridging the supply of gas for importer countries. It suggests that the UAE, India and Saudi Arabia can provide low-carbon hydrogen at the lowest cost and will be competitively placed for supply in Europe, Japan and South Korea.
“The UAE is expected to produce the cheapest green hydrogen and green ammonia in 2030 across the ten countries analysed. India is expected to be second, driven by cheap renewable energy, low electrolyser costs and a depreciating currency advantage,” said a market expert.
Having recently announced its National Green Hydrogen Mission with an outlay of $2.3bn, India has previously outlined its strategy to accelerate its green hydrogen economy. By scaling up and reducing costs, India is aiming to secure a substantial market share in global supply markets.
To capitalise on its potential and create momentum for nascent green hydrogen projects, Alvarez & Marshall recommends that the government targets the creation of initial domestic demand for one million tonnes of hydrogen by 2027.
“This could be done in a transparent manner through public-private partnership models to design projects. Some of the sectors that should be targeted are refineries, fertiliser, steel and heavy-duty transport.”
It also suggests reducing production costs through supply-side interventions by de-risking projects through credible offtake guarantees, a contract for differences model to enable ‘round-the-clock’ renewables and reducing taxes on equipment.
The report claims that these strategies could lead to a reduction of approximately 45% in green hydrogen levelised costs. Challenges still exist, however, and India’s main challenges surround low incentive rates.
Earlier this month, the Institute for Energy Economics and Financial Analysis (IEEFA) revealed that incentive rates outlined by the Indian Government under its Strategic Initiative for Green Hydrogen Technologies (SIGHT) scheme fall short of other international mechanisms.
The levelised cost of hydrogen (LCOH) in India currently ranges between $4.5 – 6.3/kg, with an average incentive for the first three years of green hydrogen production set at $0.48/kg.
In comparison, the US’ Inflation Reduction Act (IRA) provides up to $3/kg for green hydrogen projects over ten years, while the European Hydrogen Bank is offering up to $4.9/kg.
“Considering the nascent stage of green hydrogen in India, bidders believe that higher incentives are essential to establish larger plants, benefit from economies of scale and gain a competitive edge, especially against global producers enjoying substantial incentives,” said the IEEFA report.
