Higher Demand, Lower Costs To Accelerate Green Hydrogen Adoption In India

With demand for hydrogen expected to go up, the outlook for adoption of green hydrogen in India appears positive, according to Nuvama Research. It said given green hydrogen's various use cases, it will also have wider applications going forward.

The projections are in line with the country's target to produce 5 million metric tonnes of green hydrogen annually by 2030.

Factors likely to drive green hydrogen adoption in India:

As per Nuvama Research, demand for hydrogen in the refining and fertiliser industries is likely to double by 2030. The refining sector is likely to account for 4.5 million tonnes of hydrogen demand annually by 2030, which will help make a smoother transition to green hydrogen in India, stated the brokerage.

Nuvama Research added that demand for green hydrogen in the refining sector is estimated to be 1.1 million tonnes per annum, which is 24% of the total sectoral demand for hydrogen.

Green hydrogen has wide application across sectors. As per the Council on Energy, Environment and Water, green hydrogen has the following use cases:

• As feedstock for refinery, fertilizer, steel and methanol sectors

• As fuel for trucks, buses, ships and airplanes

• As energy carrier for green ammonia

• For blending with natural gas

• As energy storage for the power sector

According to Nuvama Research technological advancements are expected to further boost green hydrogen demand in the steel and transportation segment in the long term. However, these pathways may not come to the mainstream until FY50, the brokerage said.

The Indian government is trying to make green hydrogen cheaper by reducing the overall costs of electricity and machinery used to make hydrogen. Lower costs will encourage adoption.

At present, the levelised cost of hydrogen — which is basically the price of producing one kg hydrogen — in India stands at $3.5−$5 in 2024, as per industry estimates. India aims to bring this cost down to $1.63 to $3.13 by 2030. As per Nuvama, the government plans to do so by:

• Cheaper Electricity: By making electricity used to produce hydrogen cheaper via tax removals. This can save about $0.96 per kg hydrogen.

• Cheaper Equipment: By making electrolysers, the machines that produce hydrogen, cheaper via tax breaks and other support, India can save about $0.29 per kg.

• Market Support: Industry estimates also expect wider use of hydrogen, to drive prices down, saving about $0.62 per kg.

Stocks that mainly benefit from green hydrogen adoption are companies that have won the government's green hydrogen capacity allotment as part of the Green Hydrogen Transition (SIGHT) Programme, which provided incentives to companies for building production capacity. The programme provided a major financial outlay of Rs 17,490 crore

Key winners in the listed space include Reliance Industries, Welspun Enterprises, Torrent Power, CESC, UPL, JSW Energy and Bharat Petroleum.