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EXPLAINED: Green hydrogen and India’s new policy around it

EXPLAINED: Green hydrogen and India’s new policy around it
PolicyPolicy5 min read
Representative image    Canva
  • India currently imports 85% of its oil demand and the rise in crude oil prices directly increases import bill and expenses.
  • This ever-increasing demand for fuel and dependency on imported crude oil for domestic needs has made us wonder if there's an alternative solution to this problem.
  • Yes, there is. Hydrogen.
One thing that the entire country is worried about today is rising fuel prices that are burning a hole in our pockets.

Fuel prices are burning a hole in our pockets
Imgflip

The price of crude oil, which is used to make petrol and diesel, shot up after Russia – one of the major oil producing countries – went onto the battlefield with Ukraine.

India currently imports 85% of its oil demand and the rise in crude oil prices directly increases import bill and expenses. And crude oil prices have increased more than 50% in the last one year to $100 from $60 a year ago.

This ever-increasing demand for fuel and dependency on imported crude oil for domestic needs has made us wonder if there's an alternative solution to this problem.

Yes, there is! Hydrogen.

What is hydrogen and how can it be used as fuel?

Hydrogen is a clean energy alternative and can be made directly from fossil fuels or biomass, or it can be produced by passing electricity through water.

Green hydrogen (GH2) can be generated by breaking water (H20) into hydrogen and oxygen through the electrolysis of water. An electrical current is used to separate hydrogen from oxygen in water and it is extracted without generating any net carbon emissions.

This also means that the energy created from hydrogen does not release toxic carbon dioxide, which makes it one of many potential energy sources that could help reduce carbon emissions and slow global warming.

The process of producing Green Hydrogen
The process of producing Green Hydrogen      BI India research

This green fuel can be utilised as a source of energy in transport, electricity production, and industry activity. It can power anything that uses electricity including electric vehicles and electronic devices. It can also be used as a substitute for natural gas for cooking and heating within homes.

If the electricity needed for electrolysis is generated from renewable sources such as solar or wind, the production of green hydrogen does not emit any harmful gases unlike coal and oil. It only emits water vapour.

Hydrogen is also the most abundant element on the planet and offers tremendous promise for innovation. Hence, this is the most eco-friendly way of producing fuel.

This is why different countries are rushing to include green hydrogen in their clean energy initiatives. Government bodies around the world have been investing time and money for research into this sustainable source of energy. And India has also taken some steps towards clean energy.

According to market research and consulting organisation Precedence Research, the global green hydrogen market was valued at $1.83 billion in 2021 and is expected to hit over US $89.18 billion by 2030, poised to grow at a compound annual growth rate (CAGR) of 54% from 2021 to 2030. The report goes on to say that the Asia-Pacific region is the fastest growing region in the green hydrogen market.
Growth expectation for global green hydrogen market
Growth expectation for global Green Hydrogen market      Precedence Research

Not to forget, Prime Minister Narendra Modi had announced the Green Hydrogen Policy and this target of becoming net zero carbon emission by 2070, earlier this year, with the goal of making India a "green hydrogen hub," or a prominent producer and exporter of "green hydrogen."

The government policy is aimed at boosting green hydrogen production in the country, which can also reduce India’s dependence on importing over 80% of the oil and gas requirements.

The policy focuses on increasing dependency on cleaner forms of energy and abandoning fossil fuels. The policy says green hydrogen and green ammonia is one of the major requirements for reduction of emissions. The government believes hydrogen can play a huge role in shifting to clean energy.

It allows companies to easily set up the capacity to generate electricity from renewable sources such as solar or wind anywhere in the country.

The government is also planning to bring a production-linked incentive (PLI) scheme for manufacturing electrolysers for producing green hydrogen.

Large companies like Reliance Industries Limited (RIL), Adani Group, Larsen & Toubro (L&T) with multiple factories that release several forms of chemicals in some way or another will take advantage of the policy. In fact, they have laid out a roadmap already to enter the green hydrogen market.

Huge conglomerates like RIL have their own emission target of achieving net zero carbon emissions by 2035. In June 2021, RIL had also said that it is planning to invest $10 billion in renewable energy. To help make Gujarat net-zero carbon, Reliance proposes to invest $67.4 billion in the state over 10 to 15 years to set up a 100 gigawatt renewable energy power plant and green hydrogen ecosystem development.

  • Reliance Industries has announced to produce green hydrogen and also make an electrolyser factory to manufacture green energy.
  • Larsen & Toubro announced plans to manufacture hydrogen electrolysers in India. Recently, it entered into a pact with the Indian Institute of Technology (IIT), Bombay to carry out a joint research and develop the green hydrogen technology.
  • Indian Oil Corp, one of the largest fossil fuel retailers, also announced its plans to build a green hydrogen plant at its Mathura refinery in Uttar Pradesh.
  • GAIL plans to build India's largest green hydrogen-making plant as it looks to supplement its natural gas business with carbon-free fuel.
  • NTPC also plans to produce green hydrogen.
The policy allows 25 years of free inter-state power transmission for any new renewable energy plants that produce green hydrogen for projects commissioned before June 30, 2025.

This means that a green hydrogen producer will be able to set up a solar power plant and supply in states and not pay any inter-state transmission charges.

Currently, green hydrogen technology is still at the stage of emergence. The country has to overcome a few barriers such as price, storage, and logistics, to ensure a smooth transition towards the green hydrogen ecosystem.

Here’s an explainer video about everything green hydrogen, challenges that the world currently faces to store GH2, positives from India's Green Hydrogen policy and five stocks that will benefit from it.

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