Clean hydrogen can turn into a fuel of the future and be used to power the heavy automobiles, power, and industrial sector only when large scale production becomes possible.

The government should create the demand-pull for hydrogen and then address the supply side by enabling investments, primarily through the public sector units to begin with, so as to create the market for clean hydrogen.

Creating a demand-pull

According to Atanu Mukherjee, President and CEO of MN Dastur & Co and Dastur Energy, some of the ways of creating the demand-pull for hydrogen would be through hydrogen blending in natural gas grids and generation of hydrogen-based steel through coal gasification. This apart, fuel switching in chemical plants and programs for heavy transport fuel cell vehicles and infrastructure should be an integral part of the policy design.

“There is a need to create the demand side by creating the market without which the consumption or use of these fuels will not happen. The policies in terms of investment credits, mandates in terms of use of certain percentage of hydrogen as green hydrogen allow you to create markets at a certain scale. The second is supply side in terms of enabling investments through PSUs to start with, investments through credits like in case of carbon capture and also to create mechanisms to draw in investments from outside. Once the demand side and supply is addressed then as scale improves and consumption improves it drives down the costs further,” Mukherjee told BusinessLine .

Cost advantage of using hydrogen

The cost of producing clean hydrogen from coal with carbon capture (blue hydrogen) can cost less than ₹100 a kg while producing hydrogen from renewables (green hydrogen) is about ₹375 a kg at present.

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At ₹100 a kg, the production cost of blue hydrogen is equivalent to diesel, priced at about ₹30 a liter. However, hydrogen distribution and retail dispensing stations will likely add another ₹75 to 100 per litre, bringing the dispensing price to between ₹100 and 125 per liter on a diesel price equivalent basis today.

As the hydrogen infrastructure of pipelines and ammonia-based carriers develops at scale, the distribution and retail costs will fall substantially, making clean hydrogen much cheaper than imported crude-based options.

Heavy transport apart, clean hydrogen-based power generation, and long-term storage can provide the much-needed flexibility support required for renewables to work seamlessly. Indigenously produced clean hydrogen can also lay the foundation for the industrial transformation for clean chemicals, clean steel and reduce cost and emissions for our natural gas consumers through hydrogen spiking.

Clean Hydrogen mix

However, realizing hydrogen's potential will require a practical policy-driven approach that leverages India's resources while ensuring its affordability and availability for the consumer and the industry. It is important to recognize that it is not about either green hydrogen or blue hydrogen. It is about policy design and incentives to engineer markets for an affordable clean hydrogen mix at a large scale in the shortest possible time.

“This would mean harnessing our vast resources of coal and our solar and wind endowments in a way that optimises costs and sequences blue and green hydrogen adoptions based on technology maturity and relative cost structures. Such a market design will likely develop an eventual large-scale competitive market for clean hydrogen, irrespective of technology,” Mukherjee pointed out.

Policy design

Based on the future consumption potential, it would be reasonable to assume that an additional 5 mtpa of clean hydrogen could be added by 2030. However, given the technology maturity, relative power, and land requirements, relative costs, and the availability of over 150 billion tons of coal reserves, it probably would make sense for India to encourage investments and production of blue hydrogen through coal and carbon capture along with green hydrogen.

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Along with the commercial mining policies, large-scale commercial demonstration plants through companies such as Coal India, would probably be a step in the right direction to seed large-scale hydrogen markets. Additionally, appropriate carbon capture policies and incentives can drive the adoption of carbon capture from coal-based hydrogen plants to create value-added products and for geo-sequestration.

At the same time, investments need to be encouraged in green hydrogen projects to lower production costs. Apart from capital costs, the most significant contributors to green hydrogen costs are clean electricity costs and capacity factors of operation, he added.

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