- ICRA’s report on India’s green hydrogen prospects sees its levelized production cost to range between $5.5 to $6.0 per kg, if delivered renewable cost of procurement is INR 3.5 per kWh
- Incremental renewable energy capacity required will be about 60 GW if green hydrogen is able to meet 30% of national hydrogen demand by 2030
- Compared to grey hydrogen, green hydrogen is currently estimated to remain costlier by about $3.5 to $4.0 per kg
- ICRA believes green hydrogen cost will remain contingent on reduction in capital costs, improvement in energy efficiency level of electrolyzer and cost of renewable energy procurement
Independent credit ratings agency ICRA Limited believes the levelized cost of production for green hydrogen in India is estimated to range between $5.5 to $6.0 per kg, under the base case scenario of delivered renewable cost of procurement at INR 3.5 ($0.046) per kWh.
In its recent report covering Indian government’s freshly announced Green Hydrogen Policy, ICRA analysts hailed the the plan. They said even if green hydrogen is able to meet 30% of the national hydrogen demand by 2030, incremental renewable energy capacity requirements are estimated to remain significant at about 60 GW. “This is over and above the RE addition to meet all India energy requirements,” reads the report.
ICRA counts most hydrogen demand to come from the industrial segment comprising sectors as refining, fertilizers and chemicals, among others that needed about 6 million metric tons (MMT) of hydrogen in FY2020, that’s projected to grow to 7.3 MMT by FY2025.
Yet ‘from the industrial off-taker’s perspective’, green hydrogen is currently estimated to remain costlier by about $3.5 to $4.0 per kg, when pitted against grey hydrogen which is produced with the help of natural gas. This high cost may act as a deterrent for the fertilizer sector that may end up preferring grey hydrogen instead in the absence of any subsidy support to mitigate the high cost of production.
“In case of phosphatic fertilizers, manufacturers may focus on procurement of Green Ammonia instead of Green Hydrogen as the ammonia-manufacturing facility may require significant investments, thus providing opportunity to standalone green ammonia manufacturers too,” points out ICRA’s Vice President and Co-Group Head-Corporate Ratings, Prashant Vasisht.
ICRA analysts argue that green hydrogen’s cost competitiveness will remain contingent on 3 factors, namely reduction in capital costs, improvement in energy efficiency level of electrolyzers and cost of renewable energy procurement.
They add, “Further, round-the-clock (RTC) procurement of renewable energy at a cost competitive rate remains extremely critical for improvement in utilization of electrolyzer. In that context, viability of battery storage & availability of energy banking remains important. The cost of RTC power with a storage component is estimated between INR 4.00 to INR 6.00 ($0.052 to $0.078) per kWh, depending on the extent of storage requirement.”
Even as the report welcomes Indian government’s policy measures in terms of timeline for open access approvals and availability of energy banking, it points out that the norms are not yet standard and vary from state to state. At the same time, the government still needs to come out with a Production Linked Incentive (PLI) Scheme to promote domestic manufacturing of electrolyzers. It also needs to clarify policy measures for green hydrogen purchase obligation.
In February 2021, India launched its Green Hydrogen Policy aiming for 5 million ton of it by 2030 (see India Launches Green Hydrogen Policy).
