With uncertainties surrounding cost-effective production and renewable energy availability, is the push for green hydrogen putting the cart before the horse?
by N.S.Venkataraman
Driven by the urgent need to reduce or possibly eliminate the use of fossil fuels like crude oil and coal, as a strategy to prevent the emission of global warming gases such as sulfur dioxide, carbon dioxide, and nitrous oxide, governments worldwide have initiated significant steps to boost the production of eco-friendly green hydrogen. This policy aligns with the global environmental agenda.
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| Green Hydrogen renewable energy production facility - green hydrogen gas for clean electricity solar and windturbine facility. [Generative AI/vecteezy.com] |
India, in particular, has taken proactive measures to promote green hydrogen production and is duly recognized as one of the leading countries in these efforts.
Scenario in India
The Indian government has launched the Strategic Intervention for Green Hydrogen Transition Programme (SIGHT) to promote green hydrogen projects on a large scale.
India’s National Green Hydrogen Mission aims to produce 5 million metric tonnes of green hydrogen each year by 2030. The government has allocated Rs.12,500 crore in incentives to support green hydrogen projects.
To meet this goal, the government plans to establish a massive 15,000 MW electrolyser manufacturing capacity, requiring an estimated investment of over Rs.40,000 crore. Around 15 companies have been shortlisted to develop this capacity, with many in the planning stages.
Leveraging government incentives, several green hydrogen projects are either in advanced stages of implementation or under planning in India. International companies, encouraged by India’s policies, have also expressed interest in participating.
For instance, US-based Ohmium has commenced operations at its 2,000 MW capacity plant in India. Ohmium is further planning to set up an electrolyser and green hydrogen manufacturing facility in Tamil Nadu, with an initial investment of around Rs.400 crore.
AM Green Ammonia B.V. has announced it has reached a final investment decision for its 5-million-metric-tonne green hydrogen project in Kakinada, Andhra Pradesh, to be commissioned by 2030. Similarly, Singapore-based Sembcorp Industries has committed to setting up a 200,010 metric tonne per annum green ammonia plant in Tuticorin, Tamil Nadu, with an investment of Rs.36,388 crore.
Weak Links in the Chain
While the global enthusiasm for green hydrogen projects is impressive, there are weak links in the chain that must be acknowledged and addressed before proceeding with massive investments. Despite the many announcements and proposed investments, it appears there is an assumption that these challenges will be overcome with time—a rather optimistic view.
Concerns Regarding Production Costs and Renewable Power
The current technology for producing green hydrogen through water electrolysis is highly energy-intensive. At present, green hydrogen is significantly more expensive to produce than grey hydrogen, which is derived from fossil fuels. Green hydrogen produced via water electrolysis costs around $5 to $6 per kilogram, while grey hydrogen costs only about $2 per kilogram.
To reduce costs, the price of electrolysers, which split water into hydrogen and oxygen, must come down. Increasing the scale of green hydrogen plants may help reduce costs, but the efficiency of the electrolysers—how much electricity they consume to produce a kilogram of hydrogen—remains a challenge. Efforts to improve electrolyser technology are ongoing but still evolving.
Today, the power required to produce green hydrogen is approximately 55 kWh per kilogram.
Importantly, the power used for green hydrogen production must be from renewable sources, such as solar or wind, and not from fossil fuels.
While the cost of solar and wind power has decreased, the reliability of renewable energy remains a concern. Solar and wind power generation is seasonal and dependent on climatic conditions, and these sources are not available around the clock. The capacity utilization of solar and wind power plants is only about 20%.
Can the world generate a consistent and sufficient amount of solar and wind power to meet the demand for the vast number of green hydrogen projects being proposed? It would be ironic if fossil-fuel-based power, which causes emissions, is used to supply energy for green hydrogen projects due to a shortfall in renewable power.
Moreover, the global demand for grey hydrogen is currently around 96 million metric tonnes per annum, and replacing this with green hydrogen seems overly ambitious. Even replacing 25% of grey hydrogen with green hydrogen in the next decade appears unlikely, especially given the uncertainties surrounding production costs and the availability of reliable renewable energy.
Transportation Issues
The cost and logistics of transporting green hydrogen from production centers to consumption sites remain unclear. There is no global consensus on the costs of transporting green hydrogen, nor is there certainty on whether existing natural gas pipelines can be repurposed for this. Technical challenges, such as the embrittlement of steel in pipelines, hydrogen permeation, and the need for durable compression technology, further complicate the issue.
Is it Similar to Putting the Cart Before the Horse?
Given the uncertainties surrounding the cost-effective production of green hydrogen, it is surprising that it is being hailed as the ultimate solution to emissions and climate threats.
Countries, including India, are investing millions of dollars into green hydrogen projects, hoping that production costs will decrease and renewable power availability will improve. However, this remains speculative at the moment.
Likely Scenario
In all likelihood, green hydrogen projects will require heavy subsidies from governments. Green hydrogen will be used to produce green ammonia, which is a key input for fertilizers like urea, ammonium nitrate, and diammonium phosphate. The high cost of green hydrogen will inevitably increase the cost of these fertilizers, which farmers may not be able to afford.
Government subsidies will be essential to sustain the green hydrogen and green ammonia economy. However, the extent to which governments, particularly India’s, can provide such support is uncertain.
For example, the European Commission has approved a €998 million subsidy scheme put forward by the Dutch government, which seeks to support at least 200 MW of green hydrogen production. The Dutch government will provide grants covering up to 80% of the upfront investment, as well as a variable premium over 5 to 10 years, in hopes of lowering the cost of green hydrogen production.
While such initiatives demonstrate strong governmental backing for green hydrogen as the fuel of the future, at present, one cannot help but conclude that investments in green hydrogen projects are a calculated risk.
N. S. Venkataraman is a trustee with the "Nandini Voice for the Deprived," a not-for-profit organization that aims to highlight the problems of downtrodden and deprived people and support their cause and to promote probity and ethical values in private and public life and to deliberate on socio-economic issues in a dispassionate and objective manner.
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