The Green Hydrogen Hype: A Reality Check for India

Green hydrogen is often hailed as the "fuel of the future," promising a cleaner, greener energy source to combat climate change. However, a closer look reveals significant challenges, especially for a developing country like India, where energy security, affordability and efficiency are paramount. While green hydrogen may have a role in the future, its current limitations position it lower on the priority list for energy investments. 

As can be well described by the Gartner's Hype Cycle, green hydrogen is positioned between the Peak of Inflated Expectations and the Trough of Disillusionment, indicating that while there is significant enthusiasm around its potential, practical challenges such as cost, inefficiency, and logistical issues are tempering expectations. It suggests that green hydrogen is still in the experimental and speculative phase, requiring further technological and economic advancements to move toward widespread adoption.

Here’s why India needs to tread cautiously:

1. High Production Costs

Indian refineries and fertilizer plants currently rely on grey hydrogen, produced from natural gas via steam methane reforming, at a cost of approximately $1-2 per kilogram depending on natural gas prices. Transitioning to renewable energy sources for green hydrogen production is projected to raise costs to $3.6-$4.0 per kilogram, making green hydrogen prohibitively expensive for widespread adoption. The U.S. Inflation Reduction Act provides subsidies of up to $3 per kilogram to make green hydrogen competitive, highlighting that production costs are expected to remain above this threshold in the near term. Even at $3 per kilogram, the shift to green hydrogen would result in a 50-200% increase in hydrogen costs, significantly impacting operational expenses for industries such as refineries, fertilizers, and steel, thereby reducing their competitiveness. Higher operational costs in these sectors would translate into increased prices for products like fuels, fertilizers, and steel, placing an additional subsidy burden on the government to mitigate inflationary pressures. For India, where affordable energy is vital for economic growth and poverty alleviation, such elevated costs pose a substantial challenge to the adoption of green hydrogen.

2. Renewable Energy Costs Are No Longer Falling Rapidly

One of the key assumptions driving the green hydrogen narrative is the continued decline in renewable energy costs which constitutes around 70% of the Green H2 production cost. However, the cost of renewables in India has plateaued in recent years due to factors like supply chain disruptions, increasing raw material costs, and land-use constraints. This stagnation makes it increasingly challenging to produce green hydrogen at a competitive price, particularly when renewable electricity itself is in high demand.

3. Inefficient Conversion Process

Producing green hydrogen involves splitting water into hydrogen and oxygen using electricity in a process called electrolysis. However, even the most advanced electrolyzers are only about 75% efficient, meaning that 25% of the renewable energy used is effectively wasted. In a country like India, where per capita electricity consumption remains among the lowest globally, diverting precious renewable energy to an inefficient process while spending resources on loss reduction schemes like RDSS etc raises serious questions about priorities. That wasted 25% could otherwise power homes, schools, and businesses.

4. Challenges in onsite production, storage and transport

Industrial use of green hydrogen necessitates an on-site renewable energy (RE) generation facility to avoid additional costs associated with transmission charges and energy losses from off-site solar or wind generation. Producing green hydrogen directly at the factory site not only eliminates the need for costly hydrogen storage and transportation but also requires a battery energy storage system to enable round-the-clock electrolysis. This ensures better utilization of the electrolyzer capacity, enhancing overall efficiency and cost-effectiveness.

The logistics of storing and transporting green hydrogen are major hurdles:

• Storage: Hydrogen has a low density even in its liquid state (~70 kg/m³), requiring energy-intensive cooling and high-pressure tanks for containment, which further drive up costs.

• Transport: Shipping green hydrogen requires 3–4 times the volume of LNG, significantly inflating transportation costs and making long-distance exports impractical.

These inefficiencies make the idea of exporting green hydrogen a costly and unrealistic ambition.

5. Lower Volumetric Energy Density

Green hydrogen's low-density results in a lower volumetric energy density and makes it highly flammable compared to alternatives like LNG. These characteristics increase costs associated with shipping, insurance, and safety measures, making it less suitable for energy-intensive applications where space and weight are critical, such as long-haul shipping.

6. Misaligned Priorities for India

India faces unique energy challenges:

• Low Per Capita Electricity Consumption: India’s per capita electricity consumption is around 1/3rd of global average. Diverting renewable energy toward green hydrogen production instead of addressing immediate electricity needs for millions of people is a questionable strategy.

• Need for Cost-Effective Solutions: With limited resources, India must prioritize energy investments that deliver the greatest benefit to the largest number of people. Green hydrogen, at its current stage, does not meet this criterion.

A Better Path Forward

Instead of placing disproportionate emphasis on green hydrogen, India should focus on more efficient and cost-effective solutions:

1. Nuclear Energy: A reliable, low-carbon baseload power source that complements renewable energy.

2. Renewable Power Expansion: Solar and wind energy can provide immediate, scalable benefits for decarbonizing the electricity grid.

3. Energy Efficiency: Modernizing the grid, improving energy storage technologies, and enhancing energy efficiency can yield higher returns and ensure a more equitable energy transition.

4. Hydrogen Research: India should invest modestly in research and pilot projects to improve electrolyzer efficiency and storage technologies while waiting for the production costs to decline. PLI scheme for electrolysers manufacturing under National Green Hydrogen Mission is a right step in that direction.

Conclusion

Green hydrogen undoubtedly holds long-term promise, particularly for decarbonizing hard-to-abate sectors like steel and cement. However, its current economic and logistical barriers, combined with the inefficiency of the production process, make it a poor choice for large-scale deployment in India in near future. Instead of pursuing green hydrogen aggressively, India should prioritize scalable, proven, and cost-effective solutions like nuclear and renewable energy to address its pressing energy and developmental needs. By adopting a realistic approach to green hydrogen, India can ensure that its energy investments align with national priorities and provide maximum benefits to its people. Green hydrogen can take its place when the time is right—once costs reduce to around $1 per kilogram, driven by advancements in electrolyzer and storage efficiencies, enabling it to fulfill its potential.