Green Hydrogen Sector Needs $4-12 Billion In Government Support To Stay Competitive

India's green hydrogen sector will need government support over the next six years to achieve scale and compete with Saudi Arabia, the UAE, Australia, Chile and Argentina.

India will need $4–12 billion in government support till 2030 to compete with global green hydrogen suppliers who get government subsidies, Santosh Kamath, managing director, energy transition at Alvarez & Marsal, told reporters while releasing a report on green hydrogen.

This support will also help the domestic end-use sectors transit affordably, Kamath said.

The benefits of such a programme can be substantial, according to Kamath. “Assuming a 10-15% share of global trade in hydrogen, it can provide $3–5 billion annually in export revenues by 2030. Import substitution in domestic sectors might save a substantial $7–16 billion in foreign exchange,” he said.

India’s GDP is likely to see a prospective impact of between 0.1 and 0.5% annually that may elevate India’s economic prowess, according to the report ‘Green Hydrogen: India’s Opportunity for a Strategic Shift in Global Energy Trade’. While the quantum of support might look large, the broader context offers perspective.

“Over the next seven years, India's oil import bill is estimated at a staggering $1.0-1.4 trillion. What we need to propel the hydrogen sector into orbit is only a fraction of this amount,” the report said.

For India, the case to aggressively support green hydrogen is strong. By moving early, it can stake a claim to a larger share of the global energy trade, substitute some imports, especially LNG, and spur domestic GDP growth, the report said.

By 2030, this could lead to $3–5 billion of exports and $7–15 billion of import substitution, opening the doors to a much larger opportunity in the decades ahead, it said.

The direct green hydrogen transportation across long distances is cost prohibitive, and it is expected to be converted to ammonia and transported in the form of ammonia, according to the report.

The analysis of green ammonia prices and factors of competitiveness across 10 high-potential countries shows that the UAE, India and Saudi Arabia seem well placed in global green hydrogen competitiveness and therefore could partake in a significant share of global trade.

In the 2030 timeframe, low-carbon hydrogen, while relatively nascent in its lifecycle, could still yield a $24–$36 billion trade opportunity for the world. The early adopters of hydrogen on the demand side, i.e., imports in global trade flows, are the EU, Japan and South Korea. Together, they are expected to create an import demand of nearly 12 million tonne of hydrogen or equivalent in green ammonia terms.

Some of the key enablers that the report suggests include:

• Setting up a programme to create a green hydrogen demand of one million tonnes per annum by 2027.

• Identifying end-use sectors for offtake and creating a mandate accompanied by a viability gap funding plan so that the impact on end-use sectors is softened. If the viability gap of $1/kg is assumed, the programme would require an annual outlay of $1 billion.

• De-risk projects through credible offtake guarantees. The Solar Energy Corporation of India’s (SECI) model of creating a credible offtaker counterparty has worked well in the case of solar and wind auctions to reduce the cost of capital and attract investments. The same may be adopted for hydrogen, where an offtake guarantee programme can significantly help reduce costs.

• Along with other cost reduction measures such as indirect tax exemptions, this model can help reduce costs by 10–15%. In addition to the initiatives already in place, the following policies can work as enablers for a green hydrogen economy.