UK-headquartered engineering firm Arup has supported governments around the world with policy, regulatory and infrastructure advisory services across the renewable hydrogen value chain. The firm has also carried out front-end engineering design for projects geared towards producing renewable hydrogen or derivatives. Argus spoke with Arup's India hydrogen lead and vice-president of the Hydrogen Association of India, Sachin Chugh, about the evolving global hydrogen market and the critical gaps that must be addressed to accelerate deployment. Edited highlights follow:
How do you assess green hydrogen's development globally?
The hydrogen space is fragmented. I would not say it is slow. Production capacities are increasing, scale is getting enhanced and we are seeing larger-sized electrolysers coming on line. The bottlenecks I see are production costs, technology maturity and uncertainty around hydrogen trade protocols, such as the standardisation of products. The recent definitions are not helping a uniform development of the ecosystem globally. Offtake and technology risks are talked about a lot and investors are already pricing them in.
But I would like to highlight another risk — co-ordination. We must understand that hydrogen is a secondary molecule. And it has a multi-nodal chain — renewables, electrolyser, transportation, conversion, shipping terminals and final use. There are lot of independent elements influencing the value chain. If we are not linking these individual elements together for optimisation, this brings a lot of risk. At Arup, we have been trying to integrate this value chain and minimise these risks.
What is your view on India's plan to export 70pc of the 5mn t/yr of renewable hydrogen that it aims to be producing by 2030?
The 70pc figure is coming from the fact that there is a cost differential and limited appetite from local industry to absorb that additional cost in their processes. We're talking about sectors like fertilisers, which are highly subsidised. Even the refining sector is under a lot of pressure because of geopolitical developments. That said, focusing only on exports can be catastrophic for India. If we look at the west, the EU is driving demand for green hydrogen. But when we look at the Middle East, we see more emphasis on low-carbon hydrogen. Competing with them on cost is going to be challenging.
Putting all our eggs in one basket can be risky. Exports should act as a catalyst to trigger demand, but the foundation must be domestic demand. We need to identify markets within India that have the appetite to absorb that cost differential. It's about addressing the right pain point in sectors such as oil and gas.
The pain point isn't merely the inclusion of hydrogen in the ecosystem, but how to mitigate CO2 emissions. When you marry these two — growing a green hydrogen market and using that hydrogen to mitigate emissions, not just through direct substitution, but by combining CO2 into e-fuels — that's where the opportunity lies. Even blending just 0.1pc of e-fuels — which will naturally be costlier than conventional fuels — can still bring considerable volumes into the ecosystem.
Are there challenges for the hydrogen sector that are specific to Asian countries and that differ from the EU or US?
The nature of business is completely different in Asia. Here, we have a cost-sensitive market where affordability for the masses is one of the paramount decisions when it comes to energy. A lot of calibration is required when pushing green hydrogen in Asian markets. The real challenge is Asia's aspiration to adopt hydrogen without localisation... I'm not considering China here. If the technology comes from Europe or China, one of the biggest challenges is the lack of real-environment performance. These technologies have been developed in regions with very different grid intermittency, and environmental conditions. We don't know how these technologies will perform here and that introduces risk.
On the policy side, Asia lacks inter-regional hydrogen diplomacy. In the EU region, you see common platforms to push the hydrogen economy. In Asia, there is no representation of hydrogen on platforms like the South Asian Association for Regional Co-operation or the Association of Southeast Asian Nations.
What kind of innovations could improve project economics?
One area is trying to reduce electrolysers' requirement for 24-7 electricity. The idea here is to develop direct DC-coupled hydrogen microgrids, so that energy storage systems are not required in between. If we can develop something like this, it can reduce costs.
Secondly, using artificial intelligence for two key purposes — predictive maintenance of machines and dynamic load shaping. At Arup, we are doing a lot of work in this space. This, along with energy optimisation, could impact up to 15-20pc of the lifecycle costs of hydrogen.
We are also trying to address the fact that the engineering world lacks hydrogen-specific references. The current engineering models used are retrofits from the hydrocarbon sector. We're assuming many things based on that experience — using those factors and scaling parameters to design hydrogen plants, which will introduce a lot of engineering risks in the future. Particularly for the Indian ecosystem, there is a need to devise the stage-gate approach in these new energy domains. The mechanism that can move from concept to feasibility in a phased manner is currently missing due to an assumption that the hydrogen and green molecule industry is mature and can be scaled up with the traditional approach.
What is your view on the Indian production-linked incentive (PLI) schemes for green hydrogen production and electrolyser manufacturing?
We need to understand the fundamental deficiencies of the PLI scheme. It is focused on triggering production, but doesn't cover system-level integration, and it ignores the ecosystem interdependence — things like land, utilities, renewable energy and offtake. This can lead to stranded assets. This is a concern for companies, which is why they are reshaping their strategies and the pace at which they are moving forward. And the scheme doesn't de-risk demand. Lastly, the scheme favours incumbents over innovators. There's a need for traditional energy incumbents to align with innovators, start-ups and incubators to find novel solutions.
What else can the government do to support the sector?
More than subsidies, what's really needed are predictive sovereign guarantees from the government, meaning price floors that are linked to macro variables in the hydrogen ecosystem — like renewable energy tariffs, ammonia demand, etc. This will make the system self-correcting. The guarantor won't need to overpay, and sovereign guarantees would kick in when there's stress in the market. This would depend on how commodity prices behave in international markets, for products like methanol and ammonia, where we see a lot of price volatility.
It's very similar to how crop insurance works in agriculture. There, adjustments are made based on changing weather conditions. In this case, the weather conditions can be replaced by the ecosystem — such as changing renewable energy prices or fluctuations in ammonia and methanol prices.
