India eyes hydrogen as cleaner fuel source

The Indian government is pushing state-run firms to start using hydrogen as a fuel, helping encourage investments by some of the country's top energy companies. But overly aggressive targets, and high taxes, could complicate the plans.

"Hydrogen is a key component of our new energy roadmap," India's former oil minister, Dharmendra Pradhan, said in July. That represents a change of tone from the government, which until recently had focused on electric vehicles (EVs) to the exclusion of other clean energy priorities.

Delhi in June announced plans to invite bids to produce green hydrogen and also require some state-controlled companies to meet a portion of their energy needs through the product. State-run fertilizer producers and oil refiners would be required to use some green hydrogen, beginning in April 2023 for seven years.

The requirement would be similar to the renewable energy mandate that exists in the electricity sector, and which has helped encourage the use of cleaner energy, particularly solar power.

India is well placed to be a global leader in hydrogen because of its very low costs of renewable energy, said SSV Ramkumar, director of research at the country's biggest state-run refiner IOC.

But India's renewables rollout has not been without problems. The government has set a target to add 175GW of renewables capacity by 2022, but current capacity only totals 93GW with renewables accounting for only 10pc of total generation. Inconsistent policies, and decisions by states to break contracts to take advantage of lower prices, have contributed to the underperformance.

Indian hydrogen demand is around 6.9mn t/yr, with around 53pc consumed by refineries and 44pc used by fertilizer plants to produce ammonia, according to IOC. The government wants to double hydrogen consumption to 12mn t/yr by 2030, rising to 28mn t/yr by 2050, with refiners and fertilizer plants remaining the main consumers.

The country's high taxes could prove a deterrent. Hydrogen is taxed at 18pc, compared to 5pc for EVs – although this is still well below tax rates of 50-60pc on transport fuels.

IOC is planning to build the country's first commercial green hydrogen plant at its 160,000 b/d Mathura refinery in northern India, as part of its plans to diversify away from its core fuel business to petrochemicals, hydrogen and battery technologies. The plant's capacity is being evaluated, an IOC official said. Green hydrogen will be produced using the company's wind power project in the desert state of Rajasthan.

IOC, which plans to add 500,000 b/d to its existing 1.6mn b/d refining capacity by 2024, aims to use clean energy such as hydrogen rather than thermal fuels to run its refineries. It is also building pilot hydrogen production units with capacity of 200-400 t/d, with a focus on blue, grey and green hydrogen. Blue hydrogen would be produced by ‘steam methane reforming' releasing CO2, which would be captured and stored at its Koyali refinery in Gujarat.

Electrolysis is an expensive method because it is capital intensive and electrolysers must be imported, Ramkumar said, making it cheaper to produce green hydrogen through biomass gasification.

The company is touting the success of a pilot project to blend 18pc hydrogen with compressed natural gas (CNG) to fuel 50 buses in Delhi. It has now tendered for 15 fuel cell powered buses, still a sliver of the 400,000 new heavy vehicles on India's roads.

India's biggest private-sector oil firm Reliance Industries (RIL) is investing around $10bn to build four gigafactories — an integrated solar photovoltaic module factory, energy storage battery plant, electrolyser factory to produce green hydrogen and fuel cell plant — over the next three years. RIL's ventures are likely to yield 3GW of hydrogen fuel sales, 18GW of renewables and 15GW of battery capacity, bank Morgan Stanley says.

By S Dinakar