"Reducing (green hydrogen) costs is possible by raising scale and enhancing electrolyser efficiencies. However, we believe initially incentives for hydrogen production and/or for electrolyser capex (capital expenditure) need to be provided," stated Nomura's 'Emerging trends: Green hydrogen in India' report, released in February.

Earlier in the day, CNBC-TV18 reported that India is aiming to give incentives worth over Rs 13,000 crore to green hydrogen fuel producers. Sources said the first tranche of the government's Strategic Interventions for Green Hydrogen Transition (SIGHT) scheme under the National Green Hydrogen Mission is set to begin this quarter, while the second tranche is likely in the next quarter.

But what is green hydrogen?

Hydrogen is made by splitting H2O (water) into two molecules -- hydrogen and oxygen — via electrolysis, which is an electrical process. The method requires electrolysers, and if the same is powered by renewable energy, then the product formed is green hydrogen — a fuel that is free of greenhouse emissions.

There are other forms of hydrogen as well — grey and blue. Grey hydrogen is formed when methane (CH4) is split via steam to give out carbon dioxide (CO2) and hydrogen (H2). When hydrogen is produced from methane (CH4), splitting it with steam into hydrogen (H2) and carbon dioxide (CO2), it is called grey hydrogen. Blue hydrogen has the same process but it requires additional technologies to capture the CO2 and store it when the hydrogen splits from methane.

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However, not all of the CO2 can be captured and to store for the long term, and not all means are effective.

Achieving low green hydrogen costs

At the moment, transitioning to green hydrogen has cost and storage issues. The Nomura report states that scaling up green hydrogen production as well as incentives are required to ensure its commercial viability. However, the gap is shrinking when it comes to higher costs issues. In the past, experts have also said that in addition to increasing the production and manufacturing of green fuel, it is also important to increase demand.

At present, green hydrogen costs around $4-5/kg. "Even at USD2/kg,

green hydrogen is still not viable but at USD1/kg, we estimate green hydrogen is viable for almost all green fuels except synthetic methane or synthetic natural gas (SNG). Thus, for production of green fuels, the cost of production have to drop to USD1/kg (Fig. 24 ) to be viable," the report stated.

A drop in the green hydrogen cost to $1-2/kg can even lead to the fuel's adoption in the transport segment as well as a potential ammonia synthesis.

The report has projected the green hydrogen generation cost to drop to $2.1/kg by 2027 and to $1.6/kg by 2030.

Power cost reduction: The report states that hydrogen costs can drop to $1.5/kg if the cost of electrolysers falls to $200/kW, compared to the average cost of $840/kW. At present, China has been able to reduce electrolyser costs to $300/kW.

The report highlighted that when it comes to the technology, stack costs will decline as manufacturing of electrolysers is scaled, besides cost reduction from scale deployment.

The cost of an electrolyser is split evenly between the cell stack as well as the balance of plant (BOP).

What is hydrogen used for?

At present, hydrogen is used in fertiliser as well as refining. It has the scope to increase applications for chemical feedstock, power, transport and steelmaking. Green hydrogen can be used to replace hydrogen in all of these.

Refining: Hydrogen removes sulphur from raw materials in the refining process for gasoline, gas oil production and diesel. Sulphur comes off as the gas hydrogen sulphide (H2S). Using green hydrogen for the same can help cut the country's industrial emissions by 5 percent, the report stated.

Also Read: India's Power Minister says green hydrogen is essential in long-distance mobility

Fertilisers: Talking about green ammonia, the report states that its production via the Haber Bosch process, using nitrogen, can be utilised in the fertiliser industry. At present, the ammonia used is grey as well and is also usually imported. Green ammonia can reduce emissions and import bills, resulting in forex savings.

Hydrogen natural gas blending: The Nomura report stated that India is considering mixing green hydrogen with piped natural gas up to 15 to 20 percent. Blending can reduce emissions related to cooking and also help reduce the import of natural gas. Blending can also be used to generate power via natural gas turbines.

Fuel cell usage: Nomura says that while fuel cell electric vehicles have not yet launched in India, they could soon be a pathway for transport decarbonisation. Citing 'Hydrogen Insights 2021', green hydrogen can disrupt long-distance transportation, especially heavy-duty shipping and trucking, without any carbon costs. Green hydrogen costs of less than $4.5/kg are possible for heavy haul transport and Japan, China as well as Korea are leading players in the rollout of FCEVs. Renewable energy faces the intermittency issue of power generation during the day as well as seasonally. This is where fuel cells can be substitutes for battery backup.

Steel making: At present hydrogen is used for cold rolling annealing operations as well as DRI-based processes. The same can be replaced by green hydrogen. And if there is a technology that is developed to replace coke as the reducing reagent in the basic oxygen furnace process, the utilisation of green hydrogen in steel making can rise further, the report added.

India's outlook on green energy transition

India has been focusing heavily on the transition to green energy, with the finance minister in her Budget speech in February announcing Rs 35,000 crore for the same. A month prior to the same, the Union cabinet approved an initial outlay of Rs 19,744 crore for the National Hydrogen Mission. Union Minister Anurag Thakur had also said that incentives worth over Rs 17,000 crore would be allotted for electrolyser and green hydrogen manufacturing in the country, while "Rs 400 crores will be spent on developing green hydrogen hubs in the country."

Also Read: Green Hydrogen draft: Government expecting to get stakeholder comments by next week

(Edited by : Abhishek Jha)