Energy Transition: Green Hydrogen #2
Part 2 of the Energy Transition series
In the previous post of the Energy Transition Series, we learned the broad contours of the energy transition. If you haven’t read it Check it out
In this part, we discuss the Hydrogen Economy, why it makes sense to invest in Hydrogen for a sustainable future, and the challenges
Chemistry 101: The Cleanest Fuel
What are the byproducts of the combustion of Hydrogen? Chemistry 101, Hydrogen + Oxygen = Water + Heat. Doesn’t it make sense to use this for our energy needs rather than burning fossil fuels increasing carbon dioxide levels and leading to global warming?
However, there are challenges in harnessing Hydrogen Energy
Hydrogen is rarely found in nature in its elemental form. It requires extraction from other hydrogen-containing compounds - energy has to be spent to get Hydrogen in molecular form. Hence it is an Energy Carrier, not an Energy Source.
Hydrogen’s energy content per unit of mass (specific energy) is higher than most hydrocarbon fuels. In contrast, its volumetric energy density is the lowest. So you either need a huge volume or alternatives being pressurization or liquefaction before hydrogen can be used as a fuel.
Why thrust towards Green Hydrogen?
Though the use cases for hydrogen have existed for a long time, the momentum in this space is being driven by economic value compared to alternatives. Potential use cases of hydrogen include consumption as:
Fuel: through either direct combustion or electricity generation through fuel cells in mobility sectors like heavy-duty trucking, aviation, and maritime shipping.
Feedstock: Hydrogen is essential as a chemical feedstock for the production of ammonia (used in the fertilizer industry), methane, and methanol.
Energy Storage: can act as an energy storage mechanism
Industrial Heat: End-use sectors such as iron ore and steel, fertilizers, refining, and methanol, which emit major amounts of CO2.
Materials critical to modern-day living such as steel, ammonia, cement, and plastic have no substitutes and cannot be decarbonized with electricity alone. Green hydrogen completes the decarbonization puzzle.So Hydrogen is not available freely - How do we get it?
Electrolyser
Electrolysers are the devices where the process of electrolysis is carried out to convert water into Hydrogen and Oxygen. Different technologies are being developed. Alkaline and polymer electrolyte membrane (PEM) electrolysers are commercially available and technologies like solid oxide and anion exchange membranes are nearing commercial deployment as well. Other less prevalent sources of production include bio-hydrogen which can either be produced by anaerobic digestion of organic waste or through a fermentation process
Electrolyser technology development is critical for the production of low-emission hydrogen.
I intentionally leave out the technical aspects of these technologies. The bottom line is that the electrolyser costs have to go down substantially before Hydrogen is commercially viable.Transportation & Storage
The properties of Hydrogen make it difficult to transport and store it. The various avenues of storage and transport are as follows:
No hydrogen storage solution combines all the factors required i.e. high energy density, low energy input, easily available resources, non-toxic, and easy to handle and store.
Side Note: Check out the post on Inox India - a manufacturer of cryogenic equipment that will benefit from the storage and transportation requirements of Hydrogen.
Hydrogen Economics
The cost of green hydrogen is dependent on the cost of electricity and the cost of electrolysers. The projected price trajectory of solar-green hydrogen production based on the decline in electrolyser and renewable costs is as follows:
Global Demand and Supply
The production of hydrogen is expected to be 4.5 times the current production of which over 75% is green hydrogen while the rest is Blue hydrogen. The use cases of hydrogen will become mainstream in sectors like mobility (Road, aviation, and marine) and power generation.
Why India - Exploring the Potential of Hydrogen in India
India has one of the lowest renewable costs in the world and ample renewable potential, and recognizing the benefit, it is already investing a lot in renewable space. Green Hydrogen complements the renewable industry and helps it become self-reliant in energy needs.
Estimated Demand for Hydrogen in India: 5X in 30 years. Over 90% of the demand is expected to be met from Green Hydgrogen
Currently ~6 million tonnes of grey hydrogen is consumed in India, mainly in refining and as feedstock to produce ammonia. Plus a small share of consumption in methanol and steel production. The demand is expected to be ~30 million tonnes by 2050. While steel and heavy-duty trucking are expected to be long-term demand drivers, industrial feedstock i.e. ammonia and refining will drive near-term demand.
Given a captive domestic demand, India will not be a pure export-driven hydrogen producer like the Middle East or Australia. But driven by the low cost of renewables in the country, India’s cost of production will be competitive and is expected to be one of the lowest and hence potential for exports as well.
Comparison of levelized cost of green hydrogen in selected countries:
Green Hydrogen is already cost-effective in India for Industrial Use: See accelerated adoption of Green Hydrogen for existing use cases in Ammonia, Refining, Methanol and Steel
Policy Support in the sector
National Green Hydrogen Mission (Total INR 19744 cr)
Production-linked Incentives for Green Hydrogen Production (INR 13000 Cr)
Production-linked Incentives for Electrolyser Manufacturing (INR 4440 Cr)
Pilot projects for Low Carbon Steel Projects, (INR 455 cr up to 2029-30), Mobility (INR 496 crore up to 2025-26), Shipping Pilot Projects (INR 115 crore up to 2025-26)
Other target areas include decentralized energy applications, hydrogen production from biomass, hydrogen storage technologies, etc.
Waiver of Interstate transmission charges for 25 years under the Green Hydrogen Policy
Final Thoughts
As I discussed in the last post, there is a focus on electrification and decarbonization. Green Hydrogen has the potential to decarbonize core industrial sectors which can’t just be electrified eg Ammonia, Iron & Steel, Chemicals, etc. Further, it has the potential to solve the immitency issue of other renewables as a reliable energy storage platform.
As per Avendus estimates, ~USD125 billion is expected to be invested in the Green Hydrogen and Green Ammonia segments in India by 2030.
To sum up, a huge change is underneath us. The sector is nascent at present but will be a significant portion of the energy mix in the future. We should keep our eyes open for opportunities in the sector as it can lead to not only a cleaner future but a wealthier future as well.
Currently, there is no pure play listed company in the Green Hydrogen space. However, the following companies are in the Hydrogen Value chain: Gujarat Fluorochemicals, L&T, Inox India, Advait Infra, John Cockerill India, Ami Organics, MTAR technologies, Adani, Reliance, JSW Energy, Waaree RTL which can be studied in detail.
Further, the way of doing business for the likes of GAIL, Steel manufacturers, etc. will be impacted by this transition.
Please let me know if any other company is part of the Hydrogen Value ChainI hope this post answers key questions on the how and why of transitioning to Hydrogen in Energy Transition.
Happy Investing :)
References:
NITI Aayog, IEA, BP Energy Outlook Reports, JP Morgan Reports on Clean Energy, Avendus Report on Green Hydrogen
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Disclaimer: I am not SEBI registered. The information provided here is for educational purposes only. This is not buy or sell advice. I will not be responsible for any of your profit/loss based on the above information. Consult your financial advisor before making any decisions.
The thing is Pankaj, Hydrogen as a viable & commercially renewal source of energy will take another 10years atleast.
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