India's recently announced Green Hydrogen policy is an important first step to enable a Hydrogen ecosystem but the country needs to do more to support the green hydrogen industry which is still in its nascent stages with high costs and relatively smaller scale, according to Goldman Sachs.
"We expect the next round of hydrogen policy to focus on demand creation with likely phased purchase obligations for key industries such as refining and fertilizer production and supply creation from a PLI scheme for electrolyzer and fuel cell manufacturing," the investment banking and research firm said in a report.
Given the higher cost involved in producing hydrogen currently, the government is likely to provide some viability gap funding to consuming sectors in the initial phases, it said, adding that companies like Reliance Industries (RIL), Renew Power and L&T as expected to be the key beneficiaries of rising Hydrogen demand.
India has announced a green hydrogen policy focusing on liberty to purchase or set up renewable capacity for green hydrogen anywhere by manufacturers themselves or with a developer; open access approval within 15 days without central surcharge and zero inter-state transmission charges for 25 years for projects commissioned before June 30, 2025; and 30-days banking facilities for storage.
The policy complements previously announced PLI schemes totaling capital support of $5.6 billion dollars for solar and battery manufacturing to ensure high domestic value addition.
India has announced a net zero target of 2070 and hydrogen will play a critical role in achieving this target. The country's competitive electricity tariffs can further act as a competitive advantage in driving a lower cost curve for hydrogen production medium term.
Electricity costs drive 70 per cent of hydrogen’s cost structure. Around 1 million ton of hydrogen demand equates to 8 GW of installed electrolyzer base requiring 15 GW of renewable capacity.
Hydrogen related demand is likely to become meaningful in the next decade accounting for 10 per cent of overall electricity demand by 2040 requiring 121 GW of renewable capacity which would be 10 per cent of total renewable installed capacity, per our Goldman Sachs estimates.
