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Assessing the Impact of Green Hydrogen Production on India’s Power System
11 September, 2024 | Power Markets
Rudhi Pradhan, Sanyogita Satpute, Disha Agarwal, and Karthik Ganesan

Suggested citation: Pradhan, Rudhi, Sanyogita Satpute, Disha Agarwal and Karthik Ganesan. 2024. Assessing the Impact of Green Hydrogen Production on India’s Power System. New Delhi: Council of Energy, Environment and Water.

Overview

This paper analyses the impact of large-scale renewable energy integration on India's power grid to meet the green hydrogen production target of 5 million tonnes per annum by 2030. The study determines the optimal renewable energy and electrolyser capacities and assesses the impact on grid flexibility, transmission and storage requirements to manage grid operations with green hydrogen production. The analysis models power system dispatch simulation under different scenarios to assess the impact on India's power system, and provides insights to power system planners, regulators, and green hydrogen industry players.

Key Findings

  • India will need 135 GW of RE capacity (51 GW solar and 84 GW wind) and 74 GW of electrolyser to meet its 310 billion units (BU) of electricity demand for 5 million tonnes (MT) of green hydrogen production. The peak electricity demand will increase by 67 GW to 409 GW in 2030.
  • The battery storage requirement will reduce by 6 GW to 38 GW as the surplus RE will be used to meet the green hydrogen electricity demand instead of being curtailed.
  • Grid flexibility requirements will quadruple between 2022 and 2030 from 250 MW/min to 1100 MW/min (for the top 10% of the hours) to integrate the larger share of intermittent RE power.
  • The cost of electricity generation will reduce by 2 per cent to INR 3.76/kWh from INR 3.83/kWh due to the increased contribution of cheaper RE sources in the generation mix.
  • INR 10.6 lakh crore worth of investments will be required in the green hydrogen ecosystem with 71 per cent going towards RE deployment and the remaining 29 per cent towards building electrolyser capacity.
  • Not utilising Inter-State Transmission System (ISTS) support to wheel power within different states for green hydrogen production will a) increase the RE capacity requirement by 10 GW to 145 GW, b) increase the levelised cost of hydrogen generation from USD 3.6/kg to USD 4.1/kg with an additional cost of INR 20,500 crore, c) reduce the electrolyser capacity by 9 GW to 65 GW still the cost of green hydrogen production will increase

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“Integrating green hydrogen into India’s power system will require a significant expansion of renewable energy capacity and better grid management. Effective policy frameworks and comprehensive planning will be crucial for India’s successful transition to a green hydrogen economy, offering economic growth, energy independence and environmental sustainability.”

Executive Summary

Green hydrogen (GH2) is an essential component for the deep decarbonisation of the economy. India’s National Green Hydrogen Mission targets the production of 5 million tonnes of GH2 per annum by 2030 to abate 50 million tonnes of greenhouse gas emissions, which is around 2 per cent of the energy sector emissions (National Green Hydrogen Mission 2022, MoEFCC 2023).

India’s GH2 target will require a significant expansion of grid-connected renewable energy (RE), beyond the 500 gigawatts (GW) of non-fossil-based capacity target for 2030. Currently, over 80 per cent of RE capacity is concentrated in just six states1.  However, the GH2 demand will be more dispersed, requiring the transmission of RE generation through the grid. This large-scale integration of RE will have implications for the electricity demand to be served, consumption patterns, transmission network planning, and power system operations.

We must answer the following key questions to plan for the emerging challenges and system needs: What will be the most efficient and cost-effective approach to achieve the green hydrogen production target? What will be the optimal combination of RE resources and electrolysers? What will be the additional grid flexibility, transmission and storage requirements for integrating large-scale green hydrogen production?

To answer these questions, we modelled India’s power system for 2030 under different scenarios2:

  • Business-as-Usual (BAU) scenario 2030: This scenario assumes the 2030 electricity demand3 as per the 20th Electric Power Survey Report (Central Electricity Authority 2022), met with 500 GW of non- fossil-based capacity. We include measures such as thermal power plant flexibility, pumped storage hydro (PSH) and battery energy storage systems (BESS) to restrict the national RE curtailment to below five per cent.
  • Green Hydrogen (GH2) scenario 2030: This scenario estimates the additional electricity demand and RE capacity required for five million tonnes (MT) of GH2 production. Under this scenario, we model two possibilities:
    • ISTS grid support to wheel RE power to other states for GH2 production (GH2 with ISTS support4 ): Surplus RE power is utilised to meet the electricity demand. For GH2 production in non-windy states, wind power is wheeled from neighbouring wind-rich states. Additionally, the model allows surplus RE in other states, which would otherwise remain unutilised (curtailed), to be transmitted to states which can absorb the same for GH2 production.
    • RE for GH2 production within a state (GH2 without ISTS support): Surplus RE power5 is not utilised to meet the demand.

Gujarat will contribute the highest share to GH2 production with 42 per cent of the national target catering to domestic (0.49 MT) and export demand (1.6 MT), followed by Tamil Nadu with 23 per cent (1.16 MT). Together, six states—Gujarat, Tamil Nadu, Maharashtra, Andhra Pradesh, Uttar Pradesh, and Odisha—will contribute around 90 per cent of the total GH2 production in 2030.

A. Key Insights

Meeting the 2030 national green hydrogen production target with ISTS support will result in the following implications on power system planning and operations, relative to the BAU scenario:

  • National peak electricity requirement will increase by 67 GW
    Despite higher RE installed capacity, BESS requirement in the system will reduce by 6 GW The required battery capacity will be 38 GW, down from 44 GW in the BAU scenario. This is because surplus renewable energy (27 BU) will be utilised for green hydrogen production instead of being stored or curtailed.
  • India will need to integrate 135 GW of additional RE capacity with the grid
    This 310 BU of additional electricity requirement will be supplied by an additional 135 GW of RE capacity that would have to be integrated with the grid by 2030. This comprises 51 GW of solar and 84 GW of wind. Gujarat and Tamil Nadu will host 43 per cent and 24 per cent of the total incremental RE capacity8
  • System will need to serve 74 GW of electrolyser capacity
    The daily power requirement for an electrolyser will range from 45 GW to 74 GW9. Electrolysers can operate over a wide loading range and have good ramping capabilities, making them a valuable resource for grid flexibility.
  • Despite higher RE installed capacity, BESS requirement in the system will reduce by 6 GW
    The required battery capacity will be 38 GW, down from 44 GW in the BAU scenario. This is because surplus renewable energy (27 BU) will be utilised for green hydrogen production instead of being stored or curtailed.
  • System flexibility requirement will quadruple between 2022 and 2030
    The share of RE in the total generation mix will increase from 11 per cent in 2022 to 40 per cent in 2030, requiring nearly a fourfold increase in grid flexibility. The net load will need to ramp up/down at a faster rate to integrate this larger share of intermittent renewables.10 This will increase the net load flexibility requirement from approx. 250 MW per minute to approx. 1,100 MW per minute for the top 10 per cent of hours.
  • Average cost of power generation will reduce by 2%
    Increased contribution of cheaper RE sources to the generation mix will reduce the cost of power generation by 2 per cent to INR 3.76/kWh from INR 3.83/kWh in the BAU scenario. This will lead to savings of INR 18,800 crore (USD 2.3 billion11) to meet the GH2 demand.
  • INR 10.6 lakh crore (USD 129 billion) worth of investments will be required in the GH2 ecosystem
    The deployment of 135 GW RE capacity will require a capital expenditure of INR 7.6 lakh crore (USD 92 billion), or 71 per cent of the total investment. Additionally, an electrolyser capacity of 74 GW will need an investment of INR 3.03 lakh crore (USD 37 billion), or 29 per cent of the total investment.

Table ES 1: National level dispatch for 2030 scenarios shows the positives of GH2 with ISTS support

B. Impact of not utilising ISTS support on GH2 production

We modelled a second scenario that allows India to reach its GH2 target, but without leveraging the ISTS
network and generating RE for producing GH2 within the same state. As one would expect, this led to
suboptimal outcomes.

  • Increased RE requirement: The system will need 145 GW of additional RE, 10 GW more than in the scenario where ISTS support is available.
  • Higher cost of hydrogen: The levelised cost of hydrogen production will increase from USD 3.6/kg to USD 4.1/kg, leading to an additional cost of INR 20,500 crore (USD 2.5 billion).
  • Increased battery storage requirement: 3 GW of additional BESS will be required.
  • Reduced electrolyser capacity: This will reduce fall from 74 GW to 65 GW. Despite this reduction, the cost of GH2 production will increase13.
  • Additional RE capacity will be needed for Punjab, Uttar Pradesh, and Haryana: These states will need 5.3 GW of additional in-house RE capacity to produce the required GH2.
C. Recommendations

India should leverage its extensive electricity grid to achieve its green hydrogen production targets cost- effectively. Based on our findings, we recommend the following planning, regulatory, and policy measures.

  • Identify green hydrogen production hubs to guide national and state transmission planning
    The activities under the National Green Hydrogen Mission should identify GH2 hubs in specific regions based on factors like RE potential, water availability, and land use for large-scale production and use of hydrogen. The Central Electricity Authority (CEA) must utilise this information to guide planning for intra and inter-state transmission networks. The Government of India must collaborate with states to develop transmission plans and consider expanding the Intra-State Transmission System Green Energy Corridor (InSTS GEC) schemes to other beneficiary states to attract investments14.
  • Recognise electrolysers as a flexible resource under the Central Electricity Regulatory Commission (CERC) Ancillary Services Regulation, 2022
    India will require 135 GW of additional vRE by 2030 to achieve its green hydrogen target. This will take India’s total installed vRE capacity to 560 GW in 2030, implying high flexibility needs in the system. Electrolysers, with their higher ramping rates and wider load range, can provide flexibility and support grid balancing15. The CERC should recognise electrolysers as an eligible resource and set appropriate compensation norms to encourage their use for grid balancing.
  • Develop grid connectivity standards for electrolysers
    Our study indicates that electrolyser capacity will increase to 74 GW by 2030. These capacities must adhere to robust technical standards to maintain grid safety and reliability. Hence, the CEA must introduce grid connectivity standards for electrolysers through an amendment to the CEA (Technical Standards for Connectivity to the Grid) Regulations, 2007 (CEA 2020).
  • Facilitate the establishment of an industry-led consortium to pilot large-scale grid-connected GH2 projects
    India’s GH2 target can be achieved more cost-effectively under the GH2 scenario with ISTS support, saving INR 20,500 crores (USD 2.5 billion). However, at this nascent stage, developers are wary of the challenges, risks and uncertainties associated with large-scale GH2 projects. More importantly, offtake prospects for GH2 are uncertain, in absence of the developers’ ability to guarantee a selling price. The National Green Hydrogen Mission should facilitate and support the creation of an industry-led consortium to address these issues. Such a consortium should establish a ‘Green Hydrogen Development Fund’ to finance multiple pilot demonstration projects in different sectors and geographies to de-risk investments and identify price ranges at which GH2 can be offered to potential buyers16. This fund could be capitalised by member industries, development finance institutions, and grants sanctioned under the SIGHT programme, among other appropriate sources. The experience and knowledge gained through the deployment of these projects should be shared through data publication on project planning, deployment, and performance. This will build confidence in the sector and expedite the development of green hydrogen projects.

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