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A Green Hydrogen Economy for IndiaPolicy and Technology Imperatives to Lower Production Cost

Tirtha Biswas, Deepak Yadav, Ashish Guhan Baskar
December 2020 | Industrial Sustainability & Competitiveness

Suggested citation: Biswas, Tirtha, Deepak Yadav, and Ashish Guhan. 2020. A Green Hydrogen Economy for India: Policy and Technology Imperatives to Lower Production Cost. New Delhi: Council on Energy, Environment and Water.

Overview

This paper estimates the hydrogen production costs for India through a spatio-temporal analysis of the production modes and cost of production of hydrogen from solar and wind energy till 2040. In the spatial analysis, it factors in 19 centres (including six metros) and the sectors of the economy (fertiliser, refineries, and iron and steel) that are likely to drive future demand for hydrogen. Further, the study considers baseline and optimistic scenarios in future projections. It determines the cost of hydrogen production in 2020, 2030 and 2040 in these two scenarios.

Model description

The study models the production of green hydrogen as a linear optimisation problem in Python. The model includes all steps from the production of electricity in a solar photovoltaic (PV) plant and wind turbines till the supply of hydrogen to the hydrogen supply network.

Components and interaction of the optimisation model in our study

Classification of extreme climate events considered in this study
Source: Authors’ analysis

Key Findings

  • By 2030, locations with wind and solar can become competitive with steam methane reforming (SMR) + carbon capture and sequestration (CCS) with natural gas delivered at $6.3 /mmbtu. Further with an aggressive reduction in electrolyser and storage CAPEX, all locations can become competitive with SMR + CCS by 2030.

Comparison of LCOH for a grid offtake system across years in the baseline scenario

More than 75 per cent of Indian districts are extreme climate events hotspots
Source: Author’s analysis

Comparison of LCOH for a grid offtake system across years in the optimistic scenario

More than 75 per cent of Indian districts are extreme climate events hotspots
Source: Author’s analysis
  • Reduction in electrolyser CAPEX costs to $ 400 /kW by 2030 and $ 200 /kW by 2040 requires an annual global manufacturing capacity of 5 GW and 50 GW respectively.
  • In short to medium term, evacuation of excess electricity can reduce the LCOH up to 20 per cent. Additional flexibilities are required as the excess electricity is available only for peak hours.
  • In the long-term, the production cost difference between favourable RE locations and demand centres reduces to $ 0.2 – 0.4 /kg. Accessing the favourable RE locations would be economically viable only with large scale pipelines.

Key Recommendations

  • Establish a dedicated line of credit through budgetary support for co-financing early-stage pilot demonstrations.
  • Build additional flexibility in the grid to absorb high amounts of electricity within a few hours of peak generation. Selling excess power to the grid can reduce the cost of green hydrogen.
  • Encourage lower open-access charges for renewables to ensure that the demand centres get access to cheap RE-powered electricity. Most of the prospective users of green hydrogen (steel, refineries, fertiliser plants) are located far away from the best renewable resources (wind-solar hybrid) that are suitable for low-cost hydrogen production.
  • Build underground pipelines that are hydrogen ready through the use of better grade steel pipe or fibre reinforced plastic, as India expands its natural gas infrastructure. Hydrogen transport through existing natural gas pipelines is not possible as it is susceptible to damage (due to embrittlement). With a marginally higher cost, the barrier to green hydrogen transport and use in the future can be significantly reduced.
By 2030, locations with wind and solar can become competitive with steam methane reforming (SMR) + carbon capture and sequestration (CCS) with natural gas delivered at $6.3 /mmbtu.

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