Last Update
31 July 2023
Will renewable hydrogen be a global market & more competitive than what India anticipates?
Will renewable hydrogen be a global market & more competitive?
It is pretty much anticipated that renewable hydrogen will be a global market right from the beginning. The need to decarbonize is being felt by each country in order to meet climate change obligations which consecutively drives the need of green hydrogen globally. While the demand will kick-off in the industrialized economies first it would be a sustainable alternative for the developing economies as well to be hydrogen economy. For a country like India which can work upon developing its own hydrogen ecosystem addressing a growing local demand and integrate into the global value chain by exploring hydrogen exports to other regions.
It is well understood that regions like India, with high quality renewable energy endowments will be placed to be a globally significant suppliers. The supply shall be especially large in Middle East, Africa, LATAM, US & China. Having said so it remains a fact that unlike previous commodities booms, renewable hydrogen can be virtually produced anywhere. Consequently, competition will be stronger in RE hydrogen market when compared with current oil & gas and mineral markets. Simply, put it means that scarcity no longer shall guarantee a flourish in the market.
Further, for a country like India it is not sustainable to have a larger quantum of the hydrogen exports and not engage to supplies to in situ industrial hubs and valleys. Across feasible export markets of EU or North Africa or balance Asia only viable pathway shall be seaborne renewable hydrogen. The feasibility of seaborne hydrogen is still being undertaken and transport via ammonia is a key component of many proponent plans today in the country.
Mr. Ravi Shekhar, Director & Head, of Eninrac Consulting says “ India is amongst the largest renewable power producers across the globe and is having a fast-paced growth market for the same. Proximity to Asia provides a natural advantage for exporting seaborne renewable hydrogen to Asia relative to other prospective exporters – effectively, lower shipping costs. Seaborne hydrogen still must overcome some challenges with carriers - ammonia is currently assumed to be a viable shipping approach. However, India is not alone in the race which possess comparative advantages w.r.t RE sources. The United States, Gulf States including Saudi Arabia and Egypt, and African countries including Morocco and Namibia all have significant renewables endowments. These countries have also announced significant hydrogen production and clean manufacturing ambitions and multiple export-scale projects. This clearly suggests that India’s success in green hydrogen is not guaranteed, and cost of complacency could potentially be high. In fact, the IRA economics clearly suggests that unintended consequence could be undermining India’s ability to export to Japan & South Korea. In the near term, no producing region is likely to have material comparative advantage in renewable hydrogen production – power prices are the key driver of cost variability. This is because original equipment manufacturers (OEMs) sell electrolysers on a global market, and capacity factors are in equivalence as developers will each select the best sites in each country for their first projects and each aspirational exporting market has some sites with high-capacity factors. ”
Why overcoming the commercialization gap remains a threshold issue for India?
It will be challenging for renewable hydrogen producers to focus amply upon only exports and ignore the domestic market which shall be the base for the market to flourish. Given, the upbeat atmosphere for renewable hydrogen in the country the possibility of the charm getting over sooner than later looms large with only majors being able to sustain the rush.
The commercialization gap is not unique to India or renewable hydrogen it is the hallmark of any early-stage and nascent markets.
Scale and the pace at which renewable hydrogen is developed in India might outweigh the comparative advantage before 2030. For India, the next decade will be oriented towards participating in a race to secure offtake contracts for green hydrogen producers. The key characteristics shall be securing long-term contracts meaning that lower opportunities for many other market participants in the eventuality of being locked out of the markets for considerable period. Consecutively, this would mean a concentrated or lumpy demand market which is non-continuous. Further, globally it is anticipated that renewable hydrogen market would follow a similar trajectory to an LNG development market globally or an initial solar PV development market for India.
Why India’s green hydrogen competitiveness may be at risk?
India is amongst the largest renewable power producers across the globe and is having a fast-paced growth market for the same. Proximity to Asia provides a natural advantage for exporting seaborne renewable hydrogen to Asia relative to other prospective exporters – effectively, lower shipping costs. Seaborne hydrogen still must overcome some challenges with carriers - ammonia is currently assumed to be a viable shipping approach. However, India is not alone in the race which possess comparative advantages w.r.t RE sources. The United States, Gulf States including Saudi Arabia and Egypt, and African countries including Morocco and Namibia all have significant renewables endowments. These countries have also announced significant hydrogen production and clean manufacturing ambitions and multiple export-scale projects. This clearly suggests that India’s success in green hydrogen is not guaranteed, and cost of complacency could potentially be high. In fact, the IRA economics clearly suggests that unintended consequence could be undermining India’s ability to export to Japan & South Korea. In the near term, no producing region is likely to have material comparative advantage in renewable hydrogen production – power prices are the key driver of cost variability. This is because original equipment manufacturers (OEMs) sell electrolysers on a global market, and capacity factors are in equivalence as developers will each select the best sites in each country for their first projects and each aspirational exporting market has some sites with high-capacity factors. - Communications Team
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