Green H2: Hype less Hydrogen
Green hydrogen is a hot topic of discussion these days.
Policymakers are serious about its role in their climate change commitments.
The prime minister of India launched the green hydrogen mission last year. In February this year, the government notified the green hydrogen policy.
Businesses are optimistic about potential opportunities green hydrogen might unlock. Many Indian companies have already drawn multi-year-multi-million investment plans to take the early-mover advantage.
And as a result of these developments, investors appear inquisitively excited about the next big thing—green hydrogen.
Our research team has recently released a detailed report on a company that’s likely to be a front-runner in the green hydrogen economy. You can access the report here! It’s FREE and available to all.
So what is green hydrogen and why could it potentially be a big opportunity?
Hydrogen is one of the simplest, lightest and the most widely used elements in the world. It is calorie dense and storable.
When hydrogen combines with carbon, it forms hydrocarbons—what is popularly known as petroleum. But when it teams up with oxygen it gives us water (H2O).
Hydrogen is used largely as an energy carrier in critical but energy guzzling industries such as oil refineries and fertilizers. The potential use cases envisage hydrogen as an alternate energy source in a number of industries including steel, heavy transportation, and city gas distribution.
At present, the world is producing most of its hydrogen through a process called steam methane reforming in which hydrogen is separated from hydrocarbons.
So, the production of hydrogen isn’t new. In fact, according to Illinois Power Agency (IPA), hydrogen production accounts for 2% of total Green House Gases (GHG) emissions. Steel, Shipping and Fertilizer industries are responsible for 8.5%, 2.5% and 1% GHG emissions respectively.
Then what’s unique about green hydrogen?
The process of production and its impact.
Hydrogen obtained through the process of electrolysis using renewable energy is called green hydrogen.
Most importantly, green hydrogen manufacturing doesn’t result in GHG emissions and it helps other industries cut their GHG emissions as well—steel, oil refineries and fertilizer for instance.
As of today, the world produces 90 million tons of total hydrogen. The majority of it is grey—produced using fossil fuels.
To achieve net-zero emissions, the world would require 6 times more green hydrogen of the world’s TOTAL hydrogen production today. By 2050, green hydrogen will meet approximately 9% of the world’s final energy demand from near zero as of today.
Green hydrogen may help India:
- Reduce energy import reliance
- Reduce carbon footprint
- Help industries using hydrogen adopt more sustainable production processes
So far everything sounds hunky-dory and extremely logical. But like electrolysis splits water into pure oxygen and hydrogen, deeper evaluation may tell us how much of H2O is O i.e. how much of Hydrogen is Hype and how big is the real Opportunity.
Time to do some arithmetic
Cost of production of 1 Kg of hydrogen based on its fuel source (in USD)
The cost of green hydrogen ranges from USD 3/kg to USD 7.5/kg depending on the cost of renewable energy and the geographic area under consideration.
Coal is the cheapest source for producing hydrogen but that’s the most polluting and unsustainable one.
USD 2 is the upper end of the cost of manufacturing a kilogram of hydrogen using coal. That’s the benchmark for all policy initiatives across the globe that are pinning their hopes to green hydrogen.
Therefore, the challenge is two-fold:
- Bringing down the cost of renewable energy (used for electrolysis)
- Achieving economies of scale in hydrogen manufacturing
This has been the vision with which some Indian businesses are making investments in green hydrogen: producing 1 kg of hydrogen at USD 1 within 1 decade (1-1-1).
But how tall are these targets? Is there any element of reliability beyond optimism?
Yes, it appears so.
Even the International Energy Agency (IEA) has acknowledged that India can produce green hydrogen at competitive rates. So the targets could be ambitious but they are neither unrealistic nor ill-founded.
Connecting the dots
Let’s not forget green hydrogen technologies are still in a budding phase and offer a level-playing field to all researchers. For India to make its mark, developing the entire value-chain of green hydrogen in India is important. The struggle starts with making electrolyzers in India at competitive costs using the most advanced technologies.
As Dr Raghunath Mashelkar, one of the most eminent scientists of India says, along with innovation, India needs a lot of ‘Indovation’ to make green hydrogen a path-breaking initiative. And he sounds confident about the future of India’s hydrogen economy.
The company that our research team has covered extensively in one of the latest reports is betting big on the future of green hydrogen and trusting its execution abilities. According to the estimates of our analyst, the company’s stock price has a potential upside of 32%.
Access the full report here!
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