Top Oil Refiner Sees India’s Green Hydrogen Push Halving Costs

(Bloomberg) -- Indian Oil Corp. Ltd., the country’s biggest oil refiner and a large user of hydrogen, expects prices of the cleanest form of the fuel to halve after the government scrapped fees on wheeling renewable power across the country.

The offer to waive transmission charges on green energy from one state to the other can reduce costs by as much as 50% from $5-$6 a kilogram at present, Director for Research & Development S.S.V. Ramakumar said in an interview. The country now needs to cross the second-biggest cost barrier by promoting domestic manufacturing of electrolyzers, key hardware needed for producing the fuel.

Green hydrogen, produced from water and green electricity, is seen as a potential path to decarbonize heavy industries, such as steel, cement and oil refineries. India, the world’s third-biggest emitter of greenhouse gases, plans to take the lead and has won support from state-run heavyweights like Indian Oil and NTPC Ltd. as well as billionaires Mukesh Ambani and Gautam Adani.   

“While the whole world is gung-ho about India’s declining renewable electricity costs, inter-state transmission charges inflate the price at application sites,” Ramakumar said. “Now with the policy, the overall pie of green hydrogen cost cycle will reduce by at least 40% to 50%.”

Besides free transmission of renewable power, India’s new policy offers help to companies in setting up storage facilities near ports for green hydrogen and green ammonia. Policy support such as that being undertaken by India is critical to bring down prices and help spur adoption of hydrogen. The strategy may catapult the nation into an international leader in the development of the fuel, according to BloombergNEF. 

There are more incentives on the way for producers. The country is also considering putting obligations on industries, such as petroleum refineries and fertilizer plants, for using green hydrogen, power minister Raj Kumar Singh said Wednesday. A capital subsidy proposal is also under discussion, he said.

While usage obligations are yet to be finalized, Indian Oil is already bracing to produce 70,000 tons a year of green hydrogen by 2030, which will account for 10% of its overall consumption by that time. Refineries typically use hydrogen for removal of sulfur from fuels like diesel.

Indian Oil is exploring various plans, including manufacturing of electrolyzers or outsourcing the production of green hydrogen, Ramakumar said. India plans as much as 15 gigawatts of electrolyzer-making capacity and is considering production-linked incentives to encourage local manufacturing.

The nation has to look at manufacturing electrolyzers at about $300 per kilowatt to make green hydrogen viable, Ramakumar said. “We can ill-afford to miss the bus as far as hydrogen is concerned,” he said. “The policy shows the resolve of the government to catch that bus ahead of anybody else.”

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