Industrial Demand: Decarbonizing Steel, Fertilizers, and Refineries

Decarbonizing the most carbon-intensive sectors of India’s economy will require finding alternatives to existing fuels such as coal and natural gas. Green hydrogen is an exciting opportunity to achieve low-carbon operation in the steel industry through a new technology called hydrogen-based direct reduction, allowing steel to be manufactured without CO2 emissions by utilizing hydrogen instead of coal. The fertilizer industry can also decarbonize by transitioning from grey hydrogen, derived from natural gas, to green hydrogen for producing ammonia as the primary feedstock. Much like refineries and petrochemical plants, which currently utilize hydrogen in their operations, many refineries and petrochemical plants have an opportunity to decarbonize by using renewable hydrogen as a direct replacement for fossil fuel-based hydrogen. Ultimately, through domestic demand alone, it would create a large internal marketplace that would allow producers to develop and deliver products (to customers) over an extended period of time. Furthermore, global companies may seek low-carbon supply chains when sourcing materials that are produced from green hydrogen, which creates an additional advantage for Indian exporters.

Challenges, Investments, and the Road Ahead

India has tremendous potential as a future world leader in green hydrogen; however, it will face considerable obstacles on the way to this goal. One of the biggest barriers to developing hydrogen is its high production cost relative to ‘grey’ hydrogen (the more commonly used source) due in no small part to the relatively expensive production equipment (electrolysers, solar PV panels, etc.) as well as the integration of renewable energy. In addition, there is limited infrastructure available for storing and transporting hydrogen making capital investments required for the construction of such facilities significant. There are also concerns around securing sufficient supply of water to produce hydrogen through electrolysis in certain regions of India. Therefore, even though India’s large corporate groups and international investors have committed billions of dollars to support constructing large-scale hydrogen production facilities within India, it will still take many years before we see the full impact of these investments on the development of hydrogen as a major energy source. In addition, important technological advancements will likely reduce production costs over time through economies of scale. Partnerships with Europe, the Middle East, and East Asia are also helping to create new markets for green hydrogen produced in India. If the right conditions exist for continued policy consistency, attracting private capital investment, etc., there is an excellent chance that India will ultimately emerge as a major player in the global clean hydrogen marketplace.