The Rise of the Green Hydrogen Sector in India: Could Green Hydrogen Stocks Be the Future?
As climate change and the greenhouse effect continue to escalate globally, the shift towards renewable energy is accelerating. At the forefront of this transformation is green hydrogen, a clean and sustainable energy source that could potentially solve fuel problems and significantly reduce CO2 emissions. Green hydrogen is produced by a method called electrolysis, where water is split using electricity into hydrogen and oxygen components. Since the energy for the electrolysis is generated through renewable sources like wind, solar or water energy, this makes the entire process emission-free. With governments around the world, including India, increasingly promoting green hydrogen, the sector is witnessing a surge in investment and interest. This raises the question: could green hydrogen stocks be the next big thing in the energy market?
Understanding Green Hydrogen
Hydrogen, used extensively across various sectors like automobiles and manufacturing, can be generated through different methods, which often determine its "colour" classification—grey, blue, pink, or green. Among these, green hydrogen stands out as it is produced through a renewable and clean process that emits close to zero CO2. This makes it an environmentally friendly alternative to traditional fossil fuels, which are major contributors to greenhouse gas emissions.
The Push for Green Hydrogen in India
India has demonstrated its commitment to green hydrogen through its National Green Hydrogen Mission, which aims to establish the country as a global hub for green hydrogen production. The government has ambitious plans to set up facilities capable of producing 5 Million Tonnes of green hydrogen annually, as part of a broader strategy to decarbonise key economic sectors and reduce dependence on fossil fuels.
Several Indian companies are already making significant progress in this direction. For example, ACME has signed MoUs with the governments of Karnataka and Tamil Nadu to establish green hydrogen manufacturing facilities, each worth over ₹50,000 crores. Other major players, such as Renew Power, Avaada Energy, Indian Oil Corporation (IOC), and Bharat Petroleum Corporation Limited (BPCL), are also planning similar ventures. Although these projects are still in the planning stages, the commitment to green hydrogen production is clear.
Challenges in Green Hydrogen Manufacturing and Distribution
Despite its potential, the green hydrogen sector faces significant challenges, particularly in manufacturing and distribution. One of the primary issues is the high cost of production. Currently, green hydrogen costs about $4 to $5 per kilogram, which is considerably higher than conventional hydrogen production methods. Efforts are underway to reduce this cost to as low as $1 per kilogram to make green hydrogen competitive with other energy sources.
The Indian government recognises the financial challenges associated with scaling up green hydrogen production, estimating that it could require approximately ₹8 lakh crores in total investment. To support the sector, the government has introduced the National Green Hydrogen Policy, which includes incentives such as the availability of land for green hydrogen producers and the waiving of interstate transmission charges for renewable energy used in hydrogen production. These measures are expected to reduce production costs by 40-50%, making green hydrogen more economically viable.
The Evolution of Green Hydrogen Stocks
The focus on green hydrogen has increased activity in the Indian stock market, particularly among companies involved in renewable energy and hydrogen production. Major corporations like Reliance Industries and the Adani Group have announced substantial investments in green hydrogen, reflecting their confidence in the sector's future. For example, Reliance Industries plans to invest ₹75,000 Crores in setting up four giga-factories within its renewable energy ecosystem, including one dedicated to electrolyser production for green hydrogen.
The Global Context and the Road Ahead
India's green hydrogen push aligns with global efforts to reduce greenhouse gas emissions, as outlined in the 2015 Paris Agreement. Green hydrogen is seen as a crucial component in decarbonising hard-to-abate sectors like steel production, heavy transport, and chemical manufacturing. The International Energy Agency (IEA) estimates that global hydrogen production could reach 73 Million Tonnes by 2030, with a market value of $73 Billion if green hydrogen can be produced for as little as $1 per kilogram.
To fully realise the potential of green hydrogen, India will need to address challenges and rapidly scale up production. Strategies like Green Hydrogen Purchase Obligations (GHPOs), which would require industries to use a minimum percentage of green hydrogen, could create a guaranteed market and encourage large-scale production. Additionally, the development of a robust green hydrogen infrastructure, including electrolyser manufacturing facilities and hydrogen storage and distribution networks, will be crucial.
The Role of the Private Sector and International Collaboration
Private sector involvement will be key in driving the green hydrogen revolution in India. Companies like Reliance Industries, Adani Group, ACME, and Renew Power are making significant investments, bringing both financial resources and technological expertise. International collaboration will also play a crucial role, with partnerships bringing in the latest technology and best practices to support the sector's growth.
Bottom line: Green Hydrogen Stocks – A Future Worth Investing In?
The green hydrogen sector in India is still in its early stages, but the foundations are being laid for what could become a major industry in the coming decades. With strong government support, increasing private sector investment, and the potential for international collaboration, green hydrogen stocks could indeed be the next big thing in India. As the country continues to push for a low-carbon future, green hydrogen presents a unique opportunity to decarbonise the economy, create new industries, and position India as a global leader in clean energy. For investors, the green hydrogen sector offers the potential for significant long-term returns, making it a promising area to watch closely as the world transitions to a more sustainable energy future.
Image Credits:
Future Fuels, 2024
My Trade Logic, 2024
