ICRA: Green Hydrogen is Estimated to Range Between $5.5 per kg to $6 per kg

Green HydrogenThe levelised cost of production for green hydrogen is estimated to range between $5.5 per kg to $6 per kg, according to ratings agency ICRA.

It said that under the base case scenario of delivering renewable cost of procurement, including intra-state wheeling and transmission charges in captive mode, at Rs. 3.5 per unit, levelised cost of production for green hydrogen is estimated to range between $5.5 per kg to $6 per kg.

According to the official press release, for projects where the electrolyser and RE capacity is located at the same location, cost is estimated to decline by $0.5 per kg to 1 per kg due to savings in intra-state open access charges.

Girishkumar Kadam, senior vice-president and co-group head – corporate ratings, ICRA said that even in a scenario of 30 per cent of hydrogen demand to be met through green hydrogen by 2030, incremental renewable capacity requirement is estimated to remain significant at about 60 GW.

“This is over and above the RE addition to meet all India energy requirements… From the industrial off-taker’s perspective, green hydrogen is currently estimated to remain costlier by about $3.5 per kg to 4 per kg against gray hydrogen,” said Kadam.

He added that the cost-competitiveness of green hydrogen would remain contingent upon the reduction in capital cost and an improvement in the energy efficiency level of electrolysers, besides cost of RE procurement.

Further, round-the-clock (RTC) procurement of renewable energy at a cost competitive rate remains extremely critical for improvement in utilisation of electrolyser. In that context, viability of battery storage and availability of energy banking remains important. The cost of RTC power with a storage component is estimated between Rs 4-6 per unit, depending on the extent of storage requirement.

“With green hydrogen being currently costlier as against gray hydrogen, switch to use of green hydrogen by the fertiliser sector will require a commensurate increase in the subsidy support from the government to mitigate the higher cost of production,” said Prashant Vasisht, vice-president and co-group head – corporate ratings, ICRA.

He added that in case of phosphatic fertilisers, manufacturers might focus on procurement of green ammonia instead of green hydrogen as the ammonia-manufacturing facility may require significant investments, thus providing opportunity to standalone green ammonia manufacturers too.

“While the announced policy measures in terms of clear timelines for open access approvals and availability of energy banking remain positive, such norms actually vary widely across the states as determined by the State Electricity Regulatory Commissions,” said Vikram V, vice-president and sector head – corporate ratings, ICRA.

He added that as a result, the consistency in these norms and applicable charges across the states is important to promote the use of open access and banking of RE power for green hydrogen projects.

scroll to top