Kotak Institutional Equities has forecasted a significant decline in the costs of green hydrogen (GH). However, the adoption of GH in lieu of traditional fossil fuels will necessitate governmental support, the analysts assert in their New Energy sector report titled "Green Energy: Hope+Hype." Even with anticipated cost reductions, replacing conventional fossil fuels with hydrogen (or its derivatives) will still incur higher expenses. For example, the cost of synthetic ammonia produced using $1/kg of hydrogen will remain approximately 55% higher than alternate options such as Very Low Sulphur Fuel Oil (VLSFO). To bridge this gap, the analysts suggest the need for support mechanisms such as green incentives or carbon taxation to incentivise industries to transition to GH.

According to the report, GH is expected to gain traction initially in specific sectors like refining and fertiliser production, eventually becoming competitive in other sectors such as steel, shipping, and aviation over the long term. Currently, GH is relatively costly, ranging from approximately $4.5-6/kg, especially when compared to gray and blue hydrogen.

The analysts emphasised the versatility of hydrogen as an energy source, noting that it could fulfil 15-20% of the energy demand in a net-zero 2050 scenario, with 70% of the energy demand being met by electricity. Hydrogen can be utilised in combustion engines similar to fossil fuels, act as an energy carrier, generate electricity through fuel cells, and be used to create synthetic fuels like ammonia and jet fuel. Furthermore, GH can serve as a connector, integrating renewable energy sources into energy systems.

Regarding India's ambitions to become a green hydrogen hub, the analysts pointed out that the country's plans align with the central government's goal of scaling up non-fossil energy to 500 GW by 2030. This scaling up of renewable energy generation is expected to provide the necessary foundation for expanding GH production in India.

Source: moneycontrol.com