Green hydrogen costs declined, may reduce further with GST cuts but USD 1-2/kg target remains distant: Report

New Delhi [India], September 19 (ANI): The cost of producing green hydrogen in India is coming down, but the target of USD 1-2 per kg still looks far, according to a report by Emkay Securities.

Currently, green hydrogen prices in India are seen at around USD 3.8 per kg, excluding GST, based on the latest bidding rounds in the refinery and fertilizer sectors.

It stated “Green hydrogen prices seem to be gradually declining and the targeted rate of USD1-2/kg still seems far”.

The report noted that while this target is ambitious, achieving it will depend on continued cost improvements and supportive policies.

It highlighted that recent changes in Goods and Services Tax (GST) on renewable energy equipment and better electrolyzer economics have helped reduce costs, though more steps will be needed to make green hydrogen affordable at scale.

Green hydrogen at USD 3.8/kg, is slightly lower compared to FY24 expectation of USD 4 per kg, indicating an improvement in cost efficiency. The reduction is largely attributed to better electrolyzer performance.

The government recently cut GST on renewable energy equipment to 5 per cent from 12 per cent, which is expected to further reduce energy costs. However, the report also pointed out that the 18 per cent GST on green hydrogen itself needs to be reduced to make the fuel more competitive.

Despite the challenges, the government remains optimistic about achieving its target of producing 5 million metric tonnes per annum (mmtpa) of green hydrogen by calendar year 2030.

On the project front, the Solar Energy Corporation of India (SECI) has launched its first green ammonia tender under the SIGHT scheme.

Under this, about 0.72 mmtpa of green ammonia will be supplied to 13 fertilizer plants for a period of 10 years. Results from the tender showed an average price of around USD0.6 per kg being offered by winners to fertilizer plants.

The scheme also provides incentives of Rs 8.8, 7.1, and 5.3 per kg for the first three years, respectively.

Since green hydrogen makes up around 17-18 per cent of ammonia, this translates into a hydrogen equivalent price of USD 3.8-3.9 per kg.

The report outlined that while costs are moving in the right direction, but India still has a long way to go to reach the globally competitive level of USD 1-2 per kg. Supportive tax reforms and efficient scaling up of technology will be crucial to meet both price targets and production goals. (ANI)

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