January 10, 2023

HDFC Mutual Fund’s Tuesday’s Talking Point: Green Hydrogen – Key Enabler of Net Zero!
The path to net zero in electricity generation is being tackled by moving from fossil fuel sources to
renewables - solar, wind and hydro. But for certain hard to abate sectors such as iron ore and steel,
fertilizers, refining, methanol, and maritime shipping, hydrogen is emerging as a popular alternative. While
hydrogen production can have many forms, there is growing clamour for ‘green’ hydrogen – hydrogen
produced using electrolysis of water using electricity from renewable sources.
Different colours of Hydrogen!

Black / Brown / Grey •Produced using carbon intensive processes - coal or lignite gasification
Hydrogen or steam methane reformation

•Produced via natural gas or coal gasification combined with carbon

Blue Hydrogen capture storage used to reduce carbon emissions

•Produced using eloctrolysis of water with electricity generated by

Green Hydrogen renewable energy.
Source: Harnessing Green Hydrogen – NITI Aayog and RMI

Falling cost of renewables to drive down cost of Green Hydrogen vs Grey Hydrogen

Note: Above chart shows estimates of cost of Levelized Cost of Hydrogen (LCOH) for Green Hydrogen vs other forms
Source: Harnessing Green Hydrogen – NITI Aayog and RMI

Green Hydrogen – Key Uses

Global Hydrogen demand is driven by its use in refining and ammonia (fertilisers). While most of the current
hydrogen usage falls in the brown and grey category, environmentalism and lower costs are expected to
move usage to green hydrogen.
A large part of likely future demand is driven by its use as a heating material in various industries (Steel,
paper, cement, aluminium, food) and as feedstock in various products such as Metallurgy, Steel, Food,
Glass. It has potential for use in transport as well, but it’s a direct competition between batteries and
hydrogen fuel cells there.

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India’s Green Hydrogen Ambition – Brief Background
With a view to establish dominance in a new energy commodity, India has been taking steps to promote
use of Hydrogen in various use cases. In his Independence Day Speech in 2021, the Prime Minister
signalled the launch of the National Green Hydrogen Mission “to make India a Global Hub for Green
Hydrogen Production and Export in the 'Amrit Kaal'” and “to make a new progress in the field of energy
self-reliance.” Last week, on January 4, 2023 the Cabinet formally approved the National Green Hydrogen
Mission with an initial outlay of INR 19,744 crore. Combined with other efforts to develop renewable energy,
costs to produce green hydrogen are expected to fall below “grey” hydrogen by 2030 (Source: NITI Aayog).
National Green Hydrogen Mission – Key Components
The Mission comprises of SIGHT programme (Strategic Interventions for Green Hydrogen Transition) with
an outlay of INR 17,490 crore, INR 1,466 crore for pilot projects, INR 400 crore for R&D, and INR 388 crore
towards other Mission components. Under the SIGHT Programme, two distinct financial incentive
mechanisms will be provided - targeting domestic manufacturing of electrolysers and production of Green
Hydrogen. The Mission will also support pilot projects in emerging end-use sectors and production
pathways. Regions capable of supporting large scale production and/or utilization of Hydrogen will be
identified and developed as Green Hydrogen Hubs. The Ministry of New and Renewable Energy (MNRE)
is responsible to formulate the scheme guidelines for implementation of the respective components.
Key Expected Outcomes and Benefits – National Green Hydrogen Mission
The Mission aims to result in the following likely outcomes by 2030:
 Development of green hydrogen production capacity of at least 5 MMT (Million Metric Tonne)
per annum with an associated renewable energy capacity addition of about 125 GW
 Over INR 8 lakh crore in investments; technology & manufacturing capabilities development
 Creation of over 6 lakh jobs
 Cumulative reduction in imports over INR 1 lakh crore; creation of export opportunities
 Abatement of nearly 50 MMT of annual greenhouse gas emissions
Conclusion
Steps towards development of Green Hydrogen have the potential to reduce India’s reliance on
hydrocarbon imports and result in savings on the current account. As the world increasingly focusses on
Net Zero emissions, Hydrogen usage is likely to improve. Being early to scale could have immense benefits
for the Indian economy. Challenges remain in terms of scaling the usage and technology behind Hydrogen.
Sources: NITI Aayog, RMI, PIB, MNRE, and other publicly available information
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About Tuesday’s Talking Points (TTP): TTP is an effort by HDFC AMC to guide key conversations in the Indian financial
markets and investing ecosystem. We aspire to do this by providing relevant facts, along with our perspective on the issue
at hand. If you have a topic that you would like to be featured here, or in our Monthly Musings newsletter, please write to us
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performance, or events to differ materially from those expressed or implied herein. Stocks/Sectors/Views referred are
illustrative and should not be construed as an investment advice or a research report or a recommendation by HDFC Mutual
Fund (“the Fund”) / HDFC Asset Management Company Limited (HDFC AMC) to buy or sell the stock or any other security.
The Fund may or may not have any present or future positions in these sectors / securities / commodities. The Fund/ HDFC
AMC is not indicating or guaranteeing returns on any investments. Readers should seek professional advice before taking
any investment related decisions.

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