Bangkok, Bombay Wherever Economics Minister Robert Habeck (Greens) steps in front of a microphone during his trip to India, he mentions India’s potential to produce green hydrogen on a large scale. Germany wants to help build the hydrogen value chain – and also buy as much of the hydrogen produced in India as possible.
But India is struggling with the demands that Germany is making. In the worst case, India could turn to the Asian market instead of producing hydrogen for Germany and the rest of Europe.
The country has great ambitions when it comes to green hydrogen. Production is to grow rapidly and also become cheap through large-scale industrial production.
The richest man in India, Mukesh Ambani, is at the forefront. He has experience in helping new technologies break through: Ambani has already brought 4G internet at discount prices to hundreds of millions of Indians. The US magazine “Forbes” estimated his fortune in 2022 at a good 90 billion dollars.
Now the man who became rich in the oil business and has since shaped large parts of the Indian economy with his conglomerate Reliance wants to repeat his successes with green hydrogen. He promises to bring the price per kilo below two dollars by the end of the decade – a fraction of the current costs. According to Ambani, in the early 2030s, less than a dollar per kilo is also conceivable.
Billionaire Ambani wants to build huge industrial plant for hydrogen
The multi-billionaire wants to achieve the goal with a 20 square kilometer industrial plant in the western Indian state of Gujarat, which is to produce masses of cheap solar cells and electrolysers. “Reliance aims to make India a world leader in new energy production,” Ambani said at his company’s annual general meeting last year.
Cheap electricity from solar panels or wind turbines, along with cheap electrolysers, is key to reducing the cost of green hydrogen production.
Green hydrogen is produced by electrolysing water into its components, hydrogen and oxygen. This requires large amounts of electricity from renewable sources. Countries with lots of sun and wind are therefore predestined for the production of green hydrogen, which is considered climate-neutral.
It is the key to decarbonizing industrial processes and can also make heavy-duty, shipping and air transport climate-neutral. Industrialized countries like Germany will need large amounts of hydrogen in the future, most of which they have to import.
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The 66-year-old Ambani is not the only businessman in India who is betting that the subcontinent, which has so far been dependent on energy imports, could supply the world markets itself with the help of green hydrogen: In addition to Reliance, Indian companies such as Indian Oil, Adani Enterprises and Renew Power have announced that they will invest heavily in the production of the energy carrier. In a first step, the planned production capacities amount to 3.5 million tons per year.
India aims to become a global hub for hydrogen
The government in New Delhi has set itself the goal of increasing production to at least five million tons a year by 2030 and intends to provide around two billion dollars in subsidies for this. “Our goal is to establish India as a global hub for green hydrogen,” India’s Information Minister Anurag Thakur said earlier this year. The country wants to serve at least ten percent of global demand by 2030.
India hopes to be able to significantly increase production volumes with the help of foreign investors. According to media reports, the country recently negotiated an agreement with the European Union that provides for the delivery of ten million tons of green hydrogen per year – with simultaneous investments from Europe in Indian hydrogen projects.
Industry representatives from the country have great expectations of the talks: “The bilateral agreements that are currently being discussed offer Indian green hydrogen producers significant business opportunities,” said Vineet Mittal, head of Indian renewable energy producer Avaada.
Indians take part in auction in Germany
Germany is arousing great interest as a possible sales market. According to India’s Oil Minister Hardeep Singh Puri, a consortium consisting of the mineral oil company Hindustan Petroleum and the renewable energy group ACME has applied for the tender for the import of green hydrogen initiated by the federal government last year. According to local media reports, another Indian consortium including the Indian Oil Corporation, Renew Power and the industrial company L&T is also in the running.
There is no official confirmation from Germany because the tender for the import of green hydrogen is still ongoing. H2 Global, a foundation set up by the federal government, manages the process. It brings potential producers abroad together with potential buyers in Germany via contracts for difference.
Whoever submits the lowest bid in the auction process is awarded the contract. The customer who is willing to pay the highest price gets a chance. The difference is covered by “H2 Global”. The foundation will have 4.4 billion euros available for several rounds of tenders in the coming years.
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Foundation head Markus Exenberger says nothing about the ongoing auction process, but refers to the soundings that preceded the auction. “At the last market consultation before the current auctions, we had a total of 1057 participants, with a disproportionately large number coming from India. This can certainly be understood as a lasting indication of Indian interest,” Exenberger told Handelsblatt.
But the initiation of business does not run smoothly. The requirements of the German tender are apparently causing problems for the Indians: These are “restrictive”, complained Bhupinder Singh Bhalla, State Secretary in the Indian Ministry of Renewable Energy a few weeks ago. The Europeans had established some criteria that met with reservations in Indian industry. According to him, India’s foreign ministry intervened to address the differences in the federal government.
Habeck: Green hydrogen must be produced under European conditions
The core question is which criteria the hydrogen must meet. The Europeans have imposed strict rules on themselves. Green hydrogen may therefore only be declared as green hydrogen if there is a close temporal and spatial connection between electricity generation and hydrogen electrolysis. In addition, the electricity should come from additional renewable systems.
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In essence, it is about relieving the power grids and avoiding cannibalization effects. No green electricity should be withdrawn from the electricity market for hydrogen production, which then has to be replaced by electricity from coal and gas-fired power plants. The requirements that Europeans make for green hydrogen apply not only to hydrogen produced within the EU, but also to hydrogen imported into the EU.
Habeck leaves no doubt about that: Green hydrogen that is imported into the EU must “be produced according to European conditions,” he said on Thursday in New Delhi. The EU has developed “relatively strict but observable requirements”.
The Indians see it differently. The conditions are too rigid, one hears in India. “The Europeans would do well not to hinder the market ramp-up with excessive regulation,” it says.
Do suppliers come to terms with Europe’s specifications?
H2 Global boss Exenberger also sees the problem: “Not all requirements can be transferred one-to-one to third countries.” However, his foundation is doing pioneering work in this regard and ensures a legally secure interpretation of the strict EU requirements. To do this, you use the help of a number of experts and coordinate with the EU Commission. The discussion with the Indian side is “very committed” and there is “a lively desire for exchange”.
Will Indians and other potential producers like Australia come to terms with this – from their point of view superfluous – complexity? In any case, in India it is sometimes said that the Europeans forget that a country like India is not dependent on buyers from Europe.
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