Mumbai, Nov 27 (IANS): The levelised cost of green hydrogen is expected to decrease to around $2.1 per kg by 2029-2030, largely driven by the projected 35-40 per cent drop in electrolyser prices and a 12 per cent-14 per cent improvement in efficiency apart from supportive government policies, according to a report released on Wednesday.

The CareEdge Ratings report believes that this reduced cost, along with the policy push and lower renewable energy prices, will provide a significant competitive advantage for India.

According to the report, the momentum of green hydrogen (GH2) in India will be driven by lower renewable energy costs and the country’s decarbonisation goals.

Additionally, PLI incentives announced by the Indian government, such as a direct production incentive of up to $0.50/kg of GH2 production for the first 2 years and an incentive on electrolyser capex of $54/Kw are a welcome move to help achieve targeted levelised cost of hydrogen (LCOH).

Green hydrogen has the potential to play a crucial role in achieving India’s decarbonisation target as well as reducing India’s dependence on fossil fuels. Nevertheless, the estimated levelised cost of GH2 - which includes both capital expenditure (capex) and operational expenditure (opex) per unit of production - is currently about 1.75 times that of grey hydrogen and around 1.50 times that of brown hydrogen.

This disparity persists despite the waiver of interstate transmission charges (ISTS) for renewable power, and it remains a key barrier to the viability and widespread adoption of GH2, the report states.

There is a need for a huge capex outlay of Rs.2.40 lakh crore investment to produce one million metric tonnes (MMT) of GH2. Considering the waiver of interstate transmission charges, LCOH was estimated at $3.74 per kg as of 2023, according to the report. In the years ahead, CareEgde Ratings highlights that reduction in electrolyser cost and efficiency improvement are prerequisites to achieve a targeted levelised cost of $ 2.1 /kg.