L&T recently signed a technology licence agreement with France-based McPhy for making alkaline electrolysers in India. Before this, Greenko had signed an agreement with John Cockerill to build a 2 GW alkaline electrolyser manufacturing plant. Other companies to show an interest in electrolyser manufacturing include Adani, Ohmium, H2ePower, Reliance and GR Infraprojects. The latter two have signed technology partnerships with Stiesdal and H2B2 respectively. The US-based Ohmium already has an annual capacity of 500 MW, the only one to make electrolysers in India at present. These announcements add up to a total of 8 GW annual capacity by 2025. While most of the companies are looking to produce alkaline electrolysers, some are hedging their bets while Ohmium is focused exclusively on the newer PEM technology.
Electrolyser availability is obviously a key requirement for green hydrogen production. In view of the nascent market status, there are concerns that lack of supply may hold up green hydrogen growth. India’s green hydrogen production target of 5 MMT by 2030 requires total electrolyser capacity of about 50 GW, translating to annual manufacturing capacity of about 15-20 GW by that time. Global demand-supply scenario shows a similar deficit. Total manufacturing capacity at the end of 2022 was reported at only 15 GW – with China predictably taking the lead – as against estimated 2030 demand of between 134-240 GW. As per IEA, manufacturing plans announced so far by all companies worldwide add up to only 65 GW capacity by 2030.
Figure: Present electrolyser manufacturing capacity, GW per annum
Source: BloombergNEF, BRIDGE TO INDIA research
It is a great opportunity for India to take lead in a high growth market. China is expected to remain the dominant supplier with its large domestic market, strong government support and manufacturing prowess. But other countries need a supply alternative. The US and EU are also promoting domestic manufacturing with eye-watering incentives although it is debatable if they can ever become genuinely competitive with their high cost base and tougher permitting process.
Getting private companies to accelerate their manufacturing plans, however, is tricky since even the current small capacity remains underutilised. Private capital needs some demand visibility or at least a clear roadmap to price competitiveness of green hydrogen. It is a classic chicken and egg problem.
We believe that growth of Indian electrolyser manufacturing business is contingent on three factors – getting demand certainty, access to latest technology and critical raw materials. The government’s plan to offer incentives for green hydrogen production does not go far enough. The proposed INR 44 billion (USD 538 million) subsidy for electrolyser manufacturing is misguided since electrolyser cost accounts for barely 15% of total cost of green hydrogen production. These funds should instead be diverted to green hydrogen production and/ or incentivising technology research and/ or gaining access to supply of mineral and metals like zirconium, nickel (both dominated by China), iridium and platinum (concentrated in Africa). It seems more desirable to focus efforts on improving technology to handle variation in renewable power availability, reducing dependency on rare metals and developing recycling capability than trying to reduce the cost of electrolysers.
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