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12.26.24

Economics of green hydrogen is very daunting

  • Author: Raghavendra Kamath
  • Featured In: Financial Express

The second growth area is renewable energy integration, where the challenge is ensuring India’s electricity grid incorporates renewables while maintaining affordability and reliability.

US-based Dastur Energy, which collaborated with the government on carbon capture, utilisation, and storage, is focusing on industrial decarbonisation, renewable energy integration, and clean fossil fuel utilisation as its key growth areas. In an interview with Raghavendra Kamath, Atanu Mukherjee, CEO and president of the company, discusses the opportunities in decarbonisation in India and emerging energy segments.

Green hydrogen has been a buzzword in the country for the past couple of years, but it seems much of it is still on paper. How do you view its progress?

The economics of green hydrogen are quite daunting. Currently, the cost of production, even in the best-case scenario, is not expected to drop below $4 per kg in the near future, making it unviable at that price. This is a fundamental challenge in terms of both the process and economics. Green hydrogen is produced via electrolysis using renewable energy, and when you factor in the cost of the electrolyser, renewable intermittency, and other factors, the price globally ranges from $4 to $7 per kg. This creates a significant gap in the cost of hydrogen production.

What opportunities do you see in India’s industrial decarbonisation space?

CO2 emissions in any country, including India, are not solely from electricity generation. Only 25-30% come from coal, gas, or other sources of power. Around 70% of emissions stem from non-electric sectors, with 35-40% originating from industrial activities like steel, plastics, cement, and fertilisers. Abating this CO2 is crucial, and renewables alone won’t suffice. Carbon capture systems are a key solution, as demonstrated in several countries. This presents a significant opportunity to reduce industrial CO2 emissions in India, especially given the country’s growing manufacturing sector and economy. As industrial emissions rise, carbon capture offers a vital tool for addressing this challenge.

Who have you worked with for industrial decarbonisation?

We work with the government, having collaborated with NITI Aayog to develop the policy framework for carbon capture systems. This framework has laid the foundation for the carbon capture mission, which is now being implemented. We are also working with companies like Indian Oil Corporation and BPCL to explore carbon abatement using carbon capture systems, as well as converting their waste into useful, clean products like hydrogen.

Apart from industrial decarbonisation, what new segments do you anticipate emerging?

Industrial decarbonisation will remain a key focus. We aim to capture CO2 and convert it into valuable products or store it securely. The second growth area is renewable energy integration, where the challenge is ensuring India’s electricity grid incorporates renewables while maintaining affordability and reliability. We are working on solutions to make renewable energy cost-effective and dependable. The third transformative area is the clean utilization of fossil resources, especially coal. Coal gasification is emerging as a significant opportunity, enabling the creation of high-value chemicals like hydrogen and methanol, while using carbon capture systems to mitigate emissions.

The government has set a target of net zero by 2070. How does your business strategy align with India’s larger goal?

India currently emits 2.5 billion tonne of CO2 annually, with projections of 4 billion tonne in the next five to seven years. Of this, 600 million to 1 billion tonne come from industrial emissions. Our strategy aims to address and abate at least 600 million to 1 billion tonne of CO2 through the technologies and solutions we offer to various clients. From this perspective, we see a significant contribution to India’s net-zero goal by helping achieve emissions abatement over time.

Can you quantify the revenues you are targeting for FY25 and the growth you anticipate over the next three years?

A significant portion of our revenues currently comes from the United States. However, we anticipate a 25-30% CAGR growth in India going forward, or potentially more, depending on the situation. Our baseline revenue goal for FY25 is $25-30 million.