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'Green Hydrogen' policy is expected to support the Renewable Energy (RE) capacity addition targets of the country.

At present, 'Green Hydrogen' is produced through electrolysis of water using renewable energy.

On the other hand, 'Gray Hydrogen' which is the most commonly used is derived from fossil fuels.

The 'Green Hydrogen' segment is becoming popular globally but cost of producing this gas remains high.

Currently, fertiliser and oil gas sectors use hydrogen, however, due to flexible uses and low emissions the gas is being touted as the ultimate solution for clean energy needs of long distance transportation and electricity generation.

In February, the Centre notified a "Green Hydrogen Policy" in line with its strong policy focus on renewable energy, a path of net zero energy transition by 2070.

According to ratings agency ICRA, under the base case scenario of delivered renewable cost of procurement at Rs 3.5 per unit, levellised cost of production for aGreen Hydrogen' is estimated to range between $5.5-6 per kg.

"For the co-located projects (Electrolyser and RE capacity at same location), such cost is estimated to decline by $0.5-1.0 per kg due to savings in intra-state open access charges."

"Further, round-the-clock (RTC) procurement of renewable energy at cost competitive rate remains extremely critical for improvement in utilisation of electrolyser."

Besides, the ratings agency said that viability of battery storage and availability of energy banking remains important.

"Even in a scenario of 30 per cent of hydrogen demand to be met through aGreen Hydrogen' by 2030, incremental renewable (RE) capacity requirement is estimated to remain significant at about 60 GW," said Girishkumar Kadam, Senior Vice President & Co-Group Head - Corporate ratings, ICRA.

"This is over and above the RE addition to meet all India energy requirements. From the industrial off-taker's perspective, 'Green Hydrogen' is currently estimated to remain costlier by about $3.5-4 per kg against 'Grey Hydrogen'. The cost competitiveness of 'Green Hydrogen' would remain contingent upon the reduction in capital cost and an improvement in the energy efficiency level of electrolyser, besides cost of RE procurement.