The COVID-19 pandemic has devastated global demand while oil and natural gas prices have plummeted, solidifying the consensus that investments in fossil fuels are becoming riskier than those in renewable and alternative energies. This global transition towards cleaner fuels puts growing industrialising economies, like India, in focus. India’s population is projected to reach 1.5 billion by the end of the decade, while the economy will at least double, according to Deutsche Bank in January. Knowing these factors contribute to growing greenhouse gases (GHGs), India has pledged to reduce the carbon intensity of its economy by up to 35 per cent by 2030 in accordance with the Paris Climate Agreement. India, like much of coal-dependent Asia, is prioritising natural gas in its energy mix to help curb its carbon emissions, because, when burned, natural gas emits the least amount of greenhouse and toxic gases of all hydrocarbons. In order to achieve a “gas-based economy,” India continues to liberalise its natural gas market and invite investors to build infrastructure to meet its growing demand. However, one must wonder: Will India’s energy transition away from fossil fuels turn its mounting natural gas infrastructure into stranded assets? Not necessarily. These assets need not be stranded in a greener economy, as they can serve as a conduit for a different carbon-free gas: hydrogen. Leapfrogging into a net-zero economy, which some advocate, is not always an economically viable solution for emerging markets like India. For an industrialising country whose critical infrastructure includes established natural gas networks, abandoning such assets is costly. Hydrogen production and consumption can make greater inroads in India with the help of the country’s existing natural gas market. India’s natural gas market presents an opportunity for hydrogen The most cost-effective and widespread methods of producing hydrogen are with natural gas, especially now that natural gas prices have hit record lows. Additionally, hydrogen can decarbonise many polluting sectors that consume natural gas in India, primarily industrial heating and transportation.While natural gas might not be the first choice to combat climate change, its high growth trajectory today can make way for hydrogen tomorrow. Although natural gas and hydrogen often fall into opposite sides of the climate change debate, they share several characteristics—one being that they are arguably the most versatile energy fuels commercially available. Natural gas and hydrogen both hold value across sectors by acting as feedstock for refining, generating and storing power, and reducing iron ore for steel production, among other applications. A striking difference, however, does exist: Hydrogen is the most energy-dense of practical fuels and does not emit carbon when consumed, while the natural gas industry still struggles to plug methane leakage—one of the severest origins of GHGs. Hydrogen can replace dirtier fuels because it produces, by weight, three to four times more energy than diesel/gasoline and coal, respectively. Hydrogen also can be produced from natural gas, as well as renewable power and biomass, and in some cases can be transported and stored in a country’s existing natural gas pipeline network. High energy density and clean combustion make hydrogen a good candidate primarily for the manufacturing and transportation sectors and support India’s industrial revamp, all while addressing climate change. To support cleaner industrial growth, natural gas and its infrastructure will be key to integrating hydrogen into India’s energy system and slate of manufacturing industries. Although New Delhi continues to bet big on natural gas for the next decade, capital flows do not. While some multinational banks have been slow to jump on the fossil fuels divestment bandwagon, many others, representing at least $47 trillion in holdings, have committed to implementing the Paris Agreement by shrinking hydrocarbon investments and promoting green projects. The latest plans to develop hydrogen markets and industries have largely been centred around higher-income industrialised economies, but emerging markets like India have avenues to not only participate but be in the forefront of innovation and demand. If India wants to draw more energy investments beyond the short term, it needs to convince funders that it is the top emerging market for net-zero carbon projects. By leveraging its growing natural gas network and supply, India can become an attractive market for high-value hydrogen projects and meet its potential to grow ten-fold by 2050. Natural gas + hydrogen Investors and policymakers are particularly excited about hydrogen as an energy source to replace fossil fuels because of its declining production costs, low emissions and ability to mitigate the risk of stranded natural gas assets. As India's government pursues market liberalisation to boost natural gas consumption and investment, it also boosts the prospects for its own hydrogen economy in at least two ways: 1. Hydrogen produced from natural gas can supply important manufacturing inputs to India’s key industries without carbon emissions. An emerging process, methane pyrolysis, uses natural gas to produce hydrogen with only a carbon black byproduct and no GHG emissions. Carbon black is a solid compound valued in the rubber and tire manufacturing industries (about 93 per cent of demand) with a market in India projected to reach $2 billion by 2026. Although most hydrogen in India is produced using natural gas in steam methane reformation (SMR), pyrolysis is a more attractive technology for an Indian hydrogen economy for four key reasons:
It has been found to be more cost-effective, with a 15 per cent discount to SMR.
It offers a valuable byproduct that offsets some hydrogen production costs.
It does not produce CO2. SMR requires expensive and space-consuming CCS technology to prevent the release of carbon emissions.
India’s manufacturing and construction sector release about a quarter of the country’s total GHG emissions, according to the latest data from 2014. Hydrogen produced by pyrolysis can help “close” the sector’s carbon cycle. 2. Beyond hydrogen’s several potential applications across India’s heavy industries, its most attainable market in the near term is the three million natural gas vehicles (NGVs) that can consume hydrogen-spiked compressed natural gas (H-CNG). NGVs using CNG became popular with light-to-heavy-duty vehicles during Asia’s high oil price periods. NGVs are making a comeback as the Indian government improves retailed natural gas availability and global natural gas prices remain low. Hydrogen’s ability to mix with natural gas inspired the Indian Oil Company to spike CNG with hydrogen to offer buses, three-wheelers and other vehicles cleaner combustion and higher fuel efficiency. If hydrogen continues to find success in India’s growing NGV fleet, it will lower the 12 per cent of energy-related CO2 emissions generated by autos. Natural gas paves the way for renewables in an Indian hydrogen economy Hydrogen fuel, leveraging India’s gas infrastructure, can transform the GHG emissions of the country’s industrial sectors to align with its long-term energy transition goal. This solution can reach its full potential if supported by similar policies, research and development, and capital investment that the natural gas industry continues to enjoy in India. The country might be able to leapfrog into the global hydrogen supply chain with the help of its natural gas market, but it must shape its clean energy future proactively by promoting hydrogen solutions and ensuring its survival in a low-priced fossil fuel environment. With the recent announcement by the U.S.-India Strategic Energy Partnership (SEP) of a new public-private Hydrogen Task Force to “help scale-up technologies to produce hydrogen from renewable energy and fossil fuel sources,” the country is on the right track. Natural gas might be the most economical way to introduce hydrogen into the country’s energy demand mix for now, but it must make way eventually for renewables to produce hydrogen. As the world’s third-largest CO2 emitter, India’s steps towards a cleaner energy future will have global ramifications. Thus, the role of natural gas in India and other emerging markets cannot be simply to replace dirtier fuels, like coal and oil, in the energy mix. It must aid, not overshadow, the expansion of cleaner energies to ensure sustainable economic growth and cleaner air. Fortunately for India, the country’s top oil and gas leaders recognise this reality and are eager to embrace this new market. While New Delhi’s current efforts to increase natural gas consumption are part of its domestic climate action plan, an Indian hydrogen economy will undoubtedly help lead the global energy transition. DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform. For further information, please contact: Shiyana Gunasekara, Berkeley Research Group firstname.lastname@example.org