Can green hydrogen stocks will be the next revolutionary and growth drivers for the economy?
Is it the solution to India’s fuel problem?
Narendra Modi led BJP Government is very keen to develop Green Hydrogen as soon as possible. Idea is to produce the cheapest hydrogen on earth.
Investment in green hydrogen stocks may give you stellar returns.
Not only the Govt. of India, but Mukesh Ambani is also investing in both blue and green hydrogen.
Moreover, Adani Group is planning to invest nearly 70 billion dollars into renewable energy.
Tata Motors is already looking to build hydrogen-based buses for India.
Green Hydrogen Stocks
You can expect many organizations will try their luck. For the time being, you can focus on these giant green hydrogen stocks like Reliance, Tata, and Adani.
Apart from that Gail, NTPC, BPCL, and L&T are also in the race.
So the question is what is this green hydrogen all about?
How is it going to play out in comparison to the lithium-ion batteries that we already have?
And most importantly as an investor what are the challenges and factors that you need to consider before you invest in green hydrogen-related stocks.
Let’s first understand why exactly is India so aggressive about renewable energy.
In fact, there are three specific reasons for that.
- India is extremely dependent on the middle east for oil. That makes India vulnerable to oil demand and supply in case of any geopolitical tensions.
- The world leaders realised that climate change is real. So India and 193 other nations signed something called the Paris pact. India is aiming to cut down 50 per cent of its greenhouse emissions by 2030.
- Lastly, three of the most important industries in India and the world itself do not yet have a viable renewable energy substitute. These industries are steel, transportation and chemical.
This means the existing modes of renewable energy production cannot run these industries profitably. So whoever manages to crack this code of renewable energy will go on to become a net exporter of renewable energy.
Eventually, they will become the global superpower in energy sectors. One of the most important instruments to achieve this is green hydrogen. Green hydrogen can produce energy with literally zero emissions and is also very cost-effective.
Green hydrogen as the name suggests is one of the cleanest forms of hydrogen wherein there is no carbon byproduct at all.
The cost of producing electricity from coal has decreased by just 2 per cent. However, the cost of producing electricity from nuclear has increased by 26 per cent.
Whereas the cost of onshore wind has dropped by 70 per cent and the cost of solar has decreased by 89 per cent.
So for the first time in human history, renewable energy source looks way cheaper than fossil fuels. In the next 10 years, this cost is expected to drop further.
This is a reason why suddenly India is focusing on renewable energy.
Now the question we hear is why we need green hydrogen?
What is the problem that hydrogen fuel will solve for the Indian economy?
Well if you look at the industry-specific application for green hydrogen, it is almost super important for three major industries steel, transportation and chemical.
Role of Green Hydrogen in the Transport Industry
So let’s start with the first industry which is transportation. Here let’s take the first factor which is range and volume
occupancy.
If you look at an Electric Vehicle with an advanced lithium-ion battery, it could achieve a 400-500 kilometre range. However, these batteries would take up 400 to 600 litres of space in your car which is absolutely enormous.
Whereas the fuel cell plus hydrogen storage tank would take up less than 50 per cent of the space. In the next five years considering the advancement in the hydrogen economy, hydrogen tanks plus storage would occupy only 100 litres. That can give you a kilometre range of 480 to 500 KM.
That means four times less occupancy of space for the same range as lithium-ion.
Secondly, hydrogen fuel cells have an energy weight ratio that is 10 times greater than lithium-ion batteries.
So in simple words, if you want to add more range to a vehicle it is very easy to add to hydrogen cells. However, lithium-ion batteries, are so heavy that if you want to add range you will need to increase the size of the battery.
This means what will happen is the weight of the vehicle will increase which will again need more power. So you will have to add more battery again.
So lithium-ion batteries after a certain point will become less productive whereas with hydrogen it’s very very simple.
Then we have the third factor which is charging time. If you look at Tesla Motors EVs models which can give you a 400 KM range with half an hour of charge. If it is a regular ac charger it will take up to four hours.
However, when it comes to hydrogen fuel even a truck which has a payload of 34 tons and 400 KM range gets recharged in just eight freaking minutes.
So passenger vehicles will not make that much of a difference. However, the commercial vehicles will play great roles and these advantages are a massive game-changer.
Because if you look at the modes of transportation then you may find that EVs are suitable for up to a weight of 10 tons and a range of 160 KM per day.
Whereas as soon as you look at heavy utility vehicles like fleets and taxis it becomes very difficult to use EVs both due to limitations of range and charging time.
Because you see a taxi driver cannot stop and charge his vehicle for 4 hours or drive only 150 KM a day.
Right?
When it comes to hydrogen cells, they are so productive that their applications extend all the way to buses with a range of 400 200 KM a day.
In fact, a weight of 50 to 80 tons to trucks with 100 to 130 tons of weight and 800 to 1000 KM range. Even trains that
has up to one thousand tons and one thousand KM range and beyond.
This is a reason why hydrogen fuel cells can revolutionize the transportation industry. The world can save hundreds of millions of tons of carbon emissions every single year.
And then we have the shipping and the aviation industry which will need synthetic hydrogen-based fuels which are a little far away from reality.
This is the reason why hydrogen fuel cells are super important because they cater to heavy-duty loads. EVs cannot deliver for commercial or passenger transportation.
Role of Green Hydrogen in the Steel Industry
This brings me to perhaps the most important industry-specific application to India which is the application of hydrogen in the steel industry.
This is where India needs to be extremely concerned about something called the carbon border tax.
Carbon must have its price because nature cannot pay this price anymore.
The idea of a carbon border tax is gaining ground in the USA and the European Union. A carbon border tax to level the playing field for European products if other countries do not go or refuse to go in the right direction.
Western countries don’t want to see companies packing up for places like China or India. They may do so because of their less stringent environmental rules which make the goods produce there cheaper.
In simple words, the European Union is going to charge you an additional tax if your carbon emissions are beyond a certain level.
This means if we do not decrease our carbon footprint the cost of Indian products in the European Union will increase. Eventually, it will cost billions of dollars in trade.
India is the second-largest producer of steel and exported 20.63 million tons of steel in 2021 alone. Steel is a superpower for India and globally.
It is also one of the most polluting sectors in the country with the steel industry alone contributing to 12 of India’s total fossil fuel emissions.
And the reason why this emission is so high is that the steel industries in India use Grey Hydrogen as fuel and releasing agents.
Considering the rise in the demand for Indian steel, if we do not shift to green hydrogen the carbon emissions from the steel industry of India are expected to shoot up from just 242 million tons to 837 million tonnes.
Over the next three decades and the fossil fuel emissions from the steel industry alone will be more than 33 per cent of the entire country’s fossil fuel emissions.
So practically if we do not curb our carbon emissions, the EU will impose a carbon tax on India and some other nation might beat India in steel export.
This is the reason why there is a direct need to decarbonize the steel industry of India and to shift from grey and blue
hydrogen to green hydrogen.
This brings me to the third important industry that we have in India which is the chemical industry.
Like transport and steel industries, chemical industries are also one of the biggest threats to the environment.
Understand this, the concept is very simple. Blue and grey hydrogen are supposed to be replaced by green hydrogen which is expected to happen with the evolution of solar and wind energy and this is mere because of the low cost of green hydrogen.
Similarly, green hydrogen also has immense application in an oil refinery, glass production, propellant fuel, semiconductors and a lot more.
This is the reason why green hydrogen is super important not just for India but for every single country on the planet.