Renewable hydrogen projects worldwide face significant delays as developers
struggle to secure the long-term offtake agreements needed to justify major capital
investments, according to Sumant Sinha, chairman and CEO of Indian firm ReNew.
The disconnect between developers requiring decades-long revenue certainty and
potential buyers who are accustomed to shorter-term purchasing models has created
a bottleneck for the industry, stalling projects that have completed initial
development, according to Sinha.
"The first port of call for all green hydrogen developers today is to get some offtake
somewhere. It's only once that is done that it makes sense to go ahead," Sinha said.
". ..what people have today is often only MOUs -- they're not firm binding contracts."
This structural mismatch between business models is impeding the industry's growth,
as projects remain in limbo in the absence of long-term time frames typically needed
for renewable energy investments.
"Green hydrogen is positioned between the electricity industry, where you have longterm
offtake contracts, and the gas industry, where we have literally year-on-year
contracts," Sinha explained. "The buyers are often gas industry purchasers used to
short-term contracts. Here, you're trying to push them to 20-25-year contracts, and
that's a bit of a stretch too far for them."
With a renewable energy portfolio of 17.4 GW as of December 2024, including 10.7 GW
of commissioned capacity, ReNew has a 100,000-mt/year renewable ammonia P-roject
in the eastern Indian state of Odisha where FEED study is nearing completion.
Market evolution
Despite these challenges, ReNew remains actively engaged with future off-takers
globally, including H2 Global in Europe and buyers in Japan and South Korea, helping
to shape tender structures.
"We were involved with H2 Global for almost a year before that first bid came out," he
said. "We try to tell them what the right structure of the bids is, the PPAs, [and] who
should take what risk."
Different regions are taking varied approaches to hydrogen adoption. European
subsidy allocations have come with "onerous" conditions, while Japan and South
Korea are initiallY.focusingon 'blue' or low-carbon hydrogen rather than renewable
hydrogen that India wants to produce.
"In Europe, they decided to go down the subsidy path, but those subsidies have been
moving very slowly. For example, in the German auction, they were giving PPAs only for
seven years," he said. "Seven years is not sufficient because ultimately, you're making
an investment for 20-25 years," he said.
Despite current delays, Sinha remains optimistic about the industry's long-term
prospects, predicting that by 2030, "there will be a few projects out there that would
have got done" with greater uptake following as costs decline.
Regarding potential impacts from US trade tariffs on renewable equipment, Sinha
expressed little concern for India's position, noting the country's self-sufficiency drive
for renewable energy components.
"I don't think we get impacted at all, simply because all the wind turbines are already
made in India. All the solar modules and solar cells are also now being made in Ind ia,11
he said, adding that electrolyzer demand remains limited globally as renewable
hydrogen deployment lags earlier commitments.
Varying cost of renewable hydrogen
Sinha emphasized multiple factors determine the final cost of production of
renewable hydrogen. "Today, solar energy costs about Rupees 2.5/kWh ($0.03/kWh)
and wind about Rupees 4/kWh, but the cost of renewable hydrogen is primarily
determined by its production location," he explained.
Production costs vary significantly depending on proximity to demand centers,
transmission infrastructure requirements, and whether 24/7 supply, necessitating
storage is needed. "I don't think that $2/kg is any sort of sacrosanct, magic number,"
he added, rejecting the notion of a universal price point.
For India to achieve its ambitious 500 GW renewable capacity target [217 GW
currently] by 2030, Sinha identified several critical challenges: "The grid has to be built
out fast. The transmission infrastructure and the distribution infrastructure, grid
management in terms of storage has to be also built out."
He also highlighted the significant P-hY.sical work reguired to secure land and build
solar farms and wind turbines, calling it, "not an insignificant task."
On whether India will meet its renewable hydrogen targets, Sinha remains cautiously
optimistic but acknowledged the uncertainty around project timelines and
government initiatives.
As for ReNew, "we intend to be very constructive participants in the green hydrogen
space," he concluded.
Platts, part of S&P Global Commodity Insights, assessed Oman hydrogen produced via
alkaline electrolysis -- including capital expenditures -- at $5.00/kg on April 23, down
4.21% month over month.
Japan hydrogen produced via alkaline electrolysis -- including capex -- was assessed
at $5.90/kg on April 23, up 25% month over month.