23 April 2025
S&P GLobal
Interviews
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.
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