Best Green Hydrogen Stocks in India (2024) for Long Term Investment

 The world is turning its gaze towards sustainable solutions and the appeal towards green hydrogen is taking centre stage.

India is looking to capture a big slice of this pie.

The country has a focus of becoming energy independent by 2047 and achieving net zero emissions by 2070.

Net zero emissions is basically achieving a balance between greenhouse gas that is emitted into the atmosphere and emissions that are taken out of the atmosphere.

To get there, we will have to reduce greenhouse emissions by switching to sustainable and low-carbon sources of energy.

And that's where green hydrogen comes into play.

You see, green hydrogen is a highly versatile energy carrier and it can be produced sustainably through renewable sources which will not emit any greenhouse gases. Moreover, it can be used as a fuel to generate electricity and power vehicles.

Even today, we generate hydrogen which is used as an industrial fuel. But, this type of hydrogen is called grey hydrogen because it is sourced from natural gas and coal which leads to emissions.

Here's how the process works... Hydrogen is produced by splitting water into hydrogen and oxygen using an electrolysing plant.

This electrolysing plant is powered by electricity. If the source of electricity generation is through renewable energy, like wind and solar, it becomes green hydrogen.

With an aim to boost sustainability, the government is encouraging the production and use of green hydrogen with an ambition of producing 5 million tonnes of green hydrogen annually starting 2030.

Why 2024 Could be the Year of Green Hydrogen Stocks...

Let's see why 2024 could be a big pivotal year for companies engaged in the green hydrogen sector.

#1 Incentives for Domestic Manufacturing of Electrolysers and Green Hydrogen

Back in September 2023, the Ministry of New and Renewable Energy (MNRE) issued the first tranche of green hydrogen incentive scheme and asked companies to place their bids.

The government's goal was to increase green hydrogen production by making sure the electrolysing plant is built within the country which will enable the production of 5 million metric tonnes per annum (MMTPA) of green hydrogen capacity from 2030.

Recently on 15 December 2023, the agency in-charge for this mission listed the names of companies who had bid for setting up electrolysers for green hydrogen.

Some of the big conglomerates including Adani, L&T, Jindal, among others were the companies who wanted to set up capacities ranging from 100 megawatts (MW) to 300 MW for electrolyser manufacturing.

The companies that got the nod included John Cockerill Greenko Hydrogen Solutions, Adani New Industries, Reliance Electrolyser Manufacturing, L&T Electrolysers, Jindal India, Avaada Electrolyser, and Waaree Energies.

Additionally, companies such as Reliance Green Hydrogen, Avaada GreenH2, Welspun New Energy, JSW Neo Energy, and others are also planning to establish capacities for green hydrogen production under the same scheme.

This initiative will kickstart India's mission of growth in the green hydrogen sector starting 2024 and will encourage the manufacturing of electrolysers and the production of green hydrogen to meet the country's renewable energy goals.

#2 Heavy Investments in R&D

To make India self-sufficient and achieve the goal of net-zero emissions, the government has invested heavily in research and development.

In October 2023, the renewable energy ministry announced a roadmap for the green hydrogen mission.

This roadmap aims to strengthen the research ecosystem and hence the government is investing Rs 4 billion (bn) in this initiative.

This plan focuses on making green hydrogen more accessible. The money set aside will help improve the materials, technologies, and infrastructure needed to make green hydrogen production, storage, and transportation better and more efficient.

Moreover, the government is focusing on specific projects which will help them see results in just 2 to 3 years.

#3 Participation of PSU Oil Refining Companies

India's public sector oil and gas companies have also joined hands to achieve an annual green hydrogen production capacity of 230 kilo tonnes by the financial year 2024-2025.

Their combined objective is to produce 7 lakh tonnes of green hydrogen annually by 2030.

To reach these goals, pilot projects have been initiated by Oil India in Assam and Indian Oil Corporation (IOC) in Gujarat.

Additionally, Bharat Petroleum Corporation is developing an electrolyser plant with the goal of making significant contributions to India's green hydrogen production.

Other public sector undertakings, including Hindustan Petroleum Corporation, Mangalore Refinery and Petrochemicals, Numaligarh Refinery, and Chennai Petroleum Corporation, are also in the planning stages for green hydrogen facilities.

All of these facilities are expected to commence operations between 2024 and 2027.

Which Indian Companies are Leading the Green Hydrogen Revolution?

#1 Adani Enterprises

Adani Enterprises has established a wholly owned subsidiary company called Adani New Industries. The company is engaged in manufacturing of wind turbines, solar modules and undertakes green hydrogen projects.

Back in 2022, the company partnered with a France based company, TotalEnergies SE which was set to invest US$ 50 billion (bn) over the next 10 years to produce green hydrogen and develop an ecosystem around it.

Till now, Adani New Industries has spent US$ 2.5 bn in developing the green hydrogen project and has an aim to implement the first phase by 2027, achieving an annual capacity of 1 million tons.

#2 Thermax

Just like Adani, the energy leader, Thermax joined hands with an Australian company called Fortescue Future Industries (FFI).

Together, both the companies are planning to establish fully integrated green hydrogen projects for commercial and industrial customers in India.

This green hydrogen can be used in refineries, fertilisers and steel industries.

#3 L&T

In August 2023, the engineering major L&T announced that it had along with IOC and ReNew formed a company called GH4India Private. Each company has a 33.3% stake in GH4India.

Together, they will invest up to US$ 4 bn in their green hydrogen businesses over the next three to five years.

Apart from this, the company is working on setting up the world's largest green hydrogen plant being built by a Saudi based green hydrogen company - NEOM Green.

#4 NTPC

NTPC is the largest power generation company in India and it has also forayed into the green hydrogen business by setting up three pilot projects.

First, is a pilot project of blending green hydrogen and natural gas in Gujarat.

Second pilot project is of setting up a green hydrogen filling station along with solar plants in Leh.

Third, is a pilot project focused on producing hydrogen while simultaneously capturing carbon, in Madhya Pradesh.

#5 Reliance

Reliance is currently a major producer of grey hydrogen. However, the company has a vision to shift towards green hydrogen and aims to provide it at the lowest cost by 2025.

Additionally, by the year 2025, Reliance plans to establish a solar energy generation capacity of 20 gigawatts (GW) and this entire capacity will be dedicated to the production of green hydrogen.

In August 2023, the company secured a 74,750 hectare land parcel in Gujarat on a 40-year lease for its green hydrogen project.

Reliance is also actively advancing its efforts in creating the Dhirubhai Ambani Green Energy Giga Complex. This complex spans over 5,000 acres in Jamnagar.

The complex aims to develop photovoltaic panels, green hydrogen production, energy storage solutions and fuel cell systems.

#6 Indian Oil Corporation

IOC is a leading refining company dependent on fossil fuels to generate revenues. But, the company is looking to change with time.

It is currently working on a decarbonisation drive with a view to replace at least a tenth of its current fossil-fuel-based hydrogen with carbon free green hydrogen.

#7 GAIL

Back in May 2023, GAIL was in the process of setting up a Green Hydrogen electrolyser plant at Vijaypur with a production capacity of 4.3 tonnes daily. This setup was expected to complete in 2023 itself.

Additionally, GAIL is conducting experimental blending of hydrogen with natural gas in Indore as part of its city gas distribution (CGD) network to assess its viability.

The company is also conducting joint studies with Engineers India Limited (EIL) and IIT Kanpur to explore further blending of hydrogen with natural gas.

#8 Jindal Steel

Last year, Jindal Steel announced its plans to set up India's first green hydrogen plant installed by a stainless steel company.

They have also teamed up with Hygenco India and together they aim to establish a Green Hydrogen Plant.

This initiative is expected to lead to a substantial reduction in the company's carbon dioxide (CO2) emissions, amounting to nearly 2,700 metric tons per annum.

Which Other Companies are Betting Big on Green Hydrogen?

The companies mentioned above are taking a significant leap and investing heavily in R&D for the green hydrogen revolution. But these were big companies.

What about smaller counterparts?

Well, even small and midcap companies are investing some amount to at least capture a smaller piece of the pie and participate in the revolution.

These companies include INOX India, Sadhna Nitro Chem, VA Tech Wabag, BHEL, Tata Power, NLC India, Torrent Power, Balmer Lawrie, and the list goes on.

We did mention about this trend in our previous editorials and it's finally getting into action... small and big, companies are eyeing foray into green hydrogen sector, so they don't miss the bus.

What are the Challenges for the Adoption of Green Hydrogen?

You see, everything looks good up until now. But there is something that we need to acknowledge.

The government has launched this green hydrogen mission with an aim to become energy efficient and achieve net zero emission. Sure, the green hydrogen mission holds significant promise, especially considering that India currently imports nearly 40% of its energy needs.

However, it is easier said than done because there are a few challenges to address.

The first challenge is setting up domestic electrolysing plants with a quality that meets global control standards.

This will not only improve efficiency of domestic green hydrogen producers but may also give India an edge in export of electrolysing plants. And, all of this will need a huge capex.

Second, the production of green hydrogen needs a lot of fresh water and electricity.

You see, to create just one kilogram of hydrogen about 10 litres of water and 50 kilowatt-hours of electricity is needed. Hence, the cost of making green hydrogen is between US$ 4.1 and US$ 7 per kg.

To put it in perspective, to produce 5 million tonnes of green hydrogen, a whopping 50 billion litres of fresh water is needed. With climate change, irregular rainfall posing a constant concern, this will be a challenge going forward.

Lastly, India needs about six million tonnes of hydrogen each year, and by 2030, it is expected to double to 12 million tonnes.

According to the national green hydrogen mission, India will produce 5 million tonnes of green hydrogen annually from 2030 and that might not cover the demand unless the production capacity is increased.

In Conclusion

The green hydrogen sector offers promising investment opportunities, but investors must stay vigilant amid evolving challenges and recent developments.

As an investor, awareness and adaptability is crucial for those seeking to capitalise on this sector's potential.