Full Update on India's Top Green Hydrogen Stocks and How They're Faring in 2023

Hydrogen (H2) is an industrial fuel with multiple applications such as the production of ammonia, steel, electricity, and refineries.

Currently, hydrogen is produced through natural gas and coal, leading to carbon dioxide emissions (CO2) into the atmosphere. The hydrogen produced through this method is known as grey hydrogen.

However, with increasing concerns over climate change and the environment, the Indian government is encouraging the use of green hydrogen.

Green hydrogen is produced using renewable sources such as solar and wind power and is the cleanest fuel as its by-product is oxygen, not carbon dioxide.

India aims to become a global hub for green hydrogen, producing 5 million metric tonnes annually by 2030 and becoming net zero by 2070.

To meet this goal, the Indian government announced the National Green Hydrogen Mission in 2022. Several companies have already stated investing in green hydrogen plants to take the first mover advantage.

Companies like NTPC, GAIL, and Indian Oil Corporation have announced several projects in this space.

In today's article, we take a look at all green hydrogen stocks in India and how they're faring in 2023 so far. This mid-year review will potentially help you select which Indian green hydrogen company is leading the race and whether any new company has entered the fray.

#1 Oil India

First on the list is Oil India, one of the largest exploration and production companies.

It is engaged in the business of exploration, development, production, and transportation of crude oil, natural gas, and LPG (liquified petroleum gas).

In 2022, the company commissioned its first green hydrogen plant with 99.99% purity. Oil India was the first in the country to pilot a green hydrogen plant with an installed capacity of 10 kg per day, which is located in Assam.

This plant produces green hydrogen from the electricity generated from the existing 500 kilowatts (KW) solar plant using a 100 kW Anion Exchange Membrane (AEM) Electrolyser array.

This is the first time AEM technology is being used in India which combines the benefits of Alkaline and PEM (proton exchange membrane) technology.

In the future, Oil India expects to increase its capacity to 30 kg per day.

The company has also collaborated with IIT Guwahati to study the blending of green hydrogen with natural gas and the commercial applications of this blend.

Oil India has signed a contract with the Himachal Pradesh government to set up a green hydrogen plant in the state.

During the India Energy Week in Bengaluru, the company also ran its first hydrogen fuel cell bus.

Its subsidiary, Numaligarh Refinery Limited (NRL), is also constructing 18 megawatts (MW) of hydrogen plants in Assam.

Apart from its hydrogen plant, the company actively invests in renewable energy space.

It has a total installed capacity of 188 MW (174 MW in wind power and 14 MW in solar power) and plans to expand it further in the coming few years.

All this shows that the company is set to lead India towards a clean energy exporter.

And all of these efforts have been well factored in the performance of the company's shares.

In the last one year, shares of Oil India have gained 38%.

To know more, check out Oil India's 2021-2022 annual report analysis.

#2 Reliance Industries

Next on the list is Reliance Industries, a company that bought the most affordable wireless broadband in the country.

The company is on a mission to make India a place with the most affordable green energy by 2030.

Reliance is not new to hydrogen as it is the largest producer of grey hydrogen globally. It plans to transition to green hydrogen production by 2025 and become net zero by 2035.

The company plans to invest Rs 750 billion (bn) over the next three years to set up its clean energy business.

It also plans to invest Rs 5 trillion (tn) in the next 10-15 years to set up a 100 GW renewable-energy power plant and green-hydrogen ecosystem development.

To achieve this goal, the company has partnered with Stiesdal A/S, a Danish company, to develop and manufacture hydrogen electrolysers, which will help make green hydrogen.

It plans to use green hydrogen for captive use, domestic and international sales.

The current cost of producing green hydrogen is US$ 3-8 per kg, but the company aims to produce it under US$ 1 per kg within a decade.

With the government inviting bids to set up green hydrogen units, Reliance indicated its interest in participating in the bidding process.

The company also participated in Indian Energy Week in Bengaluru and showcased a truck that runs on hydrogen, the world's cleanest fuel which confirms that the company is serious about its green future plans.

The market has also factored in Reliance's green energy plans (along with other megatrends like 5G, etc.).

To know more, check out Reliance's 2021-2022 annual report analysis.

#3 GAIL (India)

Third on the list is GAIL.

Under the National Hydrogen Energy Mission of the government, GAIL is setting up a green hydrogen unit that will produce 4.3 tonnes (close to 10 MW) of green hydrogen per day.

This project will be the largest PEM electrolysers plant which will start making green hydrogen by the end of 2023.

This green hydrogen will be mixed with natural gas to supply different industries.

The company has already successfully implemented the blending of natural gas with green hydrogen, which it supplies to Aavantika Gas, one of GAIL's Joint Venture (JV) Companies with HPCL.

Apart from this, GAIL has entered into MoU with Gujarat Alkalies and Chemicals to set up a 500 KLPD (kilo litre per day) bioethanol plant in Gujarat.

The company said it plans to invest Rs 260 bn in its renewable's portfolio by 2030, which will take the renewable energy capacity to 3 GW, of which 10% of the portfolio will be hydrogen.

It also aims to produce 50,000 tonnes per annum of hydrogen by 2030.

All of this would require massive funding and the company plans to raise money through debt. This should be a key metric that investors must track.

In the last one year, GAIL's shares have zoomed 18% despite falling crude prices and windfall gain tax.

To know more, check out GAIL's 2021-2022 annual report analysis.

#4 Indian Oil Corporation (IOC)

Next on the list is Indian Oil Corporation (IOC), another PSU (public sector undertaking) on the list.

A company that was primarily dependent on fossil fuels to generate revenue, IOC is now exploring the green hydrogen space.

The management believes that oil will continue to be a dominant fuel for the next few years, but they are preparing for a transition, which will involve a combination of green hydrogen and biofuels.

IOC plans to produce hydrogen by using solar energy, biomass gasification and bio-methanation, making it even more cost-efficient and cleaner.

In line with its transition plans, the company plans to set up a 7 KTPA (kilo tonnes per annum) electrolysis plant in its Panipat refinery at a cost of Rs 20 bn by 2025.

The company has approval to set up green hydrogen plants at Kochi and Thiruvananthapuram.

It also plans to set up a green hydrogen plant across all its refineries in India to achieve net zero by 2046. For this, it has entered into a joint venture with L&T and ReNew Power.

Further, the company plans to use natural gas instead of liquid fuels and replace grey hydrogen with green hydrogen at all its refineries.

The company aims to increase the share of green hydrogen in its overall hydrogen portfolio to 50% in the next 5-10 years and 100% by 2040.

IOC plans to use the green hydrogen it produces as a replacement for carbon-emitting fuels to process crude oil into value-added products such as petrol and diesel.

The share price of IOC has zoomed by 38% in the last one year.

To know more, check out IOC's 2021-2022 annual report analysis.

#5 Bharat Petroleum Corporation (BPCL)

Fifth on the list is Bharat Petroleum Corporation (BPCL), a PSU engaged in the business of refining crude oil and marketing petroleum products.

The company plans to become net zero by 2040 and is actively investing towards achieving the same.

It plans to replace the grey hydrogen it currently uses with green hydrogen. For this, it is setting up a 1 MW electrolyser manufacturing facility in the country by 2025.

The company plans to use Bhabha Atomic Research Centre's (BARC) alkaline electrolyser technology for the same.

Using the alkaline electrolyser technology would bring down the costs by 20-30% from the current US$ 800 per KW.

BPCL is inviting bids from companies as it plans to involve a third party to set up the green hydrogen plant.

BPCL has also signed a pack with HPCL for synergy in purchasing and selling hydrogen between refineries.

This will ensure the uninterrupted availability of hydrogen between the two refineries, which will further help in achieving the net-zero targets of the companies.

In line with its net zero goal, the company is establishing a 240 MW renewable power facility with a capital of Rs 16 bn by the financial year 2024.

All this has given a boost to the company's shares in the last one year.

To know more, check out BPCL's 2021-2022 annual report analysis.

#6 NTPC

Sixth on the list is NTPC (National Thermal Power Corporation), the largest power generation company in India.

The company has several initiatives with respect to green hydrogen going on simultaneously.

It is setting up India's first green hydrogen fuelling station in Ladakh and is expected to be operational by October 2023, ahead of its schedule.

This project will produce 80 kgs of green hydrogen per day, which will be compressed, stored and distributed.

The company also plans to run five hydrogen fuel cell buses in the region.

It is also setting up India's first green hydrogen energy storage at its Simhadri facility to deploy electrolyser and fuel cells. This will complete by year 2026.

The hydrogen will be produced using the advanced 240 KW solid oxide electrolyser by taking input power from the nearby floating solar project.

NTPC is also blending green hydrogen in natural gas. Its Kawas Gas blending project will blend hydrogen with piped natural gas (PNG) for domestic usage.

Here, the company will first blend 5% of hydrogen and slowly increase it to 20%.

NTPC has also signed a memorandum of understanding (MoU) with Indian Army for setting up green hydrogen projects at army establishments to reduce complex logistics, dependence on fossil fuels and to accelerate decarbonisation.

Further, along with HPCL Mittal Energy, NTPC will explore opportunities in the green hydrogen business & its derivatives, green ammonia & green methanol.

The company is also setting up India's biggest 5MW electrolyser in Madhya Pradesh to convert grey to green hydrogen with power supply from its solar and hydro plants. NTPC gave this project to Hild Electric, a Chennai-based company.

All this shows that the company's future in green hydrogen space is bright. The same is reflected in its share performance.

To know more, check out NTPC's 2021-2022 annual report analysis.

#7 L&T

Next on the list is Larsen and Toubro (L&T).

Semiconductors, 5G telecom, renewable energy, SpaceTech, metro rail, and defence. How many Indian companies have won orders in each of these segments recently? The only company is L&T.

Under the company's green hydrogen plan, it aims to create a renewable infrastructure for the world's largest green hydrogen plant in NEOM, Saudi Arabia.

In this project, L&T will engineer, procure, and construct a 2.2 GWac PV solar plant, a 1.65 GW wind generation balance of plant and a 400 MWh battery energy storage system.

It will also construct three 380 kV switching stations, 306 km of 380 kV overhead lines, and underground cables required for the Kingdom's grid network.

In collaboration with NEOM Green Hydrogen Company (NGHC), L&T is setting up a mega plant to produce green hydrogen at scale for global export in the form of green ammonia with a total investment of US$ 8.4 bn.

The project has received all necessary permissions and is progressing with construction.

L&T also signed an agreement with McPhy Energy, a French electrolyser technology and manufacturing company, to set up a 1 GW manufacturing facility.

The company is already setting up a green hydrogen plant with a capacity to produce 45 kg of hydrogen per day for captive use.

It has already signed an agreement with IOC to manufacture and sell electrolysers used in the production of green hydrogen.

Apart from these, L&T is also in talks with cement and steel manufacturing companies to set up green hydrogen facilities for them.

With the government's push for cleaner fuels and the company making significant investments towards green hydrogen, L&T is poised for strong growth. No wonder Co-head of Research at Equitymaster Tanushree Banerjee sees L&T in Sensex 2030.

In the last year, the share price of the company has zoomed over 40%.

To know more, check out L&T's 2021-2022 annual report analysis.

#8 Adani Enterprises

Last on the list is Adani Enterprises.

The Indian business conglomerate that has quickly spread its wings across multiple businesses also plans to tap opportunities in green hydrogen.

Adani plans to invest US$ 50 bn in the next ten years in developing a green hydrogen ecosystem.

It also plans to bring down the cost of green hydrogen to US$ 2 per kg, which is currently in the range of US$ 3-US$ 6 per kg.

Adani has already completed studies for developing an electrolyser with an aggregate installed capacity of 15 GW per annum and a 42-inch diameter pipeline to connect a green hydrogen facility to Mundra SEZ (special economic zone).

The company has planned investments for electrolyser manufacturing, backward integrations for component manufacturing to secure the supply chain for the solar and wind generation businesses, and AI-based utility and industrial cloud platforms.

The mega investment will lay the foundation for Adani to become one of the largest green hydrogen producers in the world. It will make India the cheapest hydrogen producer in the world.

However, it should be noted that the company has postponed its green hydrogen projects for the time being. All because of the Hindenburg rout. Adani group plans to restart the ambitious plans in 2026.

The company initially planned to use part of the funds raised from the FPO for funding its green hydrogen projects. But the FPO never went through.

To know more, check out Adani Enterprises' 2021-2022 annual report analysis.

In conclusion...

The Indian government is pushing companies to adopt green hydrogen to reduce carbon emissions by 50 million metric tonnes by 2030 and save over US$ 12 bn import bill on fossil fuels.

In January 2023, the government approved an incentive worth Rs 174.9 bn, which would help the companies cover at least 10% of the cost of producing green hydrogen.

The governed also invited bids in July 2023 for setting up green hydrogen manufacturing capacities of 450 thousand tonnes per annum in the first tranche of the Strategic Interventions for Green Hydrogen Transition (SIGHT) scheme.

Several states have also announced benefits such as low electricity and duty reimbursements for the production of green hydrogen and its derivatives.

As India readies itself to produce green hydrogen by 2026, the Indian government is also negotiating with European Union, Japan, and other countries to export this green fuel.

All this bodes well for companies that have already invested in green hydrogen.

Although there is enough push from the government, there are several challenges that Indian companies are currently facing.

The cost of producing green hydrogen is more than the cost of producing grey hydrogen. This can discourage smaller companies from participating in the government's green hydrogen mission.

Green hydrogen is still not economical, and hence its round-the-clock availability is a cause of concern.

Further, although Japan, Korea, and Europe are key export markets, trade barriers in these countries are a major worry.

Lastly, India is facing tough competition from heavily subsidised markets such as China and the USA.

So, despite looking all 'green', the future of this clean fuel is still ambiguous.

Hence one has to practice the same amount of caution with top green hydrogen stocks as they would with any other stock.

It is important that you do your due diligence before selecting a company for investing.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...