Nepal needs a green hydrogen roadmap

Green hydrogen has turned out to be one of the primary solutions to global warming and climate change as it helps in the process of decarbonization and attaining carbon neutrality. Since green hydrogen can be produced using renewable energy sources, it is an opportunity to gradually decrease the dependence on fossil fuels, which will improve energy independence and energy security. To summarize, green hydrogen is a promising, clean fuel of the future in a world that is slowly moving toward cleaner energy systems. Thus, with the vision of shifting the energy sector to cleaner and sustainable sources, the idea of hydrogen production in Nepal was initially discussed in an academic research paper completed by Prof Bhakta Bahadur Ale of Tribhuvan University and Prof SO Bade Shrestha of Western Michigan University in 2008. They suggested that hydrogen should be produced through the use of electricity from hydroelectric plants when they are generating power during off-peak hours. During that time, Nepal was struggling with acute energy crises and frequent load-shedding, which, coupled with technological constraints, made it next to impossible to turn the concept into reality. 

When the Covid-19 pandemic started, the industrial sector contracted, leading to a significant drop in energy consumption, but fossil fuel imports remained high. This led to an overproduction of electricity particularly from the hydropower plants in Nepal. This excess electricity led to wastage and an imbalance between supply and demand; hence, it was crucial to look for methods to utilize this electricity in domestic sectors. This scenario was ideal for producing green hydrogen using the surplus electricity through the process of electrolysis. That is when the shift from a fossil fuel-dependent economy to a green economy began to take shape. Recognizing this potential, Kathmandu University decided to channel the excess energy into producing hydrogen by splitting water through electrolysis. With this goal in mind, the Green Hydrogen Lab (GHL) at Kathmandu University was established in 2020 under Prof Bhola Thapa and Biraj Singh Thapa, marking a major step forward in Nepal’s pursuit of renewable energy solutions.

Even though the strategy of generating hydrogen by utilizing the excess electricity from hydropower was discussed in 2008, it was only in 2020 that R&D on hydrogen production was initiated. In particular, the GHL has contributed to developing this vision. GHL started the Nepal Hydrogen Initiative (NHI), a consolidated program for establishing a policy foundation, hydrogen energy value chain, and developing action plans. Some of the ongoing projects at GHL are Nepal’s first hydrogen refueling station and the green urea production plant in Nepal. GHL has a 5-kW electrolyzer that can produce 2 kg of hydrogen per day, which is used to refuel a car with a 6 kg hydrogen capacity, providing a driving range of 600 km. GHL is also involved in different projects: green hydrogen for the production of ammonia, industrial heat, zero-emission transportation, re-electrification and making green steel. MIT Group Foundation and Global NRN Foundation, KU being a knowledge partner, organized the Nepal Green Hydrogen Summit in October 2022 with the main aim of prioritizing the delivery of climate-friendly green hydrogen projects that help achieve the Sustainable Development Goals (SDGs). Since 2023, the Global Green Growth Institute’s (GGGI) NP15 Green Hydrogen Value Chain and Green Ammonia Plant project has been exploring the potential of green hydrogen in Nepal's energy mix. Asian Development Bank (ADB) studied the prospects of Hydropower to Hydrogen in Nepal in 2020. The first hydrogen internal combustion engine conversion technology was demonstrated on 16 September 2024 at Pulchowk Engineering College, which embarked on another big step in the development of green hydrogen in Nepal. With the adoption of the Nepal Green Hydrogen Policy-2024, the country has set a more tangible framework for future study, innovation and funding of green hydrogen. This policy lays the groundwork for realizing Nepal’s immense opportunity in green hydrogen generation, mainly based on Nepal’s hydropower potential. 

Nepal’s roadmap for green hydrogen production can be significantly boosted by studying the policies, pilot projects, and commitments of global leaders in the hydrogen economy. Countries like Japan, India, China and the United States are driving the green hydrogen agenda, making substantial investments in technology, infrastructure, and research. These nations provide important lessons for Nepal in terms of policy formulation, industrial applications and the scaling of green hydrogen.

The Indian government approved the National Green Hydrogen Mission in 2023 to develop a green hydrogen production capacity of at least 5 MMT per annum. By 2050, it aims to replace 50m metric tonnes of gray hydrogen with green hydrogen, which could cut 50m tonnes of CO2 emissions annually. India is focusing on reducing the cost of hydrogen production to $1.5 per kg by 2030 through large-scale projects. 

The US National Clean Hydrogen Strategy and Roadmap-2023 align with the administration’s goals, including the aim to develop green hydrogen production capacity of 10 MMT by 2030, 20 MMT by 2040, and 50 MMT by 2050; 100 percent carbon pollution-free electricity by 2035 and net zero GHG emissions by no later than 2050. At the same time, the United States’ Department of Energy (DOE) has launched the “Hydrogen Shot” initiative to reduce the cost of clean hydrogen to $1 per kg within a decade. In March 2022, China’s Medium and Long-Term Strategy referred to as “the National Plan” was released for the development of the hydrogen energy industry after which there has been significant development in the country’s hydrogen space. Among these targets, the deployment of 50,000 fuel cell vehicles and the production of 0.1 to 0.2 MT of renewable hydrogen toward a broader goal of reducing annual CO2 emissions by 1m to 2m tons by 2025 was most important. China is focusing on reducing the cost of hydrogen production to $2.18/kg with advancements in technology and a reduction in electricity prices. Japan, another hydrogen pioneer, is equally ambitious. Japan was an early proponent of making hydrogen for decarbonization, publishing its first hydrogen strategy in 2017, and the substance continues to be a critical part of Japan’s strategy to decarbonize its economy and achieve carbon neutrality. Japan’s hydrogen strategy is central to its goal of becoming carbon-neutral by 2050, reducing CO2 emissions across power generation, transportation and industry. Japan aims to bring down the cost of hydrogen to $2.77 per kg by 2030 from the current cost of $9.24 per kg, largely through technological advancements and scaled up production. Japan also plans to produce 1.08 MMT of hydrogen annually by 2040, a target that Nepal can aspire to as it has the potential to develop its green hydrogen capabilities.

Green hydrogen, which is generated from electrolysis, is a huge opportunity for Nepal. The government is formulating directives to generate 28,500 MW of electricity by 2035, while the country’s internal electricity requirement is estimated to be around 7,000 MW. With a surplus power of approximately 20,000 MW, there is an opportunity to produce 400,000 kg of hydrogen (as 1 MWh of electricity generates 20 kg of H2). If this surplus electricity, costing Rs 6.70 per unit, is not utilized for either domestic consumption or export, the financial value would effectively be zero. The country could face an annual loss of Rs 1.173trn, but by using surplus electricity to produce green hydrogen and its derivatives, it can reduce fossil fuel imports, cutting down on import expenses and promoting clean energy use in industries. This excess capacity could be used to produce green hydrogen which will make hydrogen one of the cheapest and competitive fuels in the market. Thus, increasing the scale of economies and with the assistance of technology across the globe, the cost of producing green hydrogen is expected to be below $1 per kilogram by 2050, which will enhance the feasibility of green hydrogen production. For Nepal, this is a chance to completely change the energy paradigm from a fossil-based to a renewable hydrogen economy.

Nepal faces several challenges in developing a green hydrogen economy, including gaps in policy, underdeveloped technology and low market readiness. Domestic demand for hydrogen applications, like Fuel Cell Electric Vehicles (FCEVs), remains limited, while high production costs and a lack of infrastructure complicate commercialization efforts. Additionally, attracting investment is challenging due to the market's early-stage conditions. To overcome these obstacles, Nepal needs to concentrate on the formulation of sound, sustainable energy policies that incorporate green hydrogen in the country’s strategic plan. The government should fund pilot projects to demonstrate the viability of green hydrogen technologies while encouraging Public-Private Partnerships (PPPs) to invest in scaling up commercial projects. 

In addition, successful pilot projects will also help to attract foreign direct investment (FDI). The government should also encourage private companies to invest in the technology by providing them with subsidies, tax exemptions and reasonable power tariffs for electrolysis. By leveraging its abundant hydropower, Nepal also has the potential to export green hydrogen to neighboring countries like India and China, with supportive export policies and infrastructure development key to realizing this opportunity. Moreover, investment in research and development (R&D) will contribute toward bringing down the costs of producing hydrogen and enable Nepal to remain competitive in the global hydrogen market. The creation of a separate hydrogen authority and simplification of the licensing of hydrogen projects will help stimulate further development and increase the share of commercial-scale projects after successful pilot projects.