A green hydrogen export hub for Asia

Asia has been one of the world’s fastest-growing regions, and energy requirement is expected to increase by more than 50 percent until 2040, mainly driven by factors such as industrialization, urbanization and population growth. The general electricity generation dependency upon coal and thermal power in the region is 70 percent for India, over 80 percent for Bangladesh and 58 percent for Pakistan. Despite being a technologically advanced nation, 70 percent of Japan’s energy demand is fulfilled by fossil fuels whereas the numbers for South Korea and China are 80 percent and 60 percent, respectively. The Asian countries use about 0.5bn metric tons of coal annually, of which more than 1.5bn metric tons of CO2 are emitted from the power sector. This heavy reliance on fossil energy resources bears the social cost of extreme air pollution and greenhouse gas pollution. As industries like steel, cement, ammonia and others that release high levels of CO2 are expected to expand during the current decades, it is imperative to develop nontraditional energy sources in the region.

Green hydrogen is a clean, versatile energy carrier generated through water electrolysis using renewable electricity. In contrast to grey or blue hydrogen, which are derivatives of fossil fuels and their production emits greenhouse gases, green hydrogen is carbon-free. Its applications are manifold: from powering industry and transport to energy storage and a clean fuel source for power generation. For Asia whose energy mix is dominated by coal and natural gas, green hydrogen offers a pathway to decarbonize hard-to-abate sectors like steel, cement and heavy transport. It also aligns with the region’s commitments under the Paris Agreement to limit global warming.

The present energy scenario of Nepal shows a comfortable position with an installed hydropower potential of about 3,157 MW, while the total domestic demand is about 1,870 MW. Nepal’s estimated peak electricity demand looks much less at 10,500 MW by 2040 with an installed capacity of 40,000 MW. This excess renewable energy is a perfect opportunity for Nepal to focus on green hydrogen production since water electrolysis can be powered with surplus electricity. Green hydrogen can act as a carbon-neutral and exportable energy vector for meeting the energy transition needs of neighboring Asian countries. Since coal and thermal energy predominate in the countries within the region, exporting green hydrogen from Nepal could be helpful to countries like China, South Korea, Japan, India, Bangladesh and Pakistan to progress toward less carbon-intensive energy sources and, at the same time, spur regional cooperation and growth of the energy sector. 

India's rising demand for green hydrogen is a perfect opportunity for Nepal to become a major exporter of green hydrogen. Nepal, being a country abundant in hydroelectric power, could use the excess clean energy to generate green hydrogen to aid India in its decarbonization drive. Moreover, Nepal has the potential to export green hydrogen and its derivatives, such as ammonia, to India via pipelines, enabling further export to East Asian and South Asian markets. While green hydrogen may not currently be the most economically viable energy source, it stands out as one of the most environmentally-sustainable options, aligning with global decarbonization goals. Besides, the geographical location of Nepal, which is adjacent to India, and the ongoing prospects of energy exchange make the country an ideal supplier of green hydrogen. At the same time, this business may lead to the generation of thousands of employment opportunities in Nepal’s energy transportation and logistics sectors and contribute to diversification. Green hydrogen holds the promise of becoming the foundation of Nepal's new export economy in energy and, therefore, could become a long-term substitute for the two most volatile industries in Nepal—remittances and tourism.

A 2023 report by the World Bank estimated that if Nepal utilized 10 percent of its technically feasible hydropower for hydrogen production, it could produce 1.2m metric tons of green hydrogen annually, worth approximately $6bn at current market rates. Exporting hydrogen to India, Bangladesh and potentially China would create thousands of jobs throughout the supply chain of hydrogen production, storage, transport and logistics. For Nepal’s economy, which relies heavily on remittances and tourism, hydrogen could diversify revenue streams and reduce trade deficits.

The proximity of Nepal to the two significant energy consumers, India and China, places it at a logistical advantage in terms of green hydrogen exports. India’s National Hydrogen Energy Mission has targeted bringing down the price of green hydrogen to $1 per kilogram by 2030, creating massive demand for cheaper imports. And Nepal could be a key supplier. Also, hydrogen trade could be added to existing bilateral agreements such as the India-Nepal Power Trade Agreement (2014). Developing regional hydrogen corridors with shared infrastructure, such as pipelines and storage facilities, would reduce costs.

The government’s support is critical to making Nepal a green hydrogen hub. The Nepal Hydrogen Hub plan foresees the utilization of excess hydropower in the production of green hydrogen that can be utilized in Nepal’s economy in green cement and green steel industries, and the excess hydrogen can be exported as green ammonia or transported through pipelines to the Asian market. Setting up a green hydrogen plant for every hydropower project being developed in Nepal would be very costly. In response, the Nepal government should propose a plan to establish four strategic hydrogen hubs to centralize resources for cost efficiency based on the approximate area of hydropower stations. These hydrogen hubs, depending on their distances from either India or Bangladesh, could be used to export green hydrogen, hence providing Nepal with perfect regional markets. 

For that, the policymakers need to formulate a National Hydrogen Roadmap outlining the production target, export strategy and incentive for investment. Offering subsidies or tax breaks for producing green hydrogen and related infrastructures can attract domestic and foreign investments. Incentivizing public-private partnerships is critical for mobilizing large-scale capital and technical expertise. Green hydrogen aligns with Nepal’s commitments under the Paris Agreement to achieve net-zero emissions by 2045. Hydrogen can reduce air pollution, improve public health, and contribute to global climate goals by replacing fossil fuels. 

Developing robust export infrastructure, such as pipelines, storage systems and transportation networks, will ensure seamless movement to regional and international markets via shipments. This will not only strengthen the Nepali economy but also make it more self-reliant, rather than being dependent on remittances and taxes, which are unsustainable long-term economic solutions. Becoming a green hydrogen export hub will not only position Nepal as a leader in sustainable energy but also create massive employment opportunities and drive the development of green infrastructure to pave the way for long-term economic growth and environmental resilience. Besides, the export of green hydrogen will lower Nepal’s trade deficit by decreasing reliance on imports while creating new revenue streams. This transformation aligns with global efforts to decarbonize energy systems and presents Nepal with an opportunity to lead the region in renewable energy innovation and sustainability.