India Set To Dominate Global Green Ammonia Market With Lowest Production Costs

India is on the brink of becoming the world’s lowest-cost producer of green ammonia, a development that could reshape the global energy landscape. According to a report by Nuvama, this competitive edge is primarily due to India's lower costs in solar photovoltaic (PV) and wind energy, which are 16-44 percent and 17-40 percent lower, respectively, than global averages. These lower energy costs, combined with a potential reduction in India’s finance costs—currently around 10 percent, compared to the global range of 4-8 percent—could further enhance the nation’s position in the green ammonia market. 

NITI Aayog predicts that by 2030, India’s green ammonia (G-NH3) production costs could be about 29 percent lower than those of China and 43 percent lower than Australia, positioning India as a formidable competitor in the field. 

Leading Indian companies, including Reliance Industries (RIL), are expected to play pivotal roles in this energy revolution. RIL plans to commission the first train of its solar PV manufacturing by the end of the fiscal year 2025, with production scaled up to an impressive 20GW by the calendar year 2026. The company has also secured Production Linked Incentives (PLIs) amounting to $0.7 billion for both solar modules and green hydrogen (GH2) production, covering 18 percent of the GH2 value chain. These incentives are set to solidify RIL’s standing as a significant beneficiary of India’s green energy policies. 

The Indian government’s commitment to bolstering domestic solar module manufacturing is evident in its Solar PV Modules PLI-Tranche II initiative, which has allocated Rs 140 billion for 39.6 GW of domestic capacity. This initiative aims to add 48GW of solar module manufacturing capacity over the next three years, with 7.4GW expected to be operational by October 2024, 16.8GW by April 2025, and the remaining 15.4GW by April 2026. The PLI scheme is crucial in making India one of the lowest-cost producers of solar modules, currently 23 percent cheaper than the global average and 6 percent lower than China. 

In a significant milestone for India’s energy sector, 6GW each has been allocated to RIL and IndoSolar for end-to-end PWCM (polysilicon, wafers, cells, and modules) manufacturing capacity. This move will establish India’s first-ever polysilicon manufacturing unit, which is expected to drastically reduce overall module costs. With polysilicon currently accounting for one-third of the total module cost and enjoying around 70 percent margins, this development is set to revolutionise the domestic solar manufacturing landscape. 

While India is making significant strides in the new energy sector, China is facing challenges in its lithium-ion battery market. Despite a 14 percent year-on-year drop in lithium-ion battery prices in 2023, China’s manufacturing capacity is projected to exceed demand by 3.6 times by the end of 2024. This oversupply could keep battery prices under pressure, potentially benefiting global electric vehicle manufacturers but posing difficulties for Chinese producers. 

India’s recent advancements, including the crash in input prices across the value chain and the rollout of PLIs for modules, electrolysers, and batteries, have enhanced the country’s economies of scale. Solar module prices have reached record lows, dropping 49 percent year-on-year as of August 2024, while lithium-ion battery prices have fallen 14 percent year-on-year. 

These developments, alongside ongoing government initiatives, are expected to accelerate India’s timeline for achieving round-the-clock renewable energy at a green hydrogen cost of $1/kg, ahead of the original 2030 target.