The Hydrogen economy in India is undoubtedly progressing and it is progressing fast! In a recent advance, forward thinking Executives at one of India’s largest corporate house – Aditya Birla Group, through their telecom business – Idea Cellular have taken the step towards implementation of Fuel Cells for Backup power. Cliches aside, Idea Cellular has made Hydrogen, “What an Idea!”.
Idea Cellular recently announced procuring and deploying Hydrogen Fuel Cells from one of world’s largest and established Fuel Cell manufacturer – Ballard Systems. Besides taking this major step forward, what is truly inspiring is the how Idea Cellular has attempted to resolve the achilles heel of Hydrogen powered systems – the Hydrogen supply chain. Aditya Birla group owns a large Caustic Soda plant in Nagda, M.P. This plant, like most other chlor-alkali plants have an abundance of “waste/by-product” Hydrogen which is either sold in the market at very low rates or simply flared or burnt in the boiler. Hence, Idea Cellular decided to tap into this company’s resource and solve the dilemma of regular supply of Hydrogen and that too at compelling prices.
Well, we at MVS Engineering got thinking about this. Several facts came to fore in our brainstorming:
1) What is the cost of the Fuel Cell and what will be total cost of ownership (TCO) of the Fuel Cell alone?
2) What is the internal transfer pricing of Hydrogen that Aditya Birla Group is giving to Idea Cellular?
3) What is the radius around Nagda, where this price of Hydrogen can be sustained? Alternatively, when you factor in the cost of transportation of Hydrogen cylinders, until what distance can the Hydrogen be delivered at reasonable cost from the supply source?
4) What are the competition/challenges/threats to this business model?
5) What about the Hydrogen business model where cheap Hydrogen is not available? Does it make sense to produce your own Hydrogen?
We decided to attempt to answer these questions and here is a summary of what we found.
1) COST OF FUEL CELLS, and TCO
Companies like Ballard and other leading Fuel Cell manufacturers around the world seem to have addressed this very well by selling Fuel Cells that are cost competitive and if cheap Hydrogen can be supplied to the Fuel Cell, the TCO of operating this is well within striking distance of cost one would incur using UPS, Inverters and/or Diesel Generators. So, for telcos and telecom tower operators, this part of the equation seems to be addressed well. The “catch” is Hydrogen must be available at affordable price.
2&3) PRICE OF HYDROGEN and it’s sustainability
So long as cheap Hydrogen is available, as example from Chlor Alkali plants, this model works well. Primarily because the Hydrogen is cheap and does not have to be transported to a long distance wherein the cost of transportation exceeds the cost of Hydrogen itself. However, if cheap Hydrogen is not available or the distance from the source of Hydrogen exceeds around 100 kms or so, the delivered Hydrogen cost goes up and at longer distance to point of use, beyond the point of sustenance for this business model. We have an article which well explains the price of Hydrogen that you may find useful in this regards.
4) COMPETITION for Fuel Cell Business Model
The telecom business in India are heavily dependent on Diesel Generator power both as “Base Load” and as “Backup Power”. These generators are in addition to instantaneous backup power sources such as UPS and/or inverters for longer duration power supply through batteries. The reliance on Diesel Generators has come due to good supply chain network and easy availability of Diesel all over the country and also the fact that Diesel in India is a heavily subsidized fuel. If left to market pricing, the cost of Diesel today will be near to Petrol. However, with the government subsidies, the cost of Diesel in India continues to be around 70% of the price of Petrol. These subsidies are a major challenge and stumbling block for renewable energy sources and alternative eco-friendly energy sources to become competitive.
5) PRODUCING HYDROGEN ONSITE
Where Hydrogen is not available cheap, means sites 100 km or more away from Chlor Alkali plants, does it make sense to produce your own Hydrogen. We worked on this premise and developed a few different business models below:
A) Produce enough Hydrogen to deliver backup power for one Telecom BTS Unit.
B) Produce enough Hydrogen required for one telecom tower hosting multiple BTS Units.
C) Produce enough Hydrogen required for multiple telecom towers and BTS Units (serving them Hydrogen in the hub-spoke supply chain model).
What we found interestingly and not surprisingly is that if you look at Hydrogen Generation with a one-to-one relationship (Model A), the business model falters primarily because of the capex involved in Hydrogen Generator and the Fuel Cell.
However, as you move towards Models B & C, this business model does become more attractive and it does start to make sense. Also, if the diesel subsidies are removed for the Telecom business backup power, Models B & C actually offer better returns for the operator.
So, if you are thinking about Fuel Cells and On-Site Generation of Power and are interested in reviewing our business model, get in touch with us and let us share with you our cost model and how we have arrived at the conclusions above.
Author: Mr. Siddharth Rastogi (Executive Director, MVS Engineering Ltd.)
MVS Engineering is a turnkey supplier of Gas generation equipment, Air and liquid drying equipment. MVS was founded in 1977 and has supplied nearly 7000 Skid mounted units worldwide. Read more about the company in the About Us section of our website.
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