Why Are Green Hydrogen Promoters Withdrawing?

Three years ago, Api Power Company Limited signed a memorandum of understanding with India’s GreenZo Energy Pvt. Ltd. to establish a 50-megawatt green hydrogen plant in Nepal. Under the agreement, Api Power planned to invest Rs 10 billion to produce 4,000 tons of hydrogen annually, with production targeted by 2025.

As 2025 nears its end, no progress has been made. Api Power’s founder, Guru Neupane, stated that while Nepal has significant technical potential, commercial production remains unfeasible due to high cost of equipment. He emphasized that such projects would require government support through viability gap funding.

A recent experiment by Kathmandu University produced one kilogram of hydrogen using 10 liters of water and 45 units of electricity, costing approximately Rs 650. Despite the government’s Green Hydrogen Policy 2080, aimed at promoting carbon neutrality, energy security, and sustainable prosperity, companies remain reluctant without viable economics.

Commercial Market Challenges

Experts highlight that the main challenge lies in creating a commercial market. Professor Biraj Singh Thapa, head of the Green Hydrogen Lab at Kathmandu University, noted that uncertainty over buyers and end-use discourages investors. He stressed the need to initiate value-chain development through a public-private partnership (PPP) model, starting with a pilot project.

Production Is Possible, Storage Is Not

Initial studies by Kathmandu University suggest Nepal could generate up to 350,000 metric tons of hydrogen annually by 2030 using surplus monsoon electricity. However, the absence of storage and transport infrastructure remains a critical barrier.

Neupane explained that while hydrogen could be used to produce ammonia and urea, the costs are prohibitively high. He noted that the agreement with GreenZo Energy is currently on hold until the government introduces production-friendly policies.

Similarly, a 2022 agreement between the Nepal Electricity Authority (NEA) and Korea’s Global Green Growth Institute to explore hydrogen production and fertilizer manufacturing has seen no progress. NEA officials confirmed that no discussions have been held since the initial signing.

Limited Interest in Production Permits

According to Joint Secretary Navin Raj Singh, no company has yet applied for a hydrogen production license. While interest exists, investors are deterred by issues of storage, transport, and profitability. Singh noted that small-scale experimental production may be possible, but large-scale commercial viability is not yet in sight.

A recent proposal by South Korean company G-Philos Cooperative Ltd. to develop a 20-megawatt pilot project in Nepal has been submitted to the Investment Board. The board has approved the process for a detailed project report, following the company’s pre-feasibility study submission earlier this year.

Key Challenges

Production costs remain the biggest obstacle. Current estimates place the cost of green hydrogen at 3 to 7 euros per kilogram, depending on renewable electricity and electrolysis expenses. Kathmandu University’s recent pilot project put the cost at Rs 650 per kilogram, far above market competitiveness.

Despite successful laboratory production and demonstrations of hydrogen-powered vehicles, scaling up requires substantial investment in research, development, and infrastructure. Coordinated efforts between the government, private sector, and public institutions are essential to progress.

Hydrogen use poses significant safety risks. Some months ago, hydrogen balloon explosion in Pokhara injured Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel and Pokhara’s mayor, highlighting storage and handling concerns. Experts stress the need for strict safety protocols, awareness, and regulatory frameworks.

Advanced storage and transport systems are necessary for widespread adoption, but Nepal currently lacks such infrastructure. Experts argue that building the logistics backbone is crucial if hydrogen is to play a role in industrial applications such as cement, ammonia, and fertilizer production.