Green hydrogen production from surplus hydroelectric power: A case study in Nepal

Nepal has a significant potential for power generation through hydropower, with an estimated techno-economic capacity of 42,000 MW [1]. Hydropower is the predominant source of electricity with its share of more than 95% of the total installed capacity of the country. Although the current hydro installed capacity is only around 2639.4 MW as of December 2023, the installation trend is expected to grow rapidly with a substantial capacity of the hydropower project under the pipeline [2]. 288 projects with an installed capacity of 9717.5 MW are under construction whereas 140 projects with a capacity of 9163.2 MW are under survey. After the commissioning of under-construction and under-survey hydropower, Nepal would soon have 21,520.1 MW of installed hydropower. Similarly, 60 projects with a capacity of 2865.25 MW and 108 projects with a capacity of 11,096.8 MW have applied for survey and construction licenses respectively. Furthermore, more than 71 projects with a capacity of 11083.8 MW are under different phases of study by the Government of Nepal [2]. With much of the hydropower development work going on, the work is visible in the global picture as well since Nepal was recognized as the fourth country to add new hydropower in 2021 with the addition of 684 MW in the national grid [3].

On the demand side, the national annual demand of FY 22/23 was 11547.44 GWh with a peak demand of 1986.39 MW [4]. In FY 2025/26, 2030/31, and 2035/36, respectively, the Nepal Electricity Authority (NEA) has predicted that the total annual demand will rise to 20,585.22 GWh, 34,355.49 GWh, and 56,007.87 GWh respectively [5]. Although the demand seems a bit exaggerated as it fails to rightly predict the demand until 2023, considering the expected demand of NEA and with the timely commissioning of the pipeline hydropower, Nepal will soon have surplus generation at least during the wet season.

NEA is a government-controlled organization that generates, transmits, and distributes electricity in Nepal and performs cross-border trade. The integrated Nepal Power System (INPS) is solely managed and regulated by the NEA which also manages the overall energy balance of the system. All the hydropower owed by NEA and the independent power producers (IPPs) are connected to INPS. NEA purchases the electricity from IPPs at a fixed Power purchase agreement (PPA) rate finalized at the time of commissioning of the project, transmits it to the desired location, and distributes it to the end consumer. PPA are of two types: “Take or Pay” and “Take and Pay”. Take or pay basis PPA contracts are those where NEA has to purchase the declared quantity of energy at any situation of demand whereas take and pay contracts are those where NEA only purchases electricity when required. The PPA rate for the ROR plant is fixed at NPR 4.40 from April to December 15 [6].

More than 95% of electricity generated in Nepal comes from the fast-flowing Himalayan River. Rivers in Nepal are perennial rivers originating from the Himalayan mountains that flow cutting across diverse mountainous terrain to the plains. Nepal lies in the Hindu Kush Himalayan region which is also known as the youngest mountain range. Due to its young geology, large constructions like dams and reservoirs are difficult to construct in this area [7].

Therefore, most of the hydropower in Nepal is run off the river type. Runoff the river hydropower plants are highly dependent upon the flow in the river. Although flow in the rivers persists throughout the year, the flow rate significantly varies between the dry and wet seasons. For example, the Trishuli River basin which has 6 operational and 7 under construction hydropower with an installed capacity of 367 MW, has an average flow of 50 m³/s in the dry season which rises to an average of 650 m³/s in the wet season [8]. This variation significantly impacts the generation of run-off-the-river hydropower in that basin which leads to decreases in power production up to 1/3rd of its generation capacity due to low discharge in the river during the dry season. These phenomena significantly affect almost every hydropower plant in Nepal and the overall energy balance in the country. Energy gets surplus in wet seasons due to higher installed capacity than actual load available within the country and gets deficits during the dry season due to lower discharge rate in the rivers.

So, to balance this out Nepal sells its surplus electricity during wet seasons to India and buys the electricity during the dry seasons. In the last FY 2022/23 Nepal imported 1854.53 GWh of electricity from India with a peak of 665 MW, whereas it exported 1333.12 GWh with a peak of 408 MW [4]. The export is significantly low because Nepal has only been permitted to sell electricity generated by a limited number of hydropower with a peak of 452 MW [9]. Thus, the other hydropowers are curtailed during the wet season to balance the load in the system. It has been reported by the Independent Power Producer Association Nepal (IPPAN) that they will have to curtail electricity worth 192.47 million USD in the fiscal year 2024/25 during the wet season and this tends to grow even more in the years to come [10].

A recent study on surplus hydroelectricity in Nepal [11]shows that Nepal will have 3.8 TWh of surplus electricity during the wet season of the year 2028 with annual average electricity growth of 8%. Another similar study shows that there will be 3500 MW of additional install capacity than the peak load in the year 2028 [12]. Different approaches such as cross-border trade and a high rise in domestic industrial demand can be the solution for the surplus electricity but challenges such as bureaucratic delays in approvals from India, and a non-conductive environment for the large industries in the country persist as a barrier. In such a case, the generation of hydrogen from the electricity that would have been wasted otherwise could be an effective option.

Hydrogen, with its high energy density per unit mass and its ability to produce water instead of carbon dioxide when utilized, is gaining significant momentum as a renewable energy carrier. As global warming becomes an urgent and universally accepted challenge, nations are accelerating their transition from conventional energy sources to renewable and sustainable alternatives. A fully renewable grid, however, presents challenges, particularly due to the intermittency of energy sources like wind and solar. The intermittencies leads to energy curtailment and shortage of energy [[12], [13], [14]]. In this scenario, hydrogen acting as an energy carrier, plays a crucial role. Different 61 countries already have their green hydrogen policies [15] and in 2024 Nepal also launched it first “Green Hydrogen Policy −2024” [16] with the aim to promote and guide the production, storage and use of green hydrogen in Nepal.

Hydrogen can be produced by splitting H2O molecules into their subsequent H2 and O2 through the process of electrolysis during the period of energy curtailment and can be used for wide range of applications such as transportation, ammonia production, power generation, heating, iron ore reduction, and many others. Hydrogen produced through electrolysis that uses electricity from renewable sources is termed as green hydrogen. The cost of producing green hydrogen significantly depends upon the cost of electricity. Study suggests that the cost of hydrogen depends more than 70% on the cost of electricity [17]. Thus, utilizing the renewable energy that would have been curtailed otherwise (Surplus Electricity), at the marginal rate can be the way to reduce the cost of green hydrogen.

There have been few studies on the generation of hydrogen through surplus electricity and its application areas in Nepal. One of the early studies on Hydrogen from hydropower in Nepal published in 2008 shows that 50% of the hydropower energy during the off-peak hour of the wet season will be surplus by 2020. This can be utilized to produce hydrogen which can generate 140,000 tonnes of hydrogen with 100% utilization of the surplus energy [18]. Another study published by the Asian Development Bank in 2020 has highlighted the prospect of utilizing the hydrogen generated from hydropower in Nepal to meet electricity and transportation fuel demand. The result showed that 40% of the total energy produced in the wet season will get surplus by 2030 and it can be converted to hydrogen which can be re-electrified in the dry season to meet the 19.6% load of the dry season [19]. Thapa et al. [12] assessed the potential of green hydrogen production with surplus electricity in Nepal. The result showed that around 3100 MW of installed capacity will get a surplus in 2030. Nepal can generate 3,153,360 tons of hydrogen in 2030 with 100% utilization of the surplus electricity. Hydrogen can be generated at the cost of 1.17 USD/kg if the surplus electricity could be utilized at 80% of the normal price. A recently published paper on the techno-economic assessment of hydrogen production in surplus hydroelectricity in Nepal shows that Nepal can produce up to 91–414 kt of hydrogen per year with the estimated legalized cost of 5.65–5.72 USD/kg by 2030 [20]. Bhandari et al. [11] evaluated the hydrogen generation potential in Nepal until 2040 utilizing surplus hydroelectricity. The result revealed that ideally 834,664 tonnes of hydrogen can be generated in the year 2040 with 100% utilization of surplus electricity. The surplus electricity is calculated by subtracting the generation capacity and the demand forecast in 2040. Furthermore, the economic analysis performed in the study showed that the levelized cost of production of hydrogen (LCOP) ranges from a minimum of 1.74 USD to a maximum of 4.84 USD for different cases. Gyanwali et al. [21] studied the integration of hydrogen generation and storage units in the Integrated Nepal Power System (INPS) and its utilization for charging hydrogen and electric vehicles. The result showed that 5700 MW of electrolyzer, 12000 MW of Hydrogen storage, and 23000 MW of storage-based hydro is required to maintain the 50% share of hydrogen vehicle by 2050.

In terms of the application of hydrogen in Nepal, Thapa et al. have evaluated the potential of storing the surplus hydroelectricity in hydrogen-derived fuel such as synthetic natural gas(SNG) [22]. The result showed that the levelized cost of production (LCOP) of SNG produced from 40 tonnes per day (TPD) SNG plant was found to be price-competitive with the conventional LPG gas when the surplus electricity was provided at the subsidized rate of 26 USD/MWh. Shakya et al. [23] studied the prospect of using the hydrogen produced from surplus energy of hydrogen in the heavy-duty transportation sector in Nepal. The study shows that hydrogen can be generated at 4.33 USD per kg at the industrial electricity tariff rate. Hydrogen produced at that rate can be used as a fuel in hydrogen buses, hydrogen minibus, and hydrogen trucks which can save up to 192.37 million USD in buses, 41.16 million USD in minibuses, and 763.49 thousand USD in trucks per year as compared to their diesel alternatives. Rahul et al. performed the techno-economic assessment of a 488-kW fuel cell power backup system in a hospital in Nepal [24]. Two cases were compared with the first one being onsite hydrogen production and the second one with the purchase of hydrogen from centralized production facilities. In the 1st case, the net present value (NPV) was found to be USD 42,717 with 8.4% IRR and 10 years payback period whereas centralized production was found to be feasible only when the hydrogen was purchased below 3.5 USD per kg.

Besides the context of Nepal, D.F. Botelho et al. [25] analyzed the green hydrogen production from spilled hydro energy in a Brazilian hydropower plant. The analysis showed the spilled hydro energy between January 2022 to June 2023 from the Brazilian hydropower could have generated 14,669.92 to 1,406,699.17 tons of hydrogen. It also mentioned that the produced hydrogen could be used to produce up to 28,134 GWh of electricity which could mitigate 22.28 million tons of carbon dioxide emission. Samaniego et al. [26] discussed the production of hydrogen from hydroelectricity and its economic analysis in Ecuador. The author has analyzed hydrogen production in two different scenarios based on the largest hydropower in Ecuador. The analysis showed that hydrogen can be produced at 3 USD/kg when the electricity was provided at 30 USD/MWh.

In another study, C. Tian et al. [27] has discussed the possibility of hydrogen production from surplus electricity of hydro-wind-photovoltaic system. A case study based on southwest region of China is performed and surplus energy is estimated using different models. The surplus of the integrated system is calculated during wet and dry season using the transmission capacity as a constrain. And the optimal size of the hydrogen production plant is identified using the techno-economic modelling. The result shows that installation of 260 hydrogen plant can increase the annual benefit of 86 million USD and decrease the power variation by 75%. A. Giocoli et al. [28] has compared the LCOP of hydrogen produced from surplus renewable electricity based on different scenario. Surplus electricity is considered as 10 TWh for 4539 h in case-1 and 5 TWh for 800 h in case-2. No fluctuation in surplus electricity is considered by the author which simplifies the study. The result shows that 819 million m3 and 1638 million m3 of hydrogen can be produced annually for each model. And if the surplus electricity is supplied to hydrogen plant for free of cost and optimistic CAPEX cost is considered the production can be comparable with the grey hydrogen. A similar study to utilize the surplus of run-off-river HPP in Slovenia [27] is conducted by D.J. Jovan et al. [29]. The study uses the overflow of water a month as the potential surplus electricity and develops a MATLAB model to find the optimal size of the electrolyzer. The size of electrolyzer varying from 0.5 MW to 2 MW is considered and 1 MW is chosen based on electrolyzer utilization rate and monthly hydrogen produced. Economic analysis on 1 MW electrolyzer is performed and it is obtained that if the electricity is free of cost than the LCOPH can be USD 3.98. But the author has considered the utilization of only surplus electricity and has not discussed the other possibility as described in this paper. E.G. de Souza et al. [13] has also studied the potential of hydrogen generation from the surplus electricity of wind and hydropower plant in southern Brazil. Two scenarios has been discussed, which considers 3% and 5% and of total surplus potential for hydrogen generation. But in this study as well the dynamics of surplus energy has not been taken into account. Some theoretical study such as one performed in Columbia river basin by T. Alford [14], highlights that the renewable energy is getting curtailed in the summer and spring due to high run off in the river and less load. It explores the potential of utilizing the curtailed energy to produce hydrogen and use mainly for transportation sector.

All of the above-mentioned studies [11,12,[18], [19], [20], [21],23,24] on Hydrogen in Nepal suggests that there is a huge potential for the generation of hydrogen with surplus electricity and hydrogen has a variety of applications for decarbonizing Nepal. However, it was observed that all the previous studies related to the generation and demand of grid-connected hydropower systems have taken a holistic approach. None of these studies have delved into the surplus power generation of a particular hydropower plant and explored its potential for hydrogen generation in Nepal. Although different research suggested that the curtailment of electricity was happening, the exact powerplant or the type of the powerplant where the issue of curtailment was severe was not identified by the previous research. In international context there has been researches such as [13,29] but the variation on availability of surplus and different approach to purchase the surplus electricity for hydrogen production is not studied sufficiently.

Hence, this paper aims to fill this gap by analyzing the surplus electric potential of a specific hydropower plant and estimating its capability for producing hydrogen. Hence the objective was set to find the exact powerplant or the category of the plant where maximum curtailment was happening and to compare different sizes of the hydrogen production unit and power purchase model to minimize the levelized cost of hydrogen production.