In recent years, green hydrogen has gained significant attention in Nepali energy discourse, emerging as a symbol of new ambition and opportunity. For Nepal, sitting on abundant water resources and with its often cited but largely untapped hydropower potential of 80 GW, the idea of channeling anticipated surplus electricity into generating green hydrogen fuel in coming years feels like a natural next step.
In August last year, Prime Minister K.P. Sharma Oli unveiled Nepal’s first hydrogen refueling station at Kathmandu University and launched the country’s first-ever hydrogen-powered car. Across media platforms and conferences, green hydrogen is hailed as a new opportunity for Nepal to join the global energy transition.
The buzz is undeniable. Optimistically, some studies suggest that Nepal could produce green hydrogen at some of the lowest costs globally – between $1 and $2 per kilogram – thanks to Kathmandu University’s Green Hydrogen Lab and its pioneering efforts in this space. However, production typically accounts for only about 15 percent of the total cost. The rest – distribution, storage, and refueling infrastructure – poses far greater and costlier challenges.
Is Nepal ready to go all in on this?
The Hype Is Not New
Green hydrogen might seem like the newest frontier in clean energy, but its promise has been discussed for decades. In 2004, Joe Romm’s “The Hype About Hydrogen” warned against overselling the technology due to economic and technological hurdles at the time. Back then, renewable electricity costs were prohibitively high, particularly for solar and wind. Two decades later, plummeting renewable energy costs have revived global optimism for green hydrogen as a solution for energy-intensive sectors like steel, cement, aviation, and shipping, which are difficult to decarbonize through direct electrification.
This enthusiasm is reflected in global trends, with hydrogen projects planned through 2030 drawing $320 billions of planned investments. Yet fewer than 10 percent have secured committed capital, exposing a gap between ambition and action. Forecasts by Bloomberg NEF and the International Renewable Energy Agency (IRENA) suggest production costs could drop to $2 per kilogram by 2050, with some estimates reaching $1 per kilogram by 2030.
In Nepal, green hydrogen enthusiasm often fixates on one thing: generation costs. However, the real challenge lies in getting that hydrogen to where it’s needed. Its low energy density means it must be compressed, liquefied, or converted into ammonia – processes that are both expensive and require significant infrastructure investments. Given Nepal’s abundant hydropower and relatively modest industrial energy needs, using electricity directly appears to be a simpler and more cost-effective solution for meeting domestic demands.
Despite this, Nepal must carefully evaluate whether it is positioned to capitalize on the global green hydrogen shift. This includes identifying specific sectors where green hydrogen is indispensable and understanding why electrification alone may not suffice. A strategic, sector-focused approach will help ensure green hydrogen complements Nepal’s energy ambitions without straining its resources unnecessarily.
You Can’t Have Both
One of Nepal’s key priorities should be deciding where to focus its limited resources. Pursuing both EVs and hydrogen vehicles is impractical, as each requires distinct and costly infrastructure – charging stations for EVs and hydrogen refueling stations. EVs, with their growing adoption and compatibility with Nepal’s electricity grid, offer a more immediate and practical pathway for sustainable transportation.
Green hydrogen for transportation, meanwhile, would demand a complete overhaul of the vehicle fleet and the development of a nationwide refueling network. Nepal must resist the temptation to hedge its bets on both technologies and instead prioritize the solution that offers the most immediate opportunities.
EVs already have a strong head start. In just the first four months of fiscal year 2024-25, Nepal imported 3,487 EVs worth 8.37 billion Nepali rupees ($60.5 million), highlighting growing public and market interest. Kathmandu University studies also show that operating an EV in Nepal is nearly 4.7 times cheaper than a petrol vehicle and 3.6 times cheaper than a diesel vehicle. EVs are clearly the more cost-effective and natural fit for Nepal, aligning seamlessly with its existing electricity grid.
Of course, the calculus changes if hydrogen is viewed as an export opportunity, but that adds logistic and geopolitical complexities. Relying on a single buyer like India mirrors the challenges Nepal already faces with electricity exports. Moreover, India’s scale and ambition to become a global green hydrogen hub itself mean it could produce hydrogen at much lower costs, making imports from Nepal less attractive. The risks of relying on a single market, the need for costly transmission infrastructure, and competition with larger, more advanced economies cannot be overlooked.
Globally, the infrastructure costs for green hydrogen remain daunting. A recent Harvard study estimated storage and distribution investments at $300,000 per ton, figures even developed economies find difficult to justify. For example, in California, while production costs are $1 to $2 per kilogram, retail prices at the refueling stations climb to $13 to $16 due to added storage and transport expenses. For Nepal, with its challenging mountainous terrain and lack of infrastructure, these figures should serve as a humble reminder of the complexity and cost involved, demanding a clear-eyed evaluation of where green hydrogen truly fits within the national energy strategy.
Green ammonia, however, presents a plausible case for Nepal, given its annual fertilizer demand of 700,000 to 800,000 metric tons. A demand threshold of this scale has justified projects from India, Saudi Arabia, and Namibia. But scale alone is not enough. Organizations like Global Green Growth Institute (GGGI) are assessing Nepal’s green ammonia potential.
While we wait for more studies and insights on ammonia, the key focus must remain on economic viability, market structure, off-take agreements, long term trade commitments, rather than merely the generation cost of green hydrogen. Can it compete with imports? Is the infrastructure viable? What scale makes economic sense? A balanced approach will ensure that Nepal’s strategy is both ambitious and grounded in long-term economic priorities. Nepal can borrow lessons from international initiatives, such as Asian Development Bank’s support for green ammonia projects under the South Asia Subregional Economic Cooperation Green Fuel Development Initiative and its technical assistance in India for advanced biofuels and green hydrogen.
However, for now, the decarbonization priority for Nepal should be to electrify everything, everywhere it can. Green hydrogen should complement – not compete with – hydropower expansion, ensuring that ambition is matched with economic realism. The export euphoria of green hydrogen to ammonia can wait. Nepal’s first duty is to power and sustain itself.
