Green hydrogen has become a key priority area for governments and industries worldwide owing to the transforming energy landscape and the demand for cleaner fuels that ensure energy security. Significant development has been witnessed in the Indian market with many projects and collaborations announced in recent months. However, what was lacking was a clear policy direction from the government to give confidence to the industry. To fulfil this need, the first phase of India’s Green Hydrogen Policy was finally released by the government on February 17, 2022, after months of deliberation. While it has garnered a positive response from most stakeholders, it is being viewed as a preliminary step in devising the policy roadmap to make India a green hydrogen hub, with more specific provisions still awaited. Renewable Watch presents the reactions of some industry leaders to this policy…
Srivatsan Iyer, Global Chief Executive Officer, Hero Future Energies
India, now emerging as a global leader in renewable energy, is targeting to replicate its success story with green hydrogen. Green hydrogen can play a crucial role in catalysing India’s net zero journey by replacing fossil fuels, while improving energy security and reducing its import dependence. Green hydrogen has a massive potential for decarbonising industries, particularly the so-called “hard to abate” sectors, and also serve as a clean fuel for transport. Recognising this, the Ministry of New and Renewable Energy (MNRE) recently unveiled Phase I of the National Hydrogen Policy, as a first step towards creating an enabling environment for green hydrogen production. This phase focuses on providing a “supply-side” push by lowering the cost of production through steady access to low-cost renewable energy, a critical input.
- The 25-year exemption from interstate transmission system (ISTS) charges for green hydrogen manufacturers for all projects commissioned before June 2025 is a big step that will allow sourcing of lower-cost renewable energy, leading to a reduction in production costs.
- Green hydrogen manufacturers can bank unconsumed renewable power for 30 days with discoms and take it back when needed. This will lead to higher capacity utilisation of electrolysers, overcoming the intermittency barrier, and, in turn, making operations more cost effective.
- Decision allowing green hydrogen manufacturers to set up bunkers for storage adjacent to ports, with land being provided by the latter, is expected to enhance exports.
- To achieve cost competitiveness, the MNRE will aggregate demand from various end-use sectors and conduct consolidated bids for green hydrogen procurement.
There are a number of steps for promoting the ease of doing business. These include:
- Green hydrogen manufacturers can now purchase renewable power from the exchange or from the existing renewable energy projects in the country – either self-owned or run by a third party, with open access being granted within 15 days of applying, enabling heavy users to procure power at cheaper rates from the open market. Discoms can also sell renewable energy to green hydrogen producers at concessional rates.
- Priority grid-connectivity for renewable power projects that are to be used for green hydrogen production.
- The government will grant land in renewable energy parks to green hydrogen manufacturers, besides setting up dedicated manufacturing zones to simplify acquisition issues, which have been a major hindrance.
- A single-window portal to speed up all statutory clearances related to manufacture, storage, transport and distribution of green hydrogen.
What needs to be addressed:
- Green hydrogen production can benefit from scale and experience. This means we need to create enough demand in the current economic scenario. One way the government can do this is by imposing mandates in the form of green hydrogen purchase obligations in selected end-use industries such as refining, fertilisers, steel and cement.
- There must be clarity around how subsidies and cross-subsidies will work in case green hydrogen manufacturers source renewable energy from plants at different locations owned by different parties.
- Given the considerably high upfront costs that green hydrogen production involves, the government should introduce viability gap funding schemes for pilots to encourage industries to adopt green hydrogen.
- The production-linked incentive scheme for incentivising domestic manufacturers should be extended to bring electrolysers within its ambit. This will not only make India self-reliant in green hydrogen production, but also enable it to emerge as a globally competitive green hydrogen manufacturing hub. However, till domestic manufacturing matures, the government should slash import duties on electrolysers to make green hydrogen production cost competitive.
- States must back up this central policy by removing intra-state transmission charges and electricity duties, in turn, reducing disparities in state-level open access charges and minimising charges for banking unused renewable power with discoms.
India can become a global champion in green hydrogen production given the country’s rich renewable energy potential, a strong developer base and a huge demand for hydrogen. What is required is a conducive policy framework that reduces the cost of production, elevates demand and eases implementation.
Gautam Mohanka, Managing Director, Gautam Solar Private Limited
We sincerely welcome the government’s much-awaited National Hydrogen Policy. India’s dependency on fossil fuels has been a matter of concern, given that our power consumption demands are likely to soar enormously over the next 20 years.
Enhancing the production of green hydrogen in India will eventually help the industrial, commercial and residential sectors alike. Given that we currently import over 80 per cent of oil to meet our national requirements, green hydrogen, along with solar and wind, could be the answer to the future. This will help in climate management and in meeting our targets of producing 5 million tonnes (mt) of green hydrogen by 2030 and making India a green hydrogen hub. Green hydrogen and green ammonia will help to further decrease the use of fossil fuels and are expected to be future fuels for a cleaner environment.
To take this forward, the government has given some perks to manufacturers of green hydrogen and green ammonia, making it easy for them to manufacture, purchase from a power exchange or set up their own plants. Waiver of ISTS charges for a period of 25 years is a welcome step and the most motivating one as well. The benefit of the renewable purchase obligation (RPO) will be granted as an incentive to hydrogen/ ammonia manufacturers.
The production of green hydrogen relies on electricity generated by solar plants and is, in a way, boosts the renewable energy sector. Gautam Solar looks forward to empowering local players and busi-nesses in using solar power for green hydrogen production and usage. We hope that the government eventually makes it mandatory for select industries to use green hydrogen and solar power to reduce the reliance on fossil fuels. We also see this as a prospect for indigenous production of power components, panels and parts used in the solar segment.
We believe that the all-new Green Hydrogen Policy will propel the renewable energy sector in the right direction.
Derek Michael Shah, Senior Vice-President & Head, Green Energy Business, Larsen and Toubro Limited
On India’s 75th Independence Day, Prime Minister Narendra Modi announced the launch of the National Hydrogen Mission in his address to the nation. The primary objective of this mission is to make the country energy independent by 2047 (before its 100th year of independence). The National Hydrogen Mission aims to make India a global green hydrogen hub, enabling the nation to meet its climate targets. The mission will further help in the reduction of fossil fuel import and transition to clean technologies. The country targets to produce 5 mt of green hydrogen by 2030 with the related development of renewable energy capacity. In keeping with this, the Ministry of Power announced the much-awaited Green Hydrogen Policy on February 17, 2022, which is the first step towards the Green Hydrogen Mission.
The objective of the Green Hydrogen Policy is to transform India into a competitive and economical producer of green hydrogen, thus making it a global green hydrogen export hub.
Renewable energy is the major driver for green hydrogen prices. Aptly, the government has focused on measures that can lower the cost of renewable energy in this policy. This step will reduce the green hydrogen production cost and help ensure the energy security of the country. The policy provides for a waiver of ISTS charges for a period of 25 years for projects commissioned before June 30, 2025, enables flexibility in purchase of renewable energy as well as banking of renewable energy for a period of 30 days, ensures prioritisation in grant of connectivity, provides flexibility to use renewable energy park land for manufacturing of green hydrogen/green ammonia, enables setting up of manufacturing zones as well as storage of green ammonia to promote export, directs creation of a single portal for statutory clearances and approvals and focuses on aggregation of demand from different sectors. These measures will help in reducing the levellised cost of hydrogen and are very positive from an industry perspective.
As per the indication, the government will be releasing the policy in phases. The next phase of the policy is expected to cover the green hydrogen consumption obligation in certain sectors, including the refinery and fertiliser sectors, starting from 2-5 per cent and gradually increasing it to 20-30 per cent by 2030. The government may consider availability of project financing for green hydrogen at competitive rates, support for research and development, focusing on Atmanirbhar Bharat by incentivising the making of electrolysers in India, providing incentives to consumers/producers in the initial phase to promote green hydrogen, and focusing on green hydrogen/ ammonia storage and transportation technologies in the next phase of the policy. This may further bring down the prices of green hydrogen and minimise the gap between grey and green hydrogen. The government is focused on green hydrogen and this policy reiterates its position. The industry is waiting for the next phase of the Green Hydrogen Policy, which will hopefully cover the above aspects and expedite India’s mission to be the global green hydrogen hub. To summarise, with the government implementing the right policies to support, India is on the right path to be a global leader in green hydrogen.
Anvesha Thakker, Partner and Lead, Renewable Energy, KPMG in India
Green hydrogen is one of the most important clean energy sources for decarbonising India’s energy sector and enhancing the country’s energy security in a sustainable manner. India can be amongst the global leaders in this space, given its rich renewable energy potential, a strong developer base and a huge hydrogen demand. What is required is to give the right fillip to bring down costs, create demand-side measures and improve ease of implementation.
In the newly announced Green Hydrogen Policy, the government has touched upon several factors to bring down costs and improve the ease of implementation of green hydrogen or green ammonia projects. Some of the notable points are waiver of ISTS charges, open access ease, priority access to ISTS, banking provisions, which will bring down the cost of transfer of electrons from renewable energy-rich states to demand centres for the production of green hydrogen/green ammonia. Single-portal clearances with time-bound addressal as well as the allotment of land in renewable energy parks for the production of green hydrogen/green ammonia are also welcome steps.
However, the policy needs to address the expectations of hydrogen producers by providing clarity on demand-side measures such as hydrogen purchase obligations. Similarly, there is no clarity yet on measures to facilitate the localisation of electrolyser manufacturing. Further, there is no mention of derivatives of green hydrogen other than green ammonia such as methanol. Additionally, the implementation of banking provisions will require consent from state utilities, where we may see some resistance by state regulatory commissions. However, Union Minister for Power and New and Renewable Energy Raj Kumar Singh has affirmed that this is only the first phase of policy roll-out. We can expect other levers to be addressed as the policy evolves and further support India’s green hydrogen ambitions.