The year 2023 started with a bang for the country’s fledgling green hydrogen sector. On January 4, 2023, the Union cabinet gave approval to the National Green Hydrogen Mission with an initial budget outlay of Rs 197,440 million, which led to excitement amongst industry players. The landmark announcement was followed by the release of the detailed mission document a few days later, which gives an overview of the overall mission goals, strategies to develop the green hydrogen ecosystem, various components under the mission, the governance framework, the implementation roadmap, expected outcomes and the financial outlay. Needless to say, the approval of this transformative mission and the related budget allocation has been a much awaited and necessary intervention to generate confidence in India’s emerging green hydrogen market.
The National Hydrogen Mission had first found a mention in the finance minister’s budget speech in February 2021. It was then formally launched by the prime minister on India’s 75th Independence Day the same year, thereby showing the strategic importance of the sector. A formal policy announcement came a few months later in February 2022. It laid out many encouraging provisions for green hydrogen and green ammonia manufacturers, including the waiver of interstate transmission charges till June 2025, priority for grid connectivity, grant of open access, energy banking and renewable purchase obligation benefits. However, this policy document was just the first phase of the larger policy framework and more policy interventions are expected soon.
Mission aims and approaches
Green hydrogen is an important piece of the energy landscape in the current global energy crisis owing to its versatile applications and its potential to help decarbonise hard-to-abate industries, as well as the transport and power sectors. This powerful fuel is non-polluting and is generated using renewable energy and water, thereby addressing the twin challenges of emission reduction and energy security. The main aim of the mission is to scale up the production and consumption of green hydrogen in the country and further make it a global hub for green hydrogen export. To achieve this goal, the mission will enable the scale-up of green hydrogen capacities to at least 5 million metric tonnes per annum (mmtpa) by 2030, with a further potential to reach 10 mmtpa. This will be supported by the growth of associated renewable energy capacity of about 125 GW.
As the country aims to be net zero by 2070, this mission has been formulated to make all major fossil fuel-based processes switch to renewable energy and green hydrogen application. This will include the replacement of hydrogen produced from fossil fuel sources in various industrial processes such as ammonia production, steel manufacturing and petroleum refining with green hydrogen. Further, green hydrogen is proposed to be blended in city gas distribution systems and green hydrogen derivatives can replace fossil fuels in various sectors including mobility, shipping and aviation. To ensure secure equipment supply chains and promote domestic manufacturing of key components, this mission will support technology advancements and the scale-up of electrolyser production as well.
The green hydrogen industry is at a nascent stage not just in India but at a global level, with a lack of proven case studies and experiences. Therefore, this mission strategy will focus on ensuring streamlined development of the green hydrogen market. Interventions will be aimed at demand creation to make green hydrogen competitive for both domestic consumption and exports. Further, supply-side constraints will be addressed through an incentive framework. An enabling ecosystem will be created through the required demand- and supply-related interventions. To facilitate this, the mission is proposed to be implemented in two phases:
Phase I (2022-23 to 2025-26): This will focus on green hydrogen deployment in sectors that are already using fossil fuel-based hydrogen. These include refineries, fertilisers and city gas distribution. Pilot projects will be taken up in green hydrogen application in steel production, long-haul heavy-duty mobility and shipping. While these will help in creating demand for green hydrogen, there will be an adequate focus on increasing domestic electrolyser manufacturing capacity on the supply side. Further, the formulation of regulations and standards will commence in this phase.
Phase II (2026-27 to 2029-30): The cost of green hydrogen is expected to become more competitive by the beginning of the second phase, increasing the scope for greater adoption. In this phase, green hydrogen projects will be taken up in the steel, mobility and shipping sectors. Their potential will be explored across railways and aviation as well. Further, R&D initiatives will continue to increase green hydrogen penetration across various sectors for the decarbonisation of the economy.
The actual implementation of these plans will require massive investments from both public and private entities. Further, significant risk mitigation strategies will have to be formulated by the government to allow such large investments to take place in a niche area with the lack of historical data. According to the mission document, the total budget outlay of Rs 197,440 million comprises an allocation of Rs 174,990 million for the Strategic Interventions for Green Hydrogen Transition Programme (SIGHT), Rs 14,660 million for pilot projects, Rs 400 million for R&D, and Rs 388 million towards other components. This includes two financial incentives that are being planned under the SIGHT programme for domestic manufacturing of electrolysers and production of green hydrogen. Further, support will be provided for pilot projects and green hydrogen hubs will be developed.
Owing to the far-reaching applications of green hydrogen development in the country, the mission will witness the involvement of various central and state government agencies. The Ministry of New and Renewable Energy will be responsible for the overall coordination. An empowered group chaired by the cabinet secretary will be formed. It will comprise high-ranking officials including the principal scientific adviser to the Government of India, chief executive officer of NITI Aayog, secretaries of various ministries and departments as well as industry experts. This group will be responsible for overseeing the activities under the mission, monitor its progress and provide policy recommendations wherever required.
In the near future, an enabling policy framework will be developed along with a robust standards and regulations framework. Continued technological advancements are necessary to develop cost-competitive technologies. In view of this, the Strategic Hydrogen Innovation Partnership (SHIP), a public-private partnership framework for R&D, is planned to be facilitated under the mission. A national portal is also being proposed for green hydrogen project application, sanction, and funds disbursal wherever required. This will also help create awareness and facilitate the connection of stakeholders. In the past year, the government has launched portals for rooftop solar and open access projects, which have proven to be successful in building sector confidence. This same is envisaged for the green hydrogen space as well.
As these plans come to fruition, it is expected that the mission will be successful in facilitating over Rs 8 trillion in total investments and creating 600,000 jobs. Moreover, it will lead to a cumulative reduction in fossil fuel imports of Rs 1 trillion and 50 mmtpa greenhouse gas emissions.
The recent financial outlay for the Green Hydrogen Mission and the detailed mission document with an implementation roadmap have come out a few days before the Union budget address by the finance minister in the month of February. The clean energy industry, which had been expecting certain budget provisions for green hydrogen, can now confidently move ahead in its project planning with the upcoming policy and capital boost in the sector.
While this mission and the related budget have been widely appreciated across the clean energy industry, a few concerns have been raised, especially regarding the actual implementation of the proposed plan as well as the timely formulation of the required supportive policy and regulatory regime. While green hydrogen mandates for industries are required to create demand, incentives are also required to promote domestic manufacturing of electrolysers. Some industry experts have also voiced concerns regarding the cost competitiveness of green hydrogen versus grey hydrogen. For this, it is critical to have domestic capabilities for producing cost-effective yet world-class electrolysers.
In addition, the affordable cost of round-the-clock renewables is essential for running green hydrogen electrolysers. It is imperative to have proper transmission infrastructure, large tracts of land for setting up additional renewable energy projects, as well as generation balancing mechanisms in the form of battery storage and pumped storage. The challenges that have long slowed down renewable energy developments, especially those linked to approvals, contracts, grid and land acquisition, need to be urgently addressed so that they do not become an impediment to green hydrogen uptake as well. Another key issue that needs to be tackled well in advance is the requirement of large volumes of clean water to produce green hydrogen on electrolysis. Thus, projects need to be planned in regions that have sufficient reserves of water, but wastage of this precious resource must be avoided.
On a positive note, India is planning to develop large green hydrogen hubs or clusters that will be located close to demand centres. They will reduce the issues associated with bringing renewables and water to the projects as well as transporting ready hydrogen to industries and ports for export.
India is one of the first countries to announce such an extensive policy roadmap specifically for green hydrogen. It is expected that this mission will help the country build large capacities and become a green hydrogen leader on the global stage.
By Khushboo Goyal