The landscape of India’s energy sector is undergoing a transformative shift as the country embraces the potential of green hydrogen. Green hydrogen is critical for meeting India’s energy security needs while reducing emissions in hard-to-abate sectors. Recognising this, the Indian government launched the National Green Hydrogen Mission in early 2022. The aim is to spur green hydrogen production and consumption through roughly $2.3 billion in incentive funding, to be distributed between 2022 and 2030. Recently, the sector witnessed key auction results and policy announcements by the government. In this article, Renewable Watch provides key details of these developments…
Auction for green hydrogen production
The tenders for green hydrogen production were issued in July 2023 under the Ministry of New and Renewable Energy’s (MNRE) Tranche-I of the Strategic Interventions for Green Hydrogen Transition (SIGHT) programme. The tenders sought proposals for both the technology agnostic pathways bucket (Bucket I) and the biomass-based pathways bucket (Bucket II). Bucket I accounts for 410,000 metric tonnes per annum of green hydrogen capacity, while Bucket II holds 40,000 metric tonnes per annum. According to SECI, bids for a total of 553,730 tonnes per year were made by the developers.
Within Bucket I, Reliance, Greenko, and ACME secured 90,000 metric tonnes of capacity each, with average incentives of Rs 18.9 per kg, Rs 30 per kg, and Rs 30 per kg, respectively. Hygenco secured 75,000 metric tonnes of capacity with an average incentive of Rs 25.04 per kg. Among other successful bidders were Welspun New Energy (Welspun), which obtained 20,000 metric tonnes at an average incentive of Rs 20 per kg, Torrent Power with 18,000 metric tonnes awarded at Rs 28.89 per kg, Calcutta Electric Supply Corporation (CESC) Projects gaining 10,500 metric tonnes, and UPL (formerly United Phosphorus Limited) obtaining 10,000 metric tonnes of capacity with no average incentive. JSW Neo Energy (JSW Energy) won 6,500 metric tonnes of capacity from the quoted 10,000 metric tonnes at an average incentive of Rs 34.66 per kg under the bucket filling method.
Bharat Petroleum Corporation Limited secured 2,000 metric tonnes of green hydrogen production capacity under Bucket II with an average incentive price of Rs 30 per kg. This company was the sole winner in this category, leaving 38,000 metric tonnes of capacity unallocated.
Auction for electrolyser manufacturing
Apart from the green hydrogen production tender, SECI also issued a tender for 1,500 MW of electrolyser manufacturing capacities across India. Reliance Electrolyser Manufacturing (Reliance), John Cockerill Green Hydrogen Solutions, Jindal India, and Adani New Industries were awarded contracts. These capacities will be developed under the MNRE’s Tranche I of the SIGHT programme. The tender, which was issued in July 2023, invited proposals in two categories.
Under Bucket I, Reliance, John Cockerill, and Jindal India secured 300 MW per year capacity, each with a maximum incentive allocation of Rs 4.44 billion. Other successful bidders included Ohmium Operations, which obtained 137 MW per annum with a maximum incentive allocation of Rs 2.03 billion, and Advait Infratech (a consortium with Rajesh Power Service), winning 100 MW with an incentive allocation of Rs 1.48 billion. L&T Electrolysers secured 63 MW out of the total 300 MW per annum capacity quoted, with an incentive allocation of Rs 932.4 million. The total bids received for Bucket I amounted to 2,842 MW per annum.
Under Bucket II, HomiHydrogen secured 101.5 MW per annum capacity with an incentive allocation of Rs 1.5 billion, while Adani New Industries secured 198.5 MW per annum capacity with an incentive allocation of Rs 2.94 billion. Adani had proposed a 300 MW per annum capacity. The total bids received for Bucket II amounted to 486 MW per annum. Furthermore, the base incentive for both buckets will start at Rs 4,440 per kW in the first year and gradually decrease to Rs 3,700 per kW in the second year, Rs 2,960 per kW in the third year, Rs 2,220 per kW in the fourth year, and Rs 1,480 per kW in the fifth year.
Guidelines for implementation of pilot projects in the mobility, steel and shipping sectors
These three separate guidelines were issued by the MNRE in February 2024 as part of the National Green Hydrogen Mission.
Under the “Scheme Guidelines for Implementation of Pilot Projects for use of Green Hydrogen in the Transport Sector”, the MNRE will execute pilot projects aimed at replacing fossil fuels in the transport sector with green hydrogen and its derivatives. These projects will be executed through the Ministry of Road Transport and Highways and the Scheme Implementing Agencies (SIAs) designated under this initiative. The scheme will facilitate the advancement of technologies for utilising green hydrogen as a fuel in buses, trucks, and four-wheelers, utilising both fuel cell-based and internal combustion engine-based propulsion technologies. Additionally, the scheme will focus on developing infrastructure, such as hydrogen refuelling stations. The scheme will be implemented with a total budget allocation of Rs 4.96 billion until the financial year 2025-26.
With a total budgetary outlay of Rs 4.55 billion until the financial year 2029-30, “Scheme Guidelines for Implementation of Pilot Projects for the Use of Green Hydrogen in the Steel Sector under the National Green Hydrogen Mission,” aim to replace fossil fuels and fossil fuel-based feedstock with green hydrogen and its derivatives in the steel industry. The MNRE will oversee pilot projects in collaboration with the Ministry of Steel and designated Implementing Agencies.
The government has also unveiled pilot project guidelines focused on reducing carbon emissions in the shipping industry through the utilisation of green hydrogen as part of the National Green Hydrogen Mission. The initiative seeks to facilitate the use of green hydrogen and its by-products as a source of fuel for ship propulsion while also working on the establishment of bunkering and refuelling facilities at ports. The programme is allocated a budget of Rs 1.15 billion until the fiscal year 2025-26. The execution of the pilot projects will be carried out by the Ministry of Ports, Shipping, and Waterways (MoPSW) and designated executing agencies.
The programme consists of two parts. As a part of Component A, current ocean-going and inland waterways vessels will undergo retrofitting to incorporate green methanol, green ammonia, or hydrogen fuel cell-based propulsion systems, at an estimated cost of Rs 800 million. By 2027, the Shipping Corporation of India is committed to retrofitting a minimum of two ships. At a cost of about Rs 350 million, Component B entails building bunkering and refuelling facilities for green hydrogen-based fuels at one port along an international shipping route by 2025.
Incentives for production of green hydrogen and green ammonia
The MNRE has introduced incentive implementation frameworks to encourage the annual production of 200,000 MT of green hydrogen and 550,000 MT of green ammonia. The incentives for producing and delivering cost-effective green hydrogen to refineries through a competitive selection process fall under Mode 2B of the SIGHT initiative and those for producing green ammonia fall within mode 2A. The incentives will be awarded for a duration of three years. The entire budget for the green hydrogen and its derivatives production incentive scheme across all modes amounts to Rs 130.5 billion. For green hydrogen, during the initial year, the incentive stands at Rs 50 per kg, followed by Rs 40 per kg in the second year, and further reduced to Rs 30 per kg in the third year. Meanwhile, for green ammonia, during the initial year, the incentive stands at Rs 8.82 per kg, followed by Rs 7.06 per kg in the second year, and further reduced to Rs 5.30 per kg in the third year.
The way forward
Both the SECI tenders for green hydrogen production and electrolyser manufacturing were oversubscribed, which highlights the enthusiasm of the industry. According to SECI, the green hydrogen auction was limited to a production capacity of 450,000 tonnes per year. However, bids were made for a total of 553,730 tonnes per year. Numerous existing and new players in the green hydrogen sector, both from India and overseas, made various project commitments related to green hydrogen production and electrolyser manufacturing.
However, the high cost of green hydrogen production is still a primary concern. This cost is expected to be offset by incentives and low tariffs witnessed for renewable energy projects, especially for solar. According to the World Economic Forum, green hydrogen costs need to come down to a benchmark goal of $2 per kg for a green energy ecosystem to develop in India, thereby achieving cost-parity with grey hydrogen and paving the way for widespread adoption. Electrolyser costs account for approximately 30–50 per cent of total green hydrogen production costs in India. Electrolyser costs can also be reduced significantly with scale and innovation.
Apart from incentives, the notification of the green hydrogen standard brings clarity to the green hydrogen community in India and was widely awaited. With this notification, India becomes one of the first few countries in the world to announce a definition of green hydrogen. To promote demand, industries may be mandated to consume a certain percentage of green hydrogen.
All in all, the oversubscribed auctions, announcement of incentives and floating of guidelines for pilot projects in steel, shipping and transportation sector is a big positive for the green hydrogen industry in India.
By Anusshka Duggal
