The Indian government is focusing on green hydrogen and its derivatives as a prospective fuel and resource for the future. The primary drivers for promoting its uptake include India’s ambitious climate targets, and the need to reduce energy imports and earn foreign exchange through exports.
Recognising this, the government launched the National Green Hydrogen Mission (NGHM) in early 2023, with an initial outlay of Rs 197.44 billion till 2029-30. Of this, Rs 174.9 billion was earmarked for the Strategic Interventions for the Green Hydrogen Transition (SIGHT) programme. Two financial incentive mechanisms were proposed under the programme, pertaining to the domestic manufacturing of electrolysers (Component I) and the production of green hydrogen (Component II). Component I has a budget of Rs 44.4 billion, while Component II has a total budget outlay of Rs 130.5 billion, and will be implemented from 2025-26 to 2029-30.
Component I
As part of Component I, tranche I the Solar Energy Corporation of India (SECI) issued a tender for 1,500 MW of electrolyser manufacturing capacities across India in July 2023. There are two buckets with the following capacity allocations: 1,200 MW under Bucket 1 (electrolyser manufacturing capacity based on any stack technology) and 300 MW under Bucket 2 (electrolyser manufacturing capacity based on indigenously developed stack technology). Under tranche I, the entire 1,500 MW capacity was awarded to eight bidders in January 2024. The initial incentive for both buckets will start at Rs 4,440 per kW in the initial 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 ultimately, Rs 1,480 per kW in the fifth year.
Recently, in March 2024, as part of Component I of the SIGHT programme, Incentive Scheme for Electrolyser Manufacturing tranche II was announced. As part of its effort to support smaller payers under domestic stack technologies, the programme also establishes distinct capacity buckets for various types of electrolyser manufacturing. These include the established Bucket 1 with a capacity of 1,100 MW, the domestically developed Bucket 2A with a capacity of 300 MW, and the smaller domestic Bucket 2B with a capacity of 100 MW. For this tranche, SECI recently called for bids, for which the submission deadline was April 30, 2024.
Component II
Component II has two modes. Mode 1 covers the competitive selection process based on the least incentive demanded over three years, and Mode 2 covers competitive bids post the aggregation of demand for green hydrogen and derivatives. Under Mode 1, Tranche I, SECI issued a tender for green hydrogen production for 450,000 metric tonnes per annum (mtpa) in July 2023. The tenders sought proposals for both the technology-agnostic pathways (Bucket 1) and the biomass-based pathways (Bucket 2). Bucket 1 contains 410,000 mtpa of green hydrogen capacity, while Bucket 2 has 40,000 mtpa. Of the total 450,000 mtpa, 412,000 mtpa capacity was awarded to 10 bidders in February 2024. Of this, 410,000 mtpa was awarded under Bucket 1, while only 2,000 mtpa was awarded under Bucket 2, leaving 38,000 mt of capacity unallocated. The capped incentives for the first, second and third years are Rs 50 per kg, Rs 40 per kg and Rs 30 per kg respectively.
Meanwhile, Mode 2A of Component II involves incentives for the procurement of green ammonia production. In January 2024, the Ministry of New and Renewable Energy (MNRE) introduced incentive implementation frameworks to encourage the annual production of 550,000 mt of green ammonia (under Mode 2A) and 200,000 mt of green hydrogen (under Mode 2B). 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, while those for producing green ammonia fall under Mode 2A. The incentives will be awarded for a duration of three years. For green ammonia, during the initial year, the incentive will stand at Rs 8.82 per kg, to be reduced to Rs 7.06 per kg in the second year and Rs 5.30 per kg in the third year. Meanwhile, for green hydrogen, during the initial year, the incentive will stand at Rs 50 per kg, to be reduced to Rs 40 per kg in the second year and Rs 30 per kg in the third year. SECI will aggregate demand and call for bids for the production and supply of green ammonia at the lowest cost with fixed incentives. Moreover, demand aggregation is under way and SECI plans to issue the tender shortly.
Guidelines for implementation of pilot projects in the mobility, steel and shipping sectors
Three separate guidelines were issued by the MNRE in February 2024 as part of the NGHM. 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 designated under this initiative. The scheme will facilitate the advancement of technologies for utilising green hydrogen as fuel in buses, trucks and four-wheelers, utilising both fuel cell-based and internal combustion engine-based propulsion technologies. Additionally, it 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 fiscal year 2025-26.
Meanwhile, with a total budgetary outlay of Rs 4.55 billion until fiscal year 2029-30, the “Scheme Guidelines for Implementation of Pilot Projects for the Use of Green Hydrogen in the Steel Sector under the NGHM” aims to facilitate the replacement of fossil fuels and fossil fuel-based feedstock with green hydrogen and its derivatives in the steel industry. The MNRE will oversee the 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 NGHM. The initiative aims 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 has been allocated a budget of Rs 1.15 billion until fiscal year 2025-26. The execution of the pilot projects will be carried out by the Ministry of Ports, Shipping and Waterways and designated executing agencies
The programme will consist of two parts. Under Component A, current ocean going and inland waterway 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 aims to retrofit a minimum of two ships. Meanwhile, at a cost of about Rs 350 million, Component B will entail the construction of bunkering and refuelling facilities for green hydrogen-based fuels at one port along an international shipping route by 2025.
Green hydrogen hub and implementation of R&D scheme under NGHM
In March 2024, the Indian government released guidelines for establishing green hydrogen hubs as part of the NGHM. The mission aims to establish a minimum of two green hydrogen hubs by fiscal year 2026. The budget allocation for the scheme is Rs 2 billion until fiscal year 2025-26. A hydrogen hub is an area characterised by a network of producers and end-users, complemented by essential infrastructure for storage, processing and transportation. The hub must possess a minimum capacity of 100,000 mtpa, and preference will be given to hubs with greater production capacity. Furthermore, SECI will issue a call for proposals for the hydrogen hubs shortly.
Furthermore, in the same month, the MNRE issued a notification inviting proposals for the development of indigenous technology to promote the widespread development of green hydrogen and its derivatives in a cost-effective manner. The scheme intends to foster collaboration between industry, academia and government while supporting various aspects of the green hydrogen value chain, including production, storage, compression, transportation and utilisation. Additionally, it aims to facilitate the commercialisation of technological innovations by providing the necessary policy and regulatory support. The scheme will be implemented witha budgetary outlay of Rs 4 billion until fiscal year 2025-26.
The way forward
By observing the auctions, incentives announcements and the issuance of guidelines for pilot projects across sectors such as steel, shipping and transportation, alongside the establishment of guidelines for the development of green hydrogen hubs, the government is actively engaged in a multitude of initiatives to facilitate a smooth transition towards a low-carbon economy. Furthermore, the government has unveiled guidelines to skill, upskill and re-skill the workforce under the NGHM. These guidelines are applicable from fiscal year 2023-24 to 2029-30, at a substantial budget of Rs 0.35 billion.
Going forward, it is crucial to ensure the efficiency and effectiveness of safety and performance standards, as well as approval processes, for the uptake of green hydrogen projects in India.
Based on the presentations by Prasad Arvind Chaphekar, Deputy Secretary, Hydrogen, MNRE, and A.K. Sinha, Additional General Manager, SECI, at the 7th Edition of Green Hydrogen in India conference organised by Renewable Watch
