India’s green hydrogen plans are in motion. Here’s how to make it truly ‘aatmanirbhar’ – EQ Mag
The wheels on India’s green hydrogen mission are in motion. There are reports of the government extending the transmission fee waiver for green hydrogen production plants, significant cost incentives for producers, and plans for a green hydrogen aggregation demand tender. India’s INR 19,700-crore National Green Hydrogen Mission (NGHM) is an ambitious move to help the country achieve energy independence and meet its climate goals. Green hydrogen is a sunrise sector of the economy. It opens up new opportunities because it uses renewables and doesn’t emit greenhouse gases. However, green hydrogen also faces significant challenges due to high production costs compared to fossil-based processes, lack of manufacturing, research and development (R&D) and experience of new end-use applications in India. As India emphasises on green growth in 2023, here’s what it must do now to unlock the potential of green hydrogen.
First, a subsidy on the consumption of green hydrogen is essential for creating demand. The Strategic Interventions for Green Hydrogen Transition (SIGHT) proposed in the government’s mission document has a budgetary outlay of INR ~13,000 crore to provide ‘viability gap funding (VGF)’ for green hydrogen production. Today, green hydrogen, at INR 240-280 per kg, is more expensive than grey hydrogen, obtained from fossil fuels, at INR 120-150 per kg. The budgetary outlay provides an average VGF of INR 26 over the 5 million tonnes per annum (MTPA) production target, which is about 10 per cent of the green hydrogen cost. A subsidy on green hydrogen consumption will reduce the cost of producing it and create the necessary demand-side pull across refineries and fertiliser units. It is expected that similar to the solar sector, the VGF will be higher in the early years and gradually taper off as the cost of green hydrogen reduces due to economies of scale and technological improvements.
Second, India needs to increase its electrolyser manufacturing capacity. Electrolysers are devices that split water into hydrogen and oxygen using renewable electricity. SIGHT has a budgetary outlay of INR ~4,500 crore for electrolyser manufacturing in India. This fund can be utilised for developing the production-linked incentive (PLI) scheme for the domestic manufacturing and indigenisation of electrolysers. According to a study, India needs at least 40 GW of electrolyser capacity to produce 5 million tonnes per annum of green hydrogen. Assuming that the implementation of NGHM starts in 2025, the electrolyser manufacturing capacity required will be at least 8 GW per year. The government can provide PLI support of USD 70 per kW of manufacturing capacity. The success of domestic manufacturing will open up export opportunities worth USD 425 billion internationally for deploying 850 GW of electrolyser capacity.
Third, deploy pilots for evaluating new applications for green hydrogen. The government has provided a budgetary outlay of INR 1,466 crore for pilot projects across new applications of green hydrogen such as steelmaking, blending in natural gas pipelines, mobility, shipping and aviation. Upcoming opportunities in these sectors will be unlocked as the cost of green hydrogen reduces due to benefits accruing from SIGHT. The pilots also open significant export opportunities for India. For instance, green steel, although 50-70 per cent more expensive than conventional steel, is an emerging market in developed countries, especially in the automobile sector. India is the second-largest producer of steel and has one of the lowest RE tariffs – this can be used for producing green steel for export.
Fourth, public-private partnership (PPP) models should be developed to commercialise technologies in the development stage in Indian labs. There is a budgetary outlay of INR 400 crore for R&D that can be used to develop technologies across the green hydrogen value chain. Research laboratories and academic institutions in India have already developed green hydrogen technologies, but they do not have the means to commercialise them into end-use applications. This fund should be utilised to develop projects with clear objectives to convert these developmental technologies into products.
Fifth, create dedicated hydrogen hubs and valleys. There is a budgetary outlay of INR 388 crore for other mission activities that can be used for developing green hydrogen hubs. Creating hydrogen hubs and valleys, where hydrogen will be produced in large quantities and consumed, will improve cost-efficiency and allow for rapid scale-up. The allocation should also be used for the development and adaptation of safety standards across the green hydrogen value chain for seamless trade.
Finally, create a rules-based architecture, both by taking the lead globally and through cooperation between Indian states. State governments should create policies aligned with NGHM. Single-window clearance for green hydrogen projects in the country will ensure ease of doing business. On an international level, India should take the lead in developing a rules-based architecture to govern the green hydrogen economy and establish bilateral/multilateral deals to unlock new opportunities for exports and collaboration.
Green hydrogen is a strategic new-age fuel for India. It allows us to fulfil our net-zero goals, improve our energy security for sustainable growth and establish us as an exporter of green fuels and technologies. With careful planning and implementation of the Mission, India can achieve decarbonisation without deindustrialisation.
Source: PTI
