Hit or Miss?: Industry experts react to the Green Hydrogen Policy

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. Power Line 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 positives:

• 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.