Context: A recent study by Climate Risk Horizons (CRH), an environmental and energy think-tank, suggests that without appropriate measures, this India’s National Green Hydrogen Mission, led by the Ministry of New and Renewable Energy (MNRE), aims to produce “green hydrogen” devoid of fossil fuel emissions.

• The MNRE defines green hydrogen as hydrogen production emitting no more than two kg of carbon dioxide per kg of hydrogen, in stark contrast to “grey hydrogen,” which emits nine kg of carbon dioxide for every kg produced.

Unfortunately, the Policy only provided generic/broad framework which was devoid of the details expected. Key features of the Policy were:

• waiver of inter-state transmission system ("ISTS") charges for a period of 25 years to the producers of green hydrogen and green ammonia for projects commissioned before June 30, 2025;

• banking of renewable energy to be permitted for 30 days for manufacture of green hydrogen and green ammonia;

• connectivity at the power generation end and manufacturing facility end, to be granted on priority basis;

• grant of open access to green hydrogen and green ammonia plants for the purposes of sourcing renewable energy within 15 days of receipt of an application;

• fast track grant of permits and clearances for green hydrogen projects; and

• renewable energy consumed for the production of green hydrogen and green ammonia would count towards the renewable purchase obligation ("RPO") of the consuming entity. And, the renewable energy consumed beyond the obligation of the producer would count towards the RPO of the discom in whose area the project is located.

The expected outcomes till 2030 as set out under the Green Hydrogen Mission are:

• India would develop green hydrogen production capacity of at least 5 MMT (million metric tonne) per annum with an associated renewable energy capacity addition of about 125 GW;

• investment of over INR 8 lakh crore;

• creation of over 6 lakh jobs;

• cumulative reduction in fossil fuel imports over INR 1 lakh crore; and

• abatement of nearly 50 MMT of annual greenhouse gas emissions.

Daunting Green Hydrogen Targets

• The National Green Hydrogen Mission aims to manufacture five million tonnes of green hydrogen by 2030.

• This endeavour necessitates the installation of 125 GW of renewable energy capacity and the utilisation of 250,000 gigawatt-hour units of power, equivalent to 13% of India’s current electricity generation.

Existing Renewable Energy Capacity

• As of August 2023, India’s total renewable energy (RE) capacity stands at 131 GW.

• Achieving the 2030 green hydrogen targets requires adding an equivalent RE capacity by that year.

• This is in addition to India’s commitment to install 500 GW of RE capacity by 2030 under the Paris Agreement.

Current Renewable Energy Progress

• In 2023, India added only 15 GW of new solar and wind capacity, significantly less than the 45 GW per year needed to reach the 2030 RE target.

Electricity Source Dilemma

• A major concern is the source of electricity for green hydrogen production, especially during nighttime when solar power generation is minimal.

• If electricity for electrolysis comes from India’s coal-powered grid (accounting for about 70% of electricity generation), it could increase carbon emissions, particularly during non-daylight hours.

Lack of Disclosure and Clarity

• The study points out that a significant number of green hydrogen projects have not disclosed their source of electricity.

• Furthermore, it is unclear if projects claiming to meet their electricity requirements from renewable sources can indeed do so.

• We now discuss some of the recent steps undertaken post the issuance of the Green Hydrogen Mission to promote the development of Green Hydrogen in the country.

I. SIGHT Programme

The MNRE on June 28, 2023 issued the following two scheme guidelines for implementation of SIGHT programme for the period from financial year 2025-26 to 2029-30:

• Component I- Incentive scheme for electrolyzers manufacturing with an outlay of INR 4,440 crore ("Scheme 1"); and

• Component II- Incentive scheme for green hydrogen production (under mode 1) with an outlay of INR 13,050 crore (for all modes) ("Scheme 2").

• Solar Energy Corporation of India Limited ("SECI") is designated as the implementing agency for the implementation of both these schemes.

Component I: Incentive scheme for electrolyzers manufacturing
The main objectives of Scheme 1 are to

• (i) maximize the indigenous electrolyzer manufacturing capacity; 

• (ii) achieving lower levelized cost of hydrogen production; 

• (iii) ensuring globally competitive performance and quality of products; 

• (iv) progressive enhancement of domestic value addition; and 

• (v) supporting established and promising technologies.

Component II: Incentive scheme for green hydrogen production (under mode 1)

• The Scheme 2 identifies two modes for granting incentives for green hydrogen production; 

• mode 1- where bidding would be conducted through a competitive process on the least incentive demanded for a period of 3 years; 

• and mode 2 – where the implementing agency would aggregate demand and invite bids on competitive bid process for procurement of green hydrogen and its derivatives at the lowest cost.

• While, the industry was waiting for the incentive scheme under mode-2; the Scheme 2 provides for only the framework for incentive to be granted for green hydrogen production under mode 1. 

• The aim of Scheme 2 is (i) maximizing production of green hydrogen and its derivatives in India; (ii) enhancing cost-competitiveness of green hydrogen and its derivatives against fossil-based alternatives; and (iii) encouraging large scale utilization of green hydrogen and its derivatives.

• Further, the Scheme 2 provide that a direct incentive in terms of INR/kg of green hydrogen production would be provided for a period of 3 years from the date of commencement of green hydrogen production. Such incentives are capped at INR 50/kg in the first year of production, INR 40/kg during the second year of production and INR 30/kg during the third year of production. And, grant of these incentives would be subject to green hydrogen production being in accordance with MNRE's National Green Hydrogen Standards.

Pursuant to the Scheme 2 guidelines, SECI on July 10, 2023 issued a RfS document for selection of green hydrogen producers for setting up production facilities for green hydrogen in India under SIGHT scheme (Mode-1-Tranche-I). The bids are invited under two buckets:

• technology agnostic pathways (410,000 MT/annum of green hydrogen); and

• biomass based pathways (40,000 MT/annum of green hydrogen).

• Bidding requirements

Both the RfS documents released for Scheme 1 and Scheme 2 mainly provide for:

• eligibility criteria;

• maximum and minimum capacity for bidding;

• bidding parameters;

• bid evaluation/selection process;

• incentive determination and disbursement of incentive mechanism;

• timeline for commissioning and delay liquidated damages;

• earnest money deposit/performance bank guarantee;

• change in control restrictions;

• construction plan and monitoring; and

• commissioning process.

II. Green Hydrogen Standards in India

• The said standard defined green hydrogen as, Hydrogen produced using renewable energy, including, but not limited to, production through electrolysis or conversion of biomass. Renewable energy also includes electricity generated from renewable sources which is stored in an energy storage system or banked with the grid in accordance with applicable regulations. The scope of the definition encompasses both electrolysis-based and biomass-based hydrogen production methods.

Relevantly, these standards provide that the non-biogenic greenhouse gas emissions arising from:

• water treatment, electrolysis, gas purification and drying and compression of hydrogen; and

• biomass processing, heat/steam generation, conversion of biomass to hydrogen, gas purification and drying and compression of hydrogen,

• shall not be greater than 2kg of carbon dioxide equivalent per kg of hydrogen, taken as an average over last 12-month period.

• It appears these standards are for well-to-gate emissions (and cover scope 1 and scope 2 emissions, though not the scope 3 emissions). Importantly, the notification specifies that a detailed methodology for measurement, reporting, monitoring, on-site verification, and certification of green hydrogen and its derivatives would be specified by the MNRE. And, Bureau of Energy Efficiency would be the nodal authority for accreditation of agencies for the monitoring, verification and certification for green hydrogen production projects.

Issues and Suggestions

To conclude, we set out below some of the main issues faced by this sector and related suggestions which may help with the growth of green hydrogen development in the country:

• Demand creation – while it has been talked about for a long time, no mandates for procurement of green hydrogen have been issued by the GoI. Until such push is provided, scaling the green hydrogen production and use would remain debatable.

• Akin to RPO/RGO1 concept, the GoI, in order to create bulk demand and scale up the production of green hydrogen, may specify a minimum share of consumption of green hydrogen or its derivative products such as green ammonia, green methanol etc. by designated consumers as energy or feedstock.

• Cost of hydrogen – majority of the cost for production of green hydrogen comprises of the cost of electrolyzers and renewable energy. Bringing down the cost of these two components would be critical to ensure reduction of green hydrogen price and to make its use commercially viable.

• In this regard, the GoI has issued certain incentive schemes (Scheme 1 and Scheme 2 discussed above), waiver of ISTS and intra-state transmission system charges, and concessions in open access charges. The implementation of these schemes and incentives would play an important role in cost reduction for manufacturing green hydrogen.

• Water availability – we understand that production of green hydrogen requires substantial amount of water (about 9 litres of water for 1 kg of production of hydrogen).

• For this, the Green Hydrogen Mission envisages the optimization of water requirements by using industrial or municipal wastewater. For this, developers may be asked to set up desalination plants as part of the green hydrogen project to treat waste water and then use such water for electrolysis.

• Land allocation – acquiring land for project development has been a bane of infrastructure sector for decades in the country. As a positive step, most states have issued policies to support grant of land for the green hydrogen projects. However, timely implementation of these policies would be imperative for the growth of this sector.

• Financing/Bankability of projects – currently, green hydrogen production projects are not bankable and it would be important to address this to move forward.

• Two main things that the lenders/investors considering funding these projects would usually like to see are: (i) policy certainty and government support; and (ii) committed offtake.

Road Ahead

• The growth of green hydrogen is intrinsically depended on the GoI working along with all the other stakeholders to address these issues being faced by this sector (based on these suggestions and/or other ways). If we can address these issues, then Green Hydrogen in addition to assisting with our clean energy targets and numerous other benefits, may be an important tool in India's scheme to achieve energy security in the long run.