India’s Green Hydrogen Policy: Fuel of the future?

Penned by Sakshi Sharma

On 17th February, the central government launched the much awaited Green Hydrogen Policy that aids the achievement of the National Hydrogen Mission. The hydrogen mission, launched last year, aims to facilitate India’s transformation to a green hydrogen hub, enabling the country to meet its climate targets whilst reducing the fossil fuel imports. It targets the production of 5 million tonnes of green hydrogen by 2030 and the related development of renewable energy capacity. In the face of these events, it becomes essential to understand all about this fuel, its development, challenges to production, and the economic implications.

Introduction

Green hydrogen is simply hydrogen produced through renewable energy sources like solar or wind power. The distinctive component of the process, as opposed to the traditional process that uses fossil fuels, is that it doesn’t produce any harmful byproducts like carbon dioxide. This is what essentially makes it a cleaner and “greener” process. The process is, however, not an easy as it sounds. It requires i.) Enormous investment to build the infrastructure, ii.) Huge costs to run and maintain the electrolyzers/fuel cells, iii.) Adequate storage facility to secure the highly flammable, corrosive hydrogen produced.

This is where the recently launched, much touted Green Hydrogen Policy comes in. The policy is designed to promote the production of green hydrogen and ammonia by easing process of renewable energy purchase, storage and transmission. The following are the key incentives of the policy:-

1.) Production of the fuel becomes easier as the renewable energy (RE henceforth) needed for production can now be availed through three ways. These include i.) Power energy exchange ii.) Independent developers iii.) Own plant setup for RE production. For such plants, open access will be granted within 15 days of receipt of application. They can bank their unconsumed renewable power, for up to 30 days, with the distribution company and take it back when required.

2.) Cost of RE for the manufacturers of green hydrogen/ammonia has been regulated in the states. It would henceforth include only the cost of procurement, wheeling charges, and small margin which would be pre-decided by the State Commission.

3.) Fee Reduction incentive given to the fuel manufacturers, provided they get the project commissioned before 30th June, 2025. This will include a 25-year waiver for inter-state transmission charges. Furthermore, all Inter-state transmission system (ISTS) projects will be given priority.Additional incentivesfrom the renewable purchase obligation (RPO) for consumption of RE to be extended to all the manufacturers and distribution licensees. 

4.)  Export Facility would be provided to the producers of green hydrogen/ammonia. This will include permission to set up bunkers near ports for storage of green ammonia for export and use by the shipping sector. The land for the storage shall be provided by the respective port authorities at applicable charges.

5.) Portal Facility involving the use of a single portal for all activities, including statutory clearances which will be provided preferably within 30 days of receipt of application.

Implications

The world uses 70 million tonnes of hydrogen per year, with India using more than 7 million tonnes (more than 10% of the global level). The hydrogen demand in India is met through domestic production based on fossil fuels, which are largely imported from other countries. Precisely, the country imports 85% of its oil and 53% of its gas; indicating its high reliance on other countries to meet its energy requirements. The Green Hydrogen policy can help the country gain greater autonomy by decreasing foreign reliance. Additionally, the policy can be thought of as a safety cushion to downscale the ramifications that might arise from the global conflicts, like the Russia-Ukraine standoff, etc. Through the policy, India can shift to large scale use of the fuel which will help bolster the geopolitical heft.

Moreover, India’s huge potential for energy generation would be fast-tracked due to the policy. This in turn could lead to cost of green hydrogen to compete with that of hydrogen generated through fossil fuel within a decade, thereby enabling Indian exports to Asia-Pacific economies. On an optimistic note, the policy brings India closer to becoming the Middle East of Green Hydrogen.

Furthermore, a positive social externality from the policy could be improvement in the air quality. The Air Quality in India is a cause of concern as the AQI frequently averages beyond the permissible limits. Furthermore, the annual average particulate pollution level in India exceeds WHO guidelines. Through the policy, the transition to green hydrogen which is a cleaner fuel has become easier, thereby helping the country achieve its decarbonization missions. The decarbonization mission serves a twofold purpose – i.) Improvement in the standard of living ii.) Signaling to the world that India is ardently following its climate commitments.

Conclusion

While the policy is surely a step in the right direction w.r.t to the current climate conditions, it is important to underscore that the technology is experimental and limited in scope (isn’t applicable to all industries; can’t totally substitute the fossil fuels). Moreover, the policy alone will not help and transitioning to the technology would require additional and persistent investments by the government. Thus, while the policy does provide an impetus to the climate change issue, much more needs and remains to be done!

References

Aishwarya | Ayush | Bhavya | Jayati | Shivika | Varshita
Apoorva | Jeevan | Priyank | Rajdeep | Sakshi | Shelly | Varnika

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