Govt releases national hydrogen policy
The national hydrogen policy provides incentives for gencos and manufacturers to produce green energy.
Releasing the first part of India’s National Green Hydrogen Policy, the government on Thursday announced some incentives for potential manufacturers, generation companies (gencos) and distribution licensees (discoms) to boost large scale indigenous production of green hydrogen, so as to decarbonise the energy sector and reduce India’s heavy dependence on fossil fuels and crude oil imports. However, industry experts sought more clarity as they claimed as per the latest policy, a lot would still depend on the rates charged by the respective states and union territories (UTs).
The policy was notified by the power ministry on Thursday a year after finance minister Nirmala Sitharaman first revealed about India’s plan to harness green hydrogen in her 2021 budget speech. Later, Prime Minister Narendra Modi announced the National Hydrogen Energy Mission in his Independence Day speech in August. The second part of the policy, which is likely to be about mandating (refineries, fertiliser companies etc) the usage of green hydrogen and green ammonia in a phased manner and also offering PLIs, will require a Cabinet approval and is currently under review with the expenditure finance committee.
As reported by HT on January 30, the policy will offer a full waiver of inter-state transmission charges for 25 years to those who venture into producing green hydrogen in India. Such producers of green hydrogen and green ammonia will get the benefit is their plants are commissioned before June 30, 2025. Manufacturers of green hydrogen/ammonia and the renewable energy plant will also be given connectivity to the grid on “priority basis” to avoid any procedural delays. Another incentive offered under the policy is that the production of green hydrogen/ammonia will be considered against the manufacturer’s Renewable Purchase Obligation (RPO) and the same will be applicable even for discoms using such renewable energy.
Power minister RK Singh said the implementation of this policy will provide clean fuel to the common people of the country. “This will reduce dependence on fossil fuel and also reduce crude oil imports. The objective also is for our country to emerge as an export Hub for Green Hydrogen and Green Ammonia. The policy gives companies the liberty to set up renewable energy capacity anywhere by themselves or through a developer. It (the policy) promotes renewable energy generation as RE will be the basic ingredient in making green hydrogen. This in turn will help in meeting the international commitments for clean energy,” he said.
The policy also allows manufacturers to set up their plants in any of the existing or upcoming renewable energy parks or even in any of the “manufacturing zones”, which the government is currently preparing a roadmap for. “Green hydrogen/green ammonia can be manufactured by a developer by using renewable energy from a co-located renewable energy (RE) plant, or sourced from a remotely located RE plants, whether set up by the same developer, or a third party or procured RE from the power exchange. Green hydrogen/green ammonia plants will be granted Open Access for sourcing of RE within 15 days of receipt of application complete in all respects. The Open Access charges shall be in accordance with Rules as laid down,” the policy seen by HT stated.
The manufacturer can also bank the unconsumed renewable power up to 30 days, with any discom and take it back when required. “Discoms can also procure and supply RE to the manufacturers of Green Hydrogen/Green Ammonia in their states at concessional prices which will only include the cost of procurement, wheeling charges and a small margin as determined by the State Electricity Commission,” it said, while also allowing manufacturers to set up bunkers near ports for storage of green ammonia for export or use by shipping. The land for building such storage units will be provided at rates applicable by the respective port authorities.
Green hydrogen is produced using renewable energy through electrolysis. The policy also clarified that hydrogen and ammonia produced from biomass or a renewable energy source that has been banked will also be considered as “green” hydrogen and “green” ammonia.
Hemant Mallya, Senior Programme Lead, Council on Energy, Environment and Water (CEEW) said waiving-off of central open access charges is a good first step in enabling lower cost distributed production of green hydrogen. "However, states have their own open access charges ranging from ₹0.27 to 3.8 per unit (kWh), also depending on whether it is solar or wind. Therefore, a concerted effort is required to remove the disparity in these charges to avoid a distorted green hydrogen market. According to CEEW analysis, about 50-70% of the cost of green hydrogen comes from the renewable power input costs, a substantial share being from open access charges.”
According to CEEW analysis, allowing banking up to 30 days will also lead to a lower production cost by up to 40% if there are no banking charges, he said.
Anish De, National Head (Energy), Natural Resources and Chemicals, KPMG in India, said it is to be seen how state regulators play. “They are not obliged by law to comply with charges or even RPO mandates. For Discom supply, this almost creates a new tariff category if the guidance of a small margin is followed,” he said.