By announcing a policy to promote a green hydrogen manufacturing ecosystem in India, the Centre has taken another major step on the energy security and climate front. It has realised the potential of scaling up green hydrogen production (now it is basically ‘grey’ as hydrogen is extracted from methane by using fossil fuels) without great difficulty. The applications of green hydrogen, produced from electrolysis powered by renewables, in transport, industry and storage can be ramped up. A recent TERI report estimates that by 2030 green hydrogen will become increasingly competitive, coinciding with a decline in electrolyser costs from ₹6.3 crore/MW today to ₹2.8 crore/MW. The increasing load factors of solar plants will lower costs. Green hydrogen could be viable as an industrial input (industry, particularly steel, fertiliser and oil refining, accounts for most of hydrogen demand) and in long-term electricity storage to offset spells of low renewables output. It is with this scenario in mind that the Ministry of Power has tried to further the cause of green hydrogen and ammonia.
Faster clearances have been promised for setting up renewable energy plants for hydrogen production. Any surplus electricity from such plants can be ‘banked’ with the local utility for up to 30 days. If a hydrogen producer wishes to buy electricity from a renewable energy company, ‘open access’ permission would be given within 15 days of application; and if the energy supplier is in another State, inter-State transmission system charges would be waived for a period of 25 years. If a distribution licensee wishes to buy renewable power from the utility for supply to a green hydrogen manufacturer, such power shall be sold at concessional rates. According to a study by the Council for Energy, Environment and Water, India consumes around 5.6 million tonnes of hydrogen, all of which comes via the carbon-emitting ‘steam methane reforming’ route. Another 1.9 million tonnes of hydrogen comes from abroad, embedded in methanol, ammonia and fertilisers. Thus, the current consumption is 7.5 million tonnes. The idea is to meet this consumption from locally-produced green hydrogen. To produce one million tonnes a year of green hydrogen, it would require 18 GW of electrolyser capacity, which in turn would need 26 GW of solar capacity. Since solar or wind installations need not always happen where electrolyser plants are set up, it is necessary to ease up transmission of solar power.
To pave the way for green hydrogen manufacturers, production-linked incentives can possibly be extended for electrolysers and bio-reactors. On the demand side, the big push is likely to come in the form of green hydrogen purchase obligation, on the lines of the RPO. The government has well-articulated that for starters, the green hydrogen PO would be put upon fertiliser and refinery industries; cement and steel would be mandated later. The emphasis on green ammonia will reduce dependence on foreign sources and provide a downstream market for green hydrogen. Besides, it packs more energy per unit of volume and is easier to store than hydrogen. In sum, the modules of the policy are in place.