Green Hydrogen In India: Accelerating The Shift Towards A Low-Carbon Economy

The Union Cabinet approved the National Green Hydrogen mission on 4th January 2023 for assisting the infrastructure and technological investment. Under the national green hydrogen mission the Government of India has plans to in gender the setting above 5 million tones of renewable hydrogen facilities in India.  Then, it also looks at Odisha and Uttar Pradesh and puts up extensive facilities in Omang, which appears to be slightly ahead of further plans. The renewable energy company ACME has signed a MoU with the Governments of Karnataka and Tamilnadu to set up renewable hydrogen manufacturing facilities for more than 50 thousand crore in each state.

For example, Renew, AVADA, Indian Oil and, BPCL, Gail are all interested in setting up new renewable hydrogen facilities. Nothing has happened yet, but they plan to invest in this critically important sector to help decarbonize global energy systems. The Uttar Pradesh state government introduced its renewable Hydrogen Policy in March 2024. This policy will remain in effect for five years from its announcement or until the state government makes any modifications to produce 1 million metric tons of renewable Hydrogen by 2028. This production will provide 120,000 jobs by 2028, facilitating investments for establishing Green Hydrogen and Green Ammonia (GH₂/GA) production facilities.

Process of green Hydrogen

Green Hydrogen primarily includes using renewable energy sources to electrolyze water. Electricity is generated from renewable sources like solar, wind and hydroelectric power. Electrolysis is the renewable electricity which is used in an electrolyzer which splits water (H₂O) into Hydrogen (H₂) and oxygen (O₂) through an electrochemical process. The green hydrogen gas is produced and stored for several applications. Green Hydrogen can significantly reduce greenhouse gas emissions, support energy security, and facilitate the transition to a low-carbon economy. India aims to partner with countries like Germany and Japan, which are leading in hydrogen technology, to exchange knowledge and technology, further enhancing its capabilities in the sector.

For the process of Green hydrogen, the Indian Govt has invested 19,744 crore, which includes 17,490 crore for the SIGHT program, 1,466 crore for pilot projects, 400 crore for research and development, and 388 crore for other components of the Mission.

TYPES OF HYDROGEN BASED ON EXTRACTION METHODS

There are three types of Hydrogen based on the production method: grey Hydrogen, green Hydrogen and blue Hydrogen.

Grey Hydrogen

The Grey hydrogen manufactured with imported liquified natural gas and high imported natural gas prices are also not very cheap. Therefore, the market itself will create demand. However experts and industry insiders have pointed out that there is a significant flow in this line of thinking because the prices keep fluctuating unless there is a kind of demand assurance to the investors for green manufacturing facilities, which will take billions of dollars.

Blue Hydrogen

Blue Hydrogen is produced similarly to grey Hydrogen. However, it incorporates carbon capture and storage (CCS) or carbon capture and utilization (CCU) technologies. These methods aim to reduce carbon emissions associated with hydrogen production. By capturing and either storing or reusing the CO₂ produced, blue Hydrogen has a lower carbon footprint than grey Hydrogen, making it a more environmentally friendly option, though still not entirely carbon-neutral.

Green Hydrogen

Green Hydrogen is shaped through water electrolysis consuming electricity generated from renewable energy sources like solar, wind, or hydro. This process does not emit CO₂, creating renewable Hydrogen, the most sustainable form. The overall carbon strength of green Hydrogen depends on the renewability of the electricity used; the more renewable energy in the mix, the greener the Hydrogen. As the world shifts towards decarbonization, renewable Hydrogen is progressively seen as a key player in energy evolution policies.

Government Initiatives Driving the Green Hydrogen Revolution

The idea behind this green mission purchase obligation was also similar. It creates demands in gender, and then people would come up for investment, so there is a demand for renewable Hydrogen even if the prices are slightly higher. However, now, by the looks it is what we hear from the government sources and the market, the government is retaking this. The government is not interested in bringing a renewable hydrogen purchase obligation.

Even though the government has set 5 million tones of Renewable Hydrogen, it would call for an investment of 8 lakh crores, like $100 million. Suppose companies have to invest billions of dollars into manufacturing facilities. In that case, they need an essential assurance that when they start producing a green mission, there is somebody to buy. Without such assurance, it is difficult for investors to put money into this, no matter how bold and courageous.

So, on the one hand, in the domestic market the prices are not coming down until there’s no demand creation. It is tough to predict how the domestic market for green missions will develop and why anybody would invest in it.  Establishing a clear regulatory framework is expected to streamline approvals and facilitate project implementation, with guidelines anticipated to be released in 2024. The renewable hydrogen sector is projected to create over 1 million jobs by 2030, contributing to economic growth and workforce development. The State government and the Central government of India are introducing further policies to bolster the National Green Hydrogen Mission (NGHM). The Ministry of Power (MoP) has established a policy waiving Inter-State Transmission Charges (ISTS).

This policy significantly enhances renewable Hydrogen production by exempting Inter-State Transmission Charges (ISTS) for 25 years from the project’s commissioning date. This exemption applies to renewable Hydrogen and Green Ammonia (GH₂/GA) production units that utilize Renewable Energy (RE) sources commissioned after March 8, 2019, as well as to projects involving Pumped Storage Systems, Battery Storage Systems, or any hybrid combination of these technologies. Projects commissioned on or before December 31, 2030, will qualify for this waiver, while those initiated after this date will be subject to graded transmission charges. This decision effectively extends the waiver’s applicability deadline from June 30, 2025, to December 31, 2030.

The Ministry of Environment, Forests and Climate Change (MoEFCC) has developed environmental clearance guidelines for producing  Renewable Hydrogen and Ammonia (GH₂/GA). MoEFCC has exempted Green Ammonia plants from needing prior ecological clearances, as outlined in the Environment Impact Assessment notification 2006, effective July 28, 2023. MoEFCC clarified that standalone plants generating renewable Hydrogen and Green Ammonia (GH₂/GA) through water electrolysis using renewable energy would not require any prior environmental clearance.

Furthermore, the MoP has implemented Green Open Access Rules that provide incentives or exemptions from various charges, including cross-subsidy surcharges and additional fees. The Government of India (GoI) is crafting various policies supporting the NGHM. On June 6, 2022, the Government of India (GoI) announced the Electricity (Promoting Renewable Energy through Green Energy Open Access) Rules 2022 to advance the country’s ambitious renewable energy programs. The goal is affordable, reliable, sustainable, and green energy access. A few states of India have declared green hydrogen policies to promote decarbonization in industries and the energy sector.

Domestic Challenges in Promoting Green Hydrogen for India’s Low-Carbon Transition

There are problems as the Indian manufacturer has two domestic and International markets. In the domestic market, the green Hydrogen produced in India is costly. Experts put it around $4 to $5 per kg. The Grey Hydrogen manufactured today is an important gas worth $2 to $ 2.5  per kg. There is no visible way to break this gap because renewable energy prices are not decreasing.

We need renewable energy to split water into Hydrogen, oxygen, wind and solar pieces, which used to be aboard a couple of years ago somewhere around 2.50 to 2.80- 2.90 rupees per kWh. There is an upward bias in the prices because if you take wind, the government has said that it will change the method of an auction of capacities from reverse bidding to closed bidding.

When that happens,  the prices will rise at least around 20-30 paise; likewise, for solar, the government has tried to push manufacturers to buy more and more buy of domestically made Indian modules or pay heavy customs duty for module imported chain and other places for this reason the module prices will go up and again the solar prices go up, so the renewable energy prices have already gone off slightly. There is an upward bias. The prices will only increase.

That being the case, there is nothing to bring confidence to anybody that the prices of renewable green Hydrogen will come down when it is possible to produce green missions through the biomass roof. Several investors believe it is not likely that the prices will come down below $3.5 per Kg.

So, in the domestic market, the prices are still high; remember when this green mission was conceived, and in 2021 and 2022, the government said it would bring in a renewable hydrogen purchase obligation. That means it will put an obligation to purchase renewable Hydrogen on the heads of significant consumers of Hydrogen, mainly to refine the research of fertilizer companies.

The government has broadened, and the system is still working so that a renewable purchase obligation (RPO) is in place. That is, large consumers will have to buy a small portion of their electricity consumption should come from renewable energy. This renewable purchase obligation has indeed created demand for renewable energy, on the back of which the Indian renewable energy sector has grown and is continuing its growth. The mission outcome projected by 2030

Global Challenges in Advancing Green Hydrogen for a Low-Carbon Economy

Coming to the International market, the problem is different if you take the major consumption centers USA and Europe. President Biden signed the Inflation Reduction Act 2022 on 16th august 2022 into a law representing the most significant congressional action on clean energy and climate change in USA history. This legislation reestablishes American leadership in tackling the climate crisis and ushers in a new era of innovation to reduce consumer costs while advancing the global clean energy economy.

This act details applicants’ eligibility criteria and the activities they can pursue. USA market is practically closed after the United States broad what is called the Inflation Reduction Act, 2022, which is the system that was a production tax credit which experts have estimated to work out something like $3 a kg. Now that the government has given this, it is impossible for anybody who manufactures renewable Hydrogen outside the USA to compete with the market. You are either manufacturing there or you are out of the market. The USA is practically closed.

Within the European market what is happening in the world there is a controversy about what renewable Hydrogen is. It means Hydrogen produced through processes that do not emit carbon dioxide, or other greenhouse gasses. But we need to have a proper legal definition for fixing associated emissions. Europe has been liberal in this standard and has adopted 3.2 kg CO2 emission equivalent per kg of Hydrogen.

That seems a little bit liberal because they seem to want to protect their natural gas industry for whatever reason. The Indian Government is very, very conservative. India said that it is called renewable Hydrogen only if the basic electricity for it comes from wind or nuclear energy, even solar is not so fancy. Because even solar, according to experts like Dr V K Sarawast NITI Ayog’s members, has substantial associated emissions.

There is another organization called Green Hydrogen Organization. This Switzerland-based not-for-profit organization wants to promote green missions.  This green mission organization has come up with the standard recommendation of its standard for companies to follow.

It has been said that if the associated emissions are not more than 1kg per 1kg of renewable Hydrogen, then the Hydrogen can be called green. Europe, therefore, has a slightly higher level, which is liberal; this is a problem because while it may help the Indian company to be a little bit liberal in producing renewable Hydrogen, it also helps other countries.  For other countries, it will be easier to meet the European standards.  India plans to achieve 500 GW of renewable energy capacity by 2030, essential for renewable hydrogen production.

It is challenging for Indian manufacturers to compete with other countries at such a liberal European standard. By their very nature, the International markets are very fickle and uncertain, and sudden disturbance has arisen. Europe may suddenly choose some country to be most favored there could be protectionist tendencies you never know. In the US, there could be protectionist impulses; you can’t set up a large manufacturing facility spending billions of dollars only with an eye on overseas markets which is something like what China does.

To invest in renewable Hydrogen, you need to have plans to cater to the Indian domestic market and the export market. Therefore, breaking into the overseas markets with a setup only for export is challenging. The point here is that the companies with green manufacturing facilities in India, both domestic and international markets, are complex in this situation. One should remember that the renewable Hydrogen under the existing setup is not likely to happen at any time.

Expected outcome of this mission

India aims to achieve energy independence by 2047 and reach net Zero by 2070. The central goal of this mission is to enhance renewable energy across all sectors as part of India’s energy transition. Through green Hydrogen, India can serve for long-term storage of renewable energy, replace fossil fuels in industries, support clean transportation, and potential applications in decentralized power generation, aviation, and marine transport.

This particular mission aims to develop domestic manufacturing capabilities, create export opportunities for renewable Hydrogen and its derivatives, and establish India as a leading global producer and supplier of renewable Hydrogen. In 2021, the government launched the National Hydrogen Mission to facilitate the production of 5 million metric tons of renewable Hydrogen annually by 2030, positioning India as a global hub for renewable Hydrogen. Also, the Indian Government has earmarked approximately $2.1 billion for the National Hydrogen Mission, aiming to attract an additional $20 billion in private investments by 2030.

Its ambition is also to have another 5 million tones of green mission facilities hoping that would get up to the export markets. Hence, Indian manufacturers have two markets, domestic and international. By the end of 2030 many companies have formed ties and joined with overseas companies to set up green mission facilities. For the process of Green hydrogen, the Indian Govt has invested 19,744 crore, which includes 17,490 crore for the SIGHT program, 1,466 crore for pilot projects, 400 crore for research and development, and 388 crore for other components of the Mission.

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