GREEN HYDROGEN POLICY

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Context

India’s Green Hydrogen Policy released in Feb 2022 has addressed several critical challenges such as open access, waiver of inter-state transmission charges, banking, time-bound clearances, etc., It is expected to further boost India’s energy transition.

What is green hydrogen?

Green hydrogen is hydrogen gas produced through electrolysis of water — an energy intensive process for splitting water into hydrogen and oxygen— using renewable power to achieve this.

Must Read: https://www.iasgyan.in/daily-current-affairs/pure-green-hydrogen

Green Hydrogen Policy

The mission aims to make India a green hydrogen hub and help to meet its climate targets.
It targets production of five million metric tonnes per annum (MMTPA) of green hydrogen by 2030 and the related development of renewable energy capacity.

Note: India’s Green Hydrogen Policy announcement comes promptly, as the country pledged to be carbon-neutral by 2070 at the COP-26 summit in Glasgow last year.

Green Hydrogen Policy

The policy offers 25 years of free power transmission for any new renewable energy plants set up to supply power for green hydrogen production before July 2025.
This means that a green hydrogen producer will be able to set up a solar power plant in Rajasthan to supply renewable energy to a green hydrogen plant in Assam. The producer would not be required to pay any inter-state transmission charges.
The move is likely going to make it more economical for key users of hydrogen and ammonia such as the oil refining, fertiliser and steel sectors to produce green hydrogen for their own use. These sectors currently use grey hydrogen or grey ammonia produced using natural gas or naphtha.

Policy Attributes

The policy offers a range of incentives to lure investors to bet on the development of green hydrogen and green ammonia:

Green hydrogen / ammonia manufacturers may purchase renewable power from the power exchange or set up renewable energy capacity themselves or through any other developer, anywhere.
If the manufacturer wishes to buy RE power from a third party (and not the utility, like Tata Power, BSES, Tangedco), permission for such ‘open access’ shall be given in 15 days of application.
If a GH manufacturer wants to put up his renewable energy plant (solar, wind), permissions will be easier to get.
The green hydrogen / ammonia manufacturer can bank his unconsumed renewable power, up to 30 days, with Distribution Company and take it back when required. That is, put the power into the utility’s grid and take it back within 30 days.
Distribution licensees can also procure and supply renewable energy to the manufacturers of green hydrogen / green ammonia in their states at concessional prices. This will only include the cost of procurement, wheeling charges and a small margin as determined by the State Commission.
If the RE power supplier to the GH plant is in another state, no inter-state transmission charges shall be levied for 25 years. It will be allowed to the manufacturers of green hydrogen and green ammonia for the projects commissioned before 30 June 2025. These charges can vary with distance and states and can be anywhere between 25 paise to 50 paise a kWhr.

Notably, the notification does not speak about ‘cross-subsidy charges’, which is in the states’ domain, but it is expected that the government would prevail upon the state governments to waive these charges for GH

If a ‘distribution licensee’ (power supplier) needs to buy RE to supply to GH manufacturers, the utility will sell the RE power at concessional rates.
The manufacturers of green hydrogen / ammonia and the renewable energy plant shall be given connectivity to the grid on priority basis to avoid any procedural delays.
The benefit of Renewable Purchase Obligation (RPO) will be granted incentive to the hydrogen / ammonia manufacturer and the distribution licensee for consumption of renewable power.
To ensure ease of doing business, a single portal for carrying out all the activities, including statutory clearances in a time bound manner, will be set up by the Ministry of New and Renewable Energy (MNRE).
Connectivity, at the generation end and the green hydrogen / green ammonia manufacturing end, for renewable energy capacity set up for the purpose of manufacturing green hydrogen / green ammonia shall be granted on priority.
Manufacturers of green hydrogen / green ammonia shall be allowed to set up bunkers near ports for storage of green ammonia for export / use by shipping. The land for the storage for this purpose shall be provided by the respective Port Authorities at applicable charges. This reveals that the government is keen on it exports, which will command a premium in the market and likely fetch carbon credits. Exporting green ammonia will bring down India’s net import bill on account of this commodity.

Significance and Challenge

India’s current hydrogen demand is around 6.7 million tonnes (MT) which is expected to approximately double by 2030.
Oil refineries, fertiliser plants and steel units consume most of it as process fuel to produce finished products.
Presently, it is grey hydrogen, which is produced from fossil fuels, such as natural gas or naphtha.
With the increased deployment of renewable power capacity, the price of renewable electricity has fallen sharply to make green hydrogen more feasible, but it is still expensive to compete with grey hydrogen.
Incentives announced in the policy will help in lowering the cost of green hydrogen production.
But it will remain the key challenge to make it as affordable as grey hydrogen which is four to six times cheaper currently.
The waiving of central open access charges will enable lower cost of production, however there is state level open access charges which can forfeit the intended incentives.
Therefore collaborative efforts are required to remove this disparity in charges and create beneficial impact of policy incentives.

Way Forward

Green Hydrogen Consumption Obligation

The government plans to introduce Green Hydrogen Consumption Obligation in petroleum refining and fertiliser production on similar lines of renewable purchase obligation.
It will mandate the use of green hydrogen and ammonia as a certain proportion of requirements in a phased manner.
Initially, the refineries and fertiliser plants would be required to use 10% green hydrogen, which would be increased to 20%-25% in three to four years.
The mandate will support the deployment of green hydrogen manufacturing until its cost comes down in parity with grey hydrogen.

Indigenously manufactured Electrolysers

The production cost can go down further if electrolysers are indigenously manufactured.
India is targeting 15 gigawatts of electrolyser-making capacity and is considering production-linked incentives to boost local manufacturing.
Currently, alkaline water electrolysis technique is being used, which consumes more electricity to produce hydrogen.
Use of polymer electrolyte membrane (PEM) electrolysis would bring down the electricity requirement resulting in further cost reduction for hydrogen production.

A Positive Step Forward

The policy is an important first step to enable a hydrogen ecosystem. It has tried to address some of the key demands of the industry in terms of open access, grid banking and single window approval mechanism.
The policy aims to leverage the country’s landmass, increasing solar installations and decreasing renewable power generation costs to produce low-cost green hydrogen / ammonia for exports. Germany and Japan could be key markets for green hydrogen produced in India.
To support this transition from grey hydrogen to green hydrogen and to cater to growing hydrogen demand, India will have to invest continuously for innovation, R&D projects and demonstration projects. This will lead to commercialization of upcoming technologies and accelerate cost reduction of green hydrogen production.

TRIVIA

At the 26th Session of the Conference of Parties (COP-26) to the United Nations Framework Convention on Climate Change (UNFCCC) in Glasgow, in November 2021, India has made the following announcements:

· India's non-fossil energy capacity to reach 500 GW by 2030.

· India will meet 50 per cent of its energy requirements with renewable energy by 2030.

· India will reduce its total projected carbon emissions by one billion tonnes from now to2030.

· India will reduce the carbon intensity of its economy by 45 per cent by 2030, over 2005levels. • By 2070, India will achieve the target of net-zero emissions.

https://www.thehindu.com/opinion/op-ed/energy-independence-through-hydrogen/article65359780.ece?homepage=true