(New Delhi / India) – The Indian Ministry of New and Renewable Energy (MNRE) has presented two funding programs for the hydrogen support project announced in April. Accordingly, there should be funds for both the production of electrolysers and for hydrogen production.
1,95 billion euros for two programs
The total amount is 174,9 billion rupees (1,95 billion euros). Of this, 44,4 billion rupees (0,5 billion euros) are earmarked as incentives for the production of electrolysers (“Component I”) and 130 billion rupees (1,45 billion euros) for the production of green hydrogen (“Component II”) ). The implementation will take place between the fiscal years 2025-26 and 2029-30. The Indian fiscal year begins on April 1st and ends on March 31st. The program would therefore start in April 2024.
Promote the production of electrolysers
In the first section (“Component I”), the ministry wants in particular
- expand the capacity of electrolyzer factories in the country
- reduce the production costs for hydrogen
- increase international competitiveness and
- increase the local value chain.
In order to achieve this, there will be gradually decreasing funding over a period of five years based on the new capacity to be created. The winners of a tender to be carried out will receive 4.440 rupees (49,63 euros) per installed kilowatt in the first year. The amount drops annually to 1.480 rupees (16,54 euros) per kilowatt in the fifth year of funding.
However, companies that participate must also submit calculations of their specific energy use. A maximum of 56 kilowatt hours per kilogram of hydrogen produced is permitted. Information on the local value chain is also required. There are also requirements regarding the size of the companies or consortia. Whoever is awarded the contract must also provide proof of at least 50 percent of annual sales of electrolyzers in India. Only the sum of all individual factors is used to determine whether the applicants qualify for an award.
In the first round of bidding, the MNRE will invite bids for 1.500 megawatts (MW) of electrolyzer capacity, of which 1.200 MW will be “any stack technology” and 300 MW will be electrolyzer manufacturing capacity based on domestically developed technology. A minimum of 100 MW and a maximum of 300 MW will be allocated per bidder.
Promoting hydrogen production
The second program is intended to increase the production of green hydrogen and its derivatives in India and at the same time encourage the establishment of large-volume production facilities in order to achieve cost parity with fossil fuels. Here too, bidders must meet a number of criteria in order to benefit from funding.
The program will provide a direct incentive with a maximum limit of 50, 40 and 30 rupees (0,56 euros, 0,45 euros and 0,34 euros) per kilogram of hydrogen over a production period of three years. Comparable to the usual tendering method for other technologies, such as photovoltaic power plants, the interested parties who claim the lowest costs and thus demand the “lowest average subsidy” based on the three-year period will be considered first.
In the initial phase, bids will be collected for production capacities in two categories: technology-independent and biomass-based. In the first category there is a tender volume of 410.000 tonnes per year to be funded, while in the second category it is 40.000 tonnes.
In the technology-independent category, interested parties must bid for an annual production volume of at least 10.000 tons and can be awarded a maximum of 90.000 tons per year. When producing hydrogen from biomass, the minimum volume is 500 tonnes per year and the total volume is a maximum of 4.000 tonnes per bidder.
If the end product is a derivative of green hydrogen, such as green ammonia, incentives will be awarded based on the amount of green hydrogen used to produce the derivative. The MNRE has specified the following factor: One kilogram of ammonia corresponds to 0,1765 kilograms of hydrogen.
The National Green Hydrogen Mission aims to make the country a world-leading producer and supplier of green hydrogen (PDF, 28 pages). © India Gov
The guidelines now published will be implemented by the MNRE through the Solar Energy Corporation of India (SECI). They are part of the “SIGHT” (Strategic Interventions for Green Hydrogen Transition) program as part of the “National Green Hydrogen Mission” published in January. In it, the government has stipulated that by 2030, capacity will be built up to produce five million tons of green hydrogen annually for use in the country. Potentially there should be ten million tonnes in order to also supply the export markets.
States are also preparing
In addition to the central government in Delhi, states such as Gujarat, Rajasthan, Uttar Pradesh, Odisha and Tamil Nadu are already working on strategies for the development of green hydrogen centers, according to the US Institute for Energy Economics and Financial Analysis (IEEFA).
Accordingly, Gujarat aims to produce three million tons of green hydrogen annually. Odisha plans to set up a hydrogen center at Paradip port capable of producing, storing and exporting green hydrogen.
60 billion euros for building supply chains
Public and private companies also initiated pilot projects for green hydrogen and ammonia. According to IEEFA, these include Oil India, National Thermal Power Corporation (NTPC), Gujarat Gas, ACME Cleantech Ventures, Larsen & Toubro and Tata Steel. Reliance Industries has also announced that it will invest five trillion rupees (around 60 billion euros) in the development of the green hydrogen supply chain over the next ten to fifteen years.
Although the use of hydrogen in industrial applications is not new in and of itself, producing explicitly green hydrogen and expanding its application across various industries requires new strategies and infrastructure, writes energy analyst Charith Konda of IEEFA India in a post. This leads to some challenges that India has to overcome in building a green hydrogen industry.
One of the key gaps in India's green hydrogen strategy is uncertain offtake agreements, "resulting in lower investments and higher financing costs," said Konda. “Companies are reluctant to invest in green hydrogen on a large scale without knowing their potential customers.”
In addition, the lack of a globally uniform definition of green hydrogen in almost all countries and regions is another major challenge. Since hydrogen is a global commodity, the different standards and regulations could restrict international trade.
Costs for generation and distribution must fall
In addition, the forecast production costs for green hydrogen are currently twice as high as those for conventionally produced hydrogen. For gray hydrogen, around 51 percent of the costs were for investments and the ongoing operation of the plant, while the remaining costs were for energy - for example natural gas. For green hydrogen, the costs of generating electricity from renewable energy sources and transmitting electricity from renewable energy sources account for the majority of around 70 percent of the total costs. Charith Konda: “To make green hydrogen competitive, both the capital costs and, more importantly, the costs of producing and distributing renewable energy must be reduced.”
The analyst advises that India should “develop a robust green hydrogen certification that is internationally aligned and recognized to build the green hydrogen industry.” The development of norms and regulations would “not only increase the confidence of international investors but also facilitate Indian manufacturers’ access to export markets.”
Investments of 97 billion euros required
Overall, the Indian central government estimates that investments of around eight trillion rupees (around 97 billion euros) will be required to achieve the goal of annual production of five million tonnes by 2030 set in the “National Green Hydrogen Mission”. In addition, there is a renewable energy output of 125 gigawatts to be installed. However, this would mean that 50 million tons of CO2 could be saved annually, according to a statement from the Ministry for New and Renewable Energy distributed in January.
MNRE funding programs:
“Strategic Interventions for Green Hydrogen Transition (SIGHT) Program – Component I: Incentive Scheme for Electrolyzer Manufacturing” (PDF, ten pages)
“Strategic Interventions for Green Hydrogen Transition (SIGHT) Program – Component II: Incentive Scheme for Green Hydrogen Production” (PDF, eight pages)
Photos
“Bathinda” photovoltaic power plant in Punjab with 100 megawatts of output, installed by Adani Solar, one of India's largest project developers. Implementing India's goals for green hydrogen production requires renewable energy power plants with an output of 125 gigawatts. © Adani Group
