Government Unveils First Part Of National Hydrogen Policy

The government on Thursday allowed free inter-state wheeling of renewable energy used in the production of green hydrogen and ammonia as it seeks to boost usage of the carbon-free fuel and make India an export hub.

Unveiling the first part of the much-awaited National Hydrogen Policy, Power and New and Renewable Energy Minister Raj Kumar Singh said the government is targeting the production of 5 million tonnes of green hydrogen by 2030.

Oil refineries to steel plants require hydrogen to produce finished products. This hydrogen currently is generated using fossil fuels such as natural gas or naphtha. While hydrogen per se is carbon-free, the use of fossil fuels results in carbon emissions.

Green hydrogen -- also referred to as 'clean hydrogen' -- is produced by using electricity from renewable energy sources, such as solar or wind power, to split water into two hydrogen atoms and one oxygen atom through a process called electrolysis. The hydrogen thus produced is used in the manufacturing process and oxygen is released into the atmosphere or bottled and sold to hospitals and industries that need it.

A similar process also helps produce green ammonia. "Hydrogen and ammonia are envisaged to be the future fuels to replace fossil fuels. Production of these fuels by using power from renewable energy, termed as green hydrogen and green ammonia, is one of the major requirements towards environmentally sustainable energy security of the nation," Singh said.

The government, he said, is taking various measures to facilitate the transition from fossil fuel/fossil fuel-based feedstocks to green hydrogen/ green ammonia. In the second phase of the policy, the government would mandate the usage of green hydrogen and green ammonia by plants in a phased manner.

Under the policy, companies will have the liberty to set up the capacity to generate electricity from renewable sources anywhere in the country by themselves or through a developer. They could also buy such power from the exchange. This electricity will be allowed to be wheeled, free of cost through open access of the transmission grid, to the plant where hydrogen is to be produced.

The government will also allow the green hydrogen/ammonia manufacturer to bank unconsumed renewable power, for up to 30 days, with the distribution company and take it back when required.

The policy provides for a "waiver of inter-state transmission charges for a period of 25 years for manufacturers of green hydrogen and green ammonia for the projects commissioned before June 30, 2025."

The manufacturers of green hydrogen/ammonia and the renewable energy plant shall be given connectivity to the grid on a priority basis to avoid any procedural delays, Singh said, adding that 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.

Manufacturers of green hydrogen/green ammonia would also be allowed to set up bunkers near ports for storage of green ammonia for export or use by shipping.

"The implementation of this policy will provide clean fuel to the common people of the country. This will reduce dependence on fossil fuels 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," he said.

The fuels can be a game-changer for the energy security of India, which imports 85 per cent of its oil and 53 per cent of gas requirements. The policy will aid in India's energy transition and achieve the target of becoming carbon neutral by 2070.

"Green hydrogen and green ammonia are the new fuels which will power the future world, and we aim to be at the forefront of this future world," Singh said.

Singh also said that he would meet major industries shortly to explain the new policy.

"The demand for green hydrogen is now increasing around the world. We aim to be a world leader in the manufacturing of green hydrogen. This is something that will transform our country, our country will now emerge as an exporter of energy as compared to the present importer of energy.

"We import huge quantities of petroleum products from different countries. Now, we aim to emerge as an exporter of energy," he said. The minister also emphasised that the next frontier is green hydrogen, and "we are now going to take a lead in green hydrogen also." Several Indian firms, including Reliance Industries Ltd, Adani Group, Greenko and Acme Solar Holdings Ltd, have announced green hydrogen plans.

 Around 54 per cent or 3.6 million tonnes of India's annual hydrogen consumption of 6.7 million tonnes is utilised in petroleum refining and the rest in fertiliser production. This is, however, 'grey' hydrogen produced from fossil fuels such as natural gas or naphtha.

India's total hydrogen demand is expected to touch 11.7 million tonnes by 2029-30.

Last year, the government announced the National Hydrogen Mission in order to promote the generation and adoption of cleaner energies, including green hydrogen. It aims at laying the roadmap for India to become a global leader in the production of hydrogen.

The government wants to bring down the cost of green hydrogen to $1 (Rs 75) per kg from the current $3 to $6.5.

It is also said to be considering bringing a Rs 15,000-crore Production Linked Incentive (PLI) scheme for the manufacturing of electrolyzers, which produce green hydrogen by electrolyzing water.

 It may also look at setting the Goods and Services Tax (GST) rate at nil for domestically-manufactured electrolyzers for a five-year period after the PLI is launched. According to an analysis by CEEW, about 50 to 70 per cent of the cost of green hydrogen comes from the renewable power input costs, a substantial share being from open access charges. The waiving 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 Rs 0.27 to Rs 3.8 per unit, 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," CEEW said.

Hemant Mallya, senior programme lead at the Council on Energy, Environment and Water (CEEW), said banking of renewable energy will be a significant enabler for green hydrogen production as it will increase the capacity utilisation of electrolysers used to produce hydrogen as solar and wind are only intermittently available.

As per the analysis, this will also lead to a lower production cost by up to 40 per cent if there are no banking charges.