Distributive policy

Green hydrogen policy is great, but we need more

The challenge is immense. Currently, the industrial sector, including manufacturing, refining and fertilizer industries, contributes more than a quarter of India’s total carbon emissions.

But the good news is that on the political front, momentum is building, especially after Prime Minister Narendra Modi’s powerful statement on India’s climate targets at the CoP-26 summit in Glasgow and a green budget for 2022-23.

GH’s policy reflects this. Some key highlights are discussed below.

Remove to improve: The elimination of interstate transmission fees for 25 years for projects commissioned before June 2025 will make it much more economical for major users of hydrogen and ammonia, such as the fertilizer and refining sectors, hydrogen production green from renewable energy (RE). other states. This can reduce GH production costs by up to 15%.

Focus on use: The new policy allows unconsumed renewable energy to be banked with distribution companies for 30 days. This essentially means that a RE producer can feed unused energy into the grid and be able to use that banked surplus with losses anytime within 30 days. This will contribute to an increased use of capital-intensive electrolysers (not burdened by the intermittency problems of renewables), which will reduce their operating costs.

Build local, look global: Finally, allowing GH producers and industrialists to set up bunkers near ports to store green hydrogen will help boost exports, which is key to India’s ambitions to become a global hydrogen hub. green.

More work to come: The first phase of India’s Ministry of Energy policy has created a platform for growth and at ReNew Power we aim to move quickly to expand our green hydrogen capacity, together with our partner L&T, in line with national targets. . But if India’s GH ecosystem as a whole is to be quickly built and quickly scaled, further announcements and clarifications are to follow soon. The challenge is big. Currently, 98% of the hydrogen produced in India is ‘grey’, fueled by polluting fossil fuels. Here are some suggestions for policy makers to consider in the second phase of the country’s GH policy.

Mandate mandates: to rapidly evolve the sector, the cost differential of almost 100% between gray hydrogen and green hydrogen must quickly be reduced. This will bring more companies, especially in massive and hard-to-shrink sectors, firmly under the decarbonization fold. The new policy, as noted, could reduce costs by up to 15%, while leaving a gap of around 80%. To reduce this, the government could immediately consider introducing special warrants for different industries, until the ecosystem reaches scale.

Clarity must reign: In order to ensure a rapid ramp-up of entrants and to attract new players, it is necessary to clarify the applicability of the cross-subsidy and the additional cross-subsidy. For example, if a RE plant used for GH production is owned by another entity, how will the project structure work? There is also a need to further clarify the type and amount of financial support to GH manufacturers. We hope that the States, taking into account the orientation of the new policy of the Center, will quickly provide clarifications on this subject.

Please: On the complement model 19,500 crores for the PLI program for the manufacture of solar modules, a similar announcement for electrolyzers would be extremely beneficial for green hydrogen. Indeed, if the demand for GH rises sharply as a result of the mandates, this may be a personal goal for the country if the availability or production of electrolyzers prove unable to keep up. We would find ourselves in a chicken and egg situation.

Acceleration funds: Since the current cost of GH is significantly higher than that of gray hydrogen, government support for industries such as fertilizers, chemicals and steel through funding and subsidies to fill the gaps Viability gaps will help accelerate adoption.

Cut the GST for scaling: Reducing GST and customs duties on electrolyser equipment, currently at 18% and 7.5% respectively, until domestic manufacturing capacity is built, will act as a catalyst.

A recent report by the International Energy Agency (IEA) indicates that the total global electrolyzer capacity will only reach 17 GW by 2026. For India alone to reach its annual target of 5 million tons of green hydrogen production by 2030, the country will need 10 GW of electrolyser. capacity.

While increasing green hydrogen capacity in particular and renewable energy generation in general to meet our climate goals is a difficult proposition, we as a nation cannot be deterred, especially with the future of the planet at stake. As Helen Keller, a famous American visually and hearing impaired author, said, “Life is either a daring adventure or nothing at all.”

Sumant Sinha is Chairman and CEO of ReNew Power and Chairman-elect of Assocham.

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