India plans to give green hydrogen fuel producers incentives worth at least 10% of their costs under a $2 billion scheme set to begin before the end of June, a top government official said.
New Delhi has approved a 174.9 billion rupee ($2bn) incentive plan this year to promote green hydrogen, reduce carbon dioxide emissions and establish itself as a major exporter in the sector. Under the scheme set to begin before the end of June, the government will provide incentives worth at least 30 Indian rupees ($0.37) per kg for the production of green hydrogen fuel, according to an official who is directly involved but requested anonymity due to the private nature of the discussions, as told to Reuters.
Currently, the cost of manufacturing green hydrogen, which is produced using renewable energy instead of fossil fuels, is estimated to be around 300 rupees ($3.7) per kg in India. In response to a query from Reuters, India’s Renewable Energy Secretary, Bhupinder Singh Bhalla, stated the incentives will be awarded through a competitive bidding process, with the incentive amount tapering down annually. Bhalla also mentioned, “Draft concept notes on the programme have been circulated to industry chambers and associations for consultations.”
Out of the total incentive plan for the sector, approximately 130 billion rupees will be awarded for producing green hydrogen, while the rest will be allocated for manufacturing electrolysers. Electrolysers are used to split hydrogen and oxygen molecules using electricity.
India has set ambitious targets of having half of its installed electricity capacity from non-fossil fuel sources by 2030 and achieving net-zero carbon emissions by 2070. The government plans to initiate the bidding process for firms seeking incentives before the end of this quarter, with the expectation of supporting 3.6 million tonnes of hydrogen production capacity in the next three years under the scheme.
The government will invite bids in three tranches for green hydrogen supply and two tranches for electrolysers, as stated by the official. This approach is aimed at gaining market insights, absorbing new technologies, and realising cost reductions. The auction for green hydrogen supply is expected to be open to companies with renewable energy plants or those producing hydrogen and ammonia. The contracts will be awarded to companies seeking the lowest incentive, the source added.
Companies such as Reliance Industries, Indian Oil, NTPC, Adani Enterprises, JSW Energy, ReNew Power, and Acme Solar, which have already announced plans for green hydrogen, are expected to be interested in these contracts.
According to the official, each tranche for the manufacturing of electrolysers is likely to be for 1,500 megawatts (MW) of capacity, with the incentive fixed at 4,440 rupees per kilowatt. The government aims to support about 3,000 megawatts of annual electrolyser capacity for five years through the scheme, with the first tranches expected to take place in this quarter and the next in the third quarter of 2023.
