Green Hydrogen and Its Role in India’s Energy Transition
Context:
The Union Budget for FY26 is expected to focus on financial incentives for green hydrogen adoption in key industries like steel, cement, and power.
- The Ministry of New and Renewable Energy (MNRE) has proposed fiscal support for green hydrogen and Carbon Capture, Utilisation, and Storage (CCUS) technologies to accelerate the energy transition.
Proposed Budgetary Measures on Green Hydrogen and CCUS
- Green Hydrogen: Fiscal incentives to encourage adoption and procurement of green hydrogen.
- CCUS Technologies: Support for CCUS technologies to capture and store carbon dioxide, which can be used in industries like urea, food, and building materials.
- Green Ammonia: Subsidies to promote the production of green ammonia and bridge the cost gap for industries transitioning to cleaner energy sources.
Current Government Targets and Schemes to Support Green Hydrogen
- National Green Hydrogen Policy, 2022:
- Target: Achieve 5 million metric tonnes (MMT) of annual green hydrogen production by 2030.
- Reduce fossil fuel imports by over ₹1 trillion annually and prevent 50 MMT of greenhouse gas emissions per year.
- National Green Hydrogen Mission (NGHM):
- Launched in January 2023 with an allocation of ₹19,744 crore up to FY 2029-30.
- Focus on manufacturing electrolysers and establishing Green Hydrogen Hubs.
- Includes the SIGHT scheme to incentivise green hydrogen production and electrolyser manufacturing.
Objectives of Government Incentives
- Encourage polluting industries to transition to green hydrogen without mandatory regulations.
- Promote viable technologies for energy transition.
- Ensure domestic capacity building in electrolysers and hydrogen production.
Lacunae in Current Schemes Resisting Green Hydrogen Growth
- National Green Hydrogen Mission (NGHM): Subsidies insufficient to bridge the cost gap for industries.
- PLI Scheme: Allocation of $560 million supports only half of the required electrolyser capacity for 2030 targets.
- CCUS: Still in the nascent stage with limited financial and technological support.
Impact of Transitioning to Green Hydrogen Fuel
- Economic Benefits:
- Potential reduction in ₹1 lakh crore worth of fossil fuel imports annually.
- Boost to domestic manufacturing and employment in the green energy sector.
- Environmental Benefits:
- Avoidance of 50 MMT CO2 emissions annually.
- A cleaner, sustainable energy source for hard-to-abate sectors.
- Geopolitical Advantage:
- Enhances India’s energy security and export potential of green hydrogen and ammonia.
Government Initiatives: Proposal for a national mission on CCUS with financial incentives to achieve net-zero targets.
About Green Hydrogen
Strategies for Producing Low-Cost Green Hydrogen
About Carbon Capture, Utilisation, and Storage (CCUS)
Demand-Supply Mismatch in Green Hydrogen
- Challenges:
- High production costs have slowed down demand.
- Lack of adequate infrastructure for storage and transport.
- Impact: Green hydrogen producers are hesitant to scale up due to limited demand.
Government Proposals to Boost Green Hydrogen Demand via Subsidies
- Subsidy on green hydrogen production:
- $0.66 per kg in the first year, reducing to $0.4 per kg by the third year.
- Incentives under the SIGHT scheme for:
- Green ammonia production.
- Viability gap funding for green hydrogen production.
