The central government has launched a new incentive scheme via the demand aggregation mode for the production of green hydrogen and green ammonia in the country.
On May 24, 2023, Moneycontrol was the first to report that the government is planning to offer incentives for green hydrogen and green ammonia production under the demand aggregation model.
Under this model, implementing or nodal agencies will aggregate demand and call for bids for the production and supply of green hydrogen and its derivatives at the lowest cost through a competitive selection process.
The first set of incentives (termed Mode 1) under the National Green Hydrogen Mission (NGHM) was announced in June 2023, which was based on a different model. Under this, the bidding was done on the least incentive demanded over a three-year period, through a competitive bidding or auction process. Here there were no nodal or implementing agencies.
The latest set of incentives (termed Mode 2) released by the Ministry of New and Renewable Energy (MNRE) on January 16 has two parts – one for green hydrogen production (Mode 2B) and another for green ammonia production (Mode 2A). The MNRE stated that the expenditure on this scheme will be met from the Budget provisions made under the NGHM head.
How the scheme will work
For green hydrogen production (Mode 2B), the implementing agencies will be the oil and gas companies nominated by the Ministry of Petroleum and Natural Gas (MoPNG). Each oil and gas company will aggregate demand and call for bids for the production and supply of green hydrogen at the lowest cost for its single refinery or multiple refineries. The capacity available for bidding under tranche I of Mode 2B will be 2,00,000 metric tonne (MT) per annum of green hydrogen.
The bidder quoting the least price of supply will be allocated its admissible capacity first. Subsequently, the bidder quoting the next lowest price of supply will be allocated its admissible capacity, continuing until the total available capacity is exhausted, the document stated. The incentive payout in a given year will be a multiplication of the incentive for that year in Rs/kg of green hydrogen and the allocated capacity or actual production and supply in the year, in kg, whichever is lower.
The incentive scheme specifically for the production of green ammonia (Mode 2A) is the first since NGHM was approved by the Union Cabinet on January 4, 2023, and launched on January 13, 2023. Under Mode 2A, direct incentives for green ammonia production and supply will be granted over three years from the commencement date. The incentive will be Rs 8.82/kg of green ammonia in the first year of production and supply, Rs 7.06/kg during the second year of production and supply, and Rs. 5.30/kg during the third year of production and supply.
Solar Energy Corporation of India (SECI) will be the implementing agency for green ammonia production and supply-demand aggregation and disbursal of incentives. The capacity available for bidding under Tranche I of Mode 2A is 5,50,000 MT per annum of green ammonia.
The MNRE clarified that the same production and supply of hydrogen and its derivatives cannot receive incentives under two different modes of the SIGHT Program.
Mode 1 scheme
Under the Mode 1 incentive scheme announced last year, the incentives are capped at Rs 50 per kg in the first year of production, Rs 40 per kg in the second year and Rs 30 per kg in the third year of production. Reliance Industries, JSW Energy, Torrent Power and Bharat Petroleum Corp are among 14 companies that have bid for incentives under India’s green hydrogen plan.
Besides, 20 companies including Reliance Industries, Adani Group, Jindal India, Larsen & Toubro and Bharat Heavy Electricals have also submitted bids for incentives to manufacture electrolysers, SECI said in a statement.
The NGHM has a total initial outlay of Rs 19,744 crore, of which Rs 17,490 crore has been kept for the production-linked incentives (PLIs) for producing green hydrogen and manufacturing electrolysers. Of the Rs 17,490 crore incentive outlay, Rs 13,050 crore is for the production of green hydrogen and its derivatives, while Rs 4,440 crore has been allotted for incentives for electrolyser manufacturing.
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