Exclusive: Govt to offer incentives in demand aggregation model for green hydrogen

The government will invite bids for the first tranche of the green hydrogen incentive scheme by June-end

The Union government is going to include demand aggregation in its incentive scheme under the National Green Hydrogen Mission (NGHM), BS Bhalla, secretary, Ministry of New and Renewable Energy (MNRE) told Moneycontrol.

"We received extensive feedback on our first draft of the incentive schemes for the NGHM. Clarity of demand for green hydrogen/its derivatives has been outlined as an important criteria for establishing large production facilities. Based on that, we are planning to add a component in the scheme for incentives through demand aggregation as well, which will assure green hydrogen/ammonia producers of certainty in offtake," he said.

Bhalla said the government will invite bids for the first tranche of the green hydrogen incentive scheme by June-end. The government is planning to roll out the scheme in two tranches, instead of three as was earlier planned.

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Even as the government aims to produce about 1.2 million metric tonnes (MMT) of green hydrogen annually initially, a section of industry stakeholders has been skeptical about mass production despite the incentive as they feel it won’t be easy to find buyers considering the costs. To resolve this, the government plans to get into long-term tie-ups with offtakers, say, fertiliser companies, for the sale of the green ammonia/hydrogen.

In the first draft of the scheme released in April this year, the government said bidders with the least incentive demanded will be given the incentive in bucket filling method. It capped the incentive at Rs 50 per kg production of green hydrogen, which will come down to a maximum of Rs 30 per kg by the third year of the scheme. In this case, the green hydrogen/ammonia producers can produce, take the incentive and sell anywhere, including exports.

While the abovementioned model will stay, the government is now going to add another segment exclusively for aggregated demand, which will be a more targeted model. In this case, the incentive will be given on the least quoted price for the hydrogen produced. SECI will float the first demand aggregation tender and it will be sold to India’s fertiliser, steel and cement industries apart from refineries.

After being approved by the Union Cabinet on January 4, the government released a blueprint for its ambitious National Green Hydrogen Mission (NGHM) on January 13, with 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.

The proposal on green hydrogen production states that the proposed incentive outlay will be Rs 13,050 crore spread over three years. Rs 4,440 crore has been allotted for incentives for electrolyser manufacturing.