Govt targets 1.2 MMT green hydrogen annual production in first three years of incentive programme

The Union cabinet approved the National Green Hydrogen Mission on January 4, 2023.

The government has proposed an incentive of up to Rs 50 per kilogram (kg) production of green hydrogen in India, which will come down to a maximum of Rs 30 per kg by the third year of the scheme, documents seen by Moneycontrol showed.

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.

Now, the government has prepared the draft proposals for the two PLI schemes, copies of which have been accessed by Moneycontrol. The proposal on green hydrogen production states that the proposed incentive outlay will be Rs 13,050 crore spread over three years. “Beneficiaries under the scheme will be selected through a competitive bidding process. The incentive will start at a cap of ₹50/kg and end at a cap of ₹30/kg. Prospective bidders will quote the base incentive for the first year of production with the upper cap of ₹50/kg. Incentive is proposed to be higher in the initial period and will gradually taper off,” read the draft proposal.

With Rs 13,050 crore worth of incentive for green hydrogen production, the government is aiming at indigenous production of about 3.6 million metric tonnes (MMT) in three years. Annually, the target is to produce 1.2 MMT of green hydrogen in India for these three years. The bidding for the PLIs is likely to happen in three tranches, with a total bid capacity of 400,000 MMT in each tranche. The maximum allocation to a single bidder has been set at 150,000 MMT per annum. Senior officials in the ministry of new and renewable energy (MNRE) said the government is aiming to open the first tranche by June this year.

Coming to the technical qualifications of the bidder, officials requesting anonymity said the average annual turnover for the last three years should be Rs 50 crore per thousand MT of their quoted annual production capacity (the estimated price of thousand MT hydrogen has been taken as ₹25-30 crore). “The bidder should have experience of developing at least 500 MW of renewable energy capacity over the last 4 years or producing at least 500,000 tonnes of ammonia or methanol or 100,000 tonnes of hydrogen over the last 4 years,” the proposal stated.

PLI FOR ELECTTROLYSER MANUFACTURING

For electrolyser manufacturing, the incentive will be offered for the first five years, reducing in magnitude. In the first year, it will be Rs 4,440 crore, Rs 3,700 crore in the second year, Rs 2,960 crore in the third year, Rs 2,220 crore for the fourth year and Rs 1,480 crore for the fifth year.

Officials said allocation of ₹4,440 crore can support about 3 GW per annum of production. “It is suggested to bid out the capacity in 2 tranches. Bid announcement for the first tranche will happen by June this year and the bid would be awarded by the second quarter of FY 2023-24. The total bid capacity will be 1,500 MW per annum and the maximum allocation to a single bidder will be 400 MW per annum,” read the proposal.

The technical qualification states that the bidder should have an average annual turnover of Rs 10 crore per MW of the quoted annual production capacity in the last three years. It also states that the bidder should have produced at least 100 MW of electrolysers over the last two years or should demonstrate technology partnerships with an entity that has produced at least 100 MW of electrolysers over the last two years.

It also suggests a possible performance multiplier matrix to reward lower energy consumption and penalise higher energy consumption to ensure high-efficiency electrolysers are pushed more.

Green hydrogen is produced using renewable energy through electrolysis and, thus, is carbon free. In this process, hydrogen is separated from oxygen in the water through an electric current. Renewable sources, such as solar or wind, are used to meet the power needed for electrolysis and, hence, the “green” is appended to this form of hydrogen.

Talking to Moneycontrol on March 25, Union minister for power and renewable energy RK Singh said that Kandla and Tuticorin ports will be India's first green hydrogen and green ammonia refuelling hubs for green shipping. He also said the government is working out a trajectory for the companies concerned to start blending green hydrogen into the city gas system, and the same will be done for the LNG they use for transport. Another trajectory is being worked out for sectors such as refineries, steel plants and so on, Singh said.

Companies such as Reliance Industries, Indian Oil, NTPC, GAIL, BPCL and so on have already committed to green hydrogen production in India.

India has set an ambitious target of setting up 500 GW of renewable energy capacity by 2030 and going net zero by 2070, which is why the NGHM will play an important role in the years to come.

Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.