Hydrogen Boom: After the centre, states begin to roll out green hydrogen policies

The good news for producers is that whatever the states offer in terms of subsidies or incentives under their own green hydrogen policies will be in addition to the schemes rolled out by the central government.

“We are seeing great response from states ever since the ministry launched India’s green hydrogen mission. Some states have come out with a green hydrogen policy, while a few others have included the new form of energy in their renewable energy policies. A number of states are working on such policies and will release them in the next few months,” said a senior MNRE official.

Also read: Green hydrogen as energy storage could be as low as Rs 6/kWh: RK Singh.

To avoid any confusion, on August 18, the MNRE released India’s standards for green hydrogen produced in the country. In that, the government has mandated that the carbon emission should not be more than two kilograms of carbon dioxide equivalent per kilogram of hydrogen. Carbon dioxide equivalent is a measure of the total greenhouse gases emitted, expressed in terms of the equivalent measure of carbon dioxide.

Asked if implementation of the central policy could be difficult due to states now bringing in their own policies, the official said it would be otherwise.

“States are free to offer any incentive or subsidy which promotes green hydrogen and renewable energy in their region. Whatever the states offer will be in addition to the incentives offered by the central government. It will be a win-win situation for producers. The definition of green hydrogen has also been released for the convenience of all states and union territories. So, states don’t have to look anywhere else. They will simply follow the standards issued by the Centre,” said the official, requesting anonymity.

Moneycontrol takes a look at some of the states which have released a green hydrogen policy or included it in their energy transition plans. Many states have already signed memorandums of understanding (MoUs) with several big corporates, including NTPC, Reliance, Adani, ArcelorMittal, and Torrent, which have pledged huge investments in green energy projects.

Andhra Pradesh

Only five months after the union cabinet approved the NGHM, the Andhra Pradesh government, on June 20, notified its own green hydrogen and green ammonia policy.

The state has set a green hydrogen production target of 0.5 MTPA (million tons per annum), and green ammonia production target of 2.0 MTPA, in the next five years by harnessing the renewable energy (RE) potential in the region.

Estimating that the AP government’s move will create 12,000 jobs per MTPA of green hydrogen produced, the government is intensively promoting the setting up of green hydrogen, green ammonia, and related manufacturing facilities in the state.

The incentives and offers include the lease of government land at a subsidised rate of Rs 31,000 per acre per year, with an escalation of 5 percent every two years; 100 percent exemption from land-use conversion charges and stamp duty; and any incentive available to industrial units in the state will be made available to green hydrogen and ammonia units too.

It is also offering a 100 percent SGST waiver in the sale of green hydrogen/ammonia; 100 percent waiver of electricity duty levied on RE used to produce the green energy; and reimbursement of cross-subsidy surcharge for five years for energy drawn from RE sources within the state. Cross-subsidy surcharge goes towards the supply of electricity to poor and under-privileged customers.

Maharashtra

On July 4, the Maharashtra government approved its green hydrogen policy and sanctioned Rs 8,562 crore to provide subsidies and benefits to companies producing the green energy or manufacturing electrolysers in the state.

At present, the demand for green hydrogen in the state is 500 kilo tonnes annually, and the state is aiming to create 1.5 million tonnes of production capacity.

The policy includes exemption of cross-subsidy surcharge and additional surcharge in power bills for green electricity procured for the production of green hydrogen; 50 percent exemption from intra-state transmission charges for 10 years from the commissioning of green hydrogen projects, for power procured from RE plants; and 100 percent exemption from electricity duty.

Gujarat

Gujarat plans to give green hydrogen manufacturing the status of a priority sector. The state government has already announced a land allotment policy that offers several benefits to companies investing in green hydrogen projects in the state.

Per the policy, companies must roll out 50 percent of their green hydrogen production capacity within five years of plant commissioning, and 100 percent within eight years. The land, initially provided on a 40-year lease, will be deemed non-agricultural and subject to an annual rent of Rs 15,000 per hectare, increasing by 15 percent every three years.

The Gujarat government aims to become a hub for green hydrogen by building a production capacity of 8 metric tonnes per annum (MTPA) by 2035.

Senior state government officials told Moneycontrol that the incentives are likely to include interest subsidy of 7 percent for 8-10 years with a cap of 1 percent of investment; 80-100 percent net SGST reimbursement for 10 years; and electricity duty exemption, to name a few.

Uttar Pradesh

The Uttar Pradesh (UP) government plans to have a green hydrogen production capacity of nearly 5,00,000 tonnes per annum by 2028, for which the state is drafting its Green Hydrogen Policy, 2023.

The current demand for hydrogen in UP is approximately 9,00,000 tonnes per annum, especially in the fertiliser and refinery sectors. The UP government has announced it will set up two centres of excellence dedicated to green hydrogen research under the UP New and Renewable Energy Development Agency.

Per the draft policy that was floated for public comments last year in November, the incentives proposed are exemption of stamp duty, electricity duty, tax reimbursement, capital interest subsidy, subsidised infra loans, etc. These will be applicable to new green hydrogen/ammonia projects, and green expansion of existing fertiliser units in the state.

Rajasthan

On September 16, the Ashok Gehlot-led state announced its Rajasthan Green Hydrogen Policy, 2023.

The Rajasthan government will offer a 50 percent rebate in transmission and distribution charges for 10 years for 500 KTPA (kilo-tonnes per annum) renewable energy plants to be installed on the state's transmission system.

It will also provide exemption from additional and cross-subsidy surcharges for 10 years if green hydrogen is procured from third parties; priority in land allocation for green hydrogen production; 30 percent subsidy of up to Rs 25 crore for establishing green hydrogen research centres; freedom to bank generated electricity; no capacity restrictions on captive power projects; 100 percent waiver on transmission charges; and reimbursement/waiver of energy banking charges for 7-10 years.

Madhya Pradesh

Madhya Pradesh has included green hydrogen and green ammonia related interventions in its renewable energy policy. In that it has stated that electrolyser manufacturing units with investments greater than or equal to Rs 50 crore will be eligible for special incentives earmarked for the RE equipment manufacturing sector under the industrial promotion policy.

Tamil Nadu and Odisha

While Tamil Nadu is finalising a separate green hydrogen policy, Odisha has announced exemptions on cross-subsidy, additional surcharges, and state transmission charges for 20 years. Odisha is also offering SGST waiver and reimbursement of Rs 3 per unit of green power purchased and consumed from local discoms for 20 years.

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