India has announced new initiatives to promote green hydrogen, with Finance Minister Nirmala Sitaraman announcing the upcoming publication of the National Hydrogen Energy Mission (NHEM), which was first mentioned in Prime Minister Narendra Modi’s 2021 Independence Day speech.
The most significant challenges facing India are the development and demonstration of technically and economically viable and cost-competitive green hydrogen technologies (including transportation technologies), as well as the establishment of a robust supply chain and delivery mechanism for these technologies.
As a result, we expect the Union Budget 2022-23 to build on the preliminary announcements made in the Union Budget 2021-22 and to focus on addressing these challenges.
The launch of incentives for hydrogen storage and fuel cell development were among the key suggestions made during the finance minister’s pre-budget consultations.
In addition, the India Hydrogen Alliance, a group of industry players, submitted a six-point policy proposal to the NITI Aayog and the Ministry of New and Renewable Energy for the development of a hydrogen economy.
The submissions include the formation of a public-private task force to prepare a national hydrogen roadmap based on milestones, the establishment of a national fund with participation from industry players, sovereign partners, multilaterals, and others with the goal of covering the entire supply chain and raising $1 billion by 2030, the promotion of domestic electrolyser manufacturing, and the establishment of globally harmonised and inter-operable standards for hydrogen storage, transport, and diversion.
Our expectations for green hydrogen-related announcements in the Union Budget 2022-23 are the creation of a fund for research and development spending, to be set up with contributions from the government and industry, and the publication of a roadmap that lays out the NHEM’s targets over the course of at least the next financial year, based on the submissions made by various stakeholders.
More specifically, research and development efforts should concentrate on the development and cost-effectiveness of green hydrogen technologies (managed through public-private partnerships), the funding of pilot and demonstration projects, and the establishment of standards for various components in the green hydrogen supply chain.
A priority should be to use India’s significant renewable energy potential to position the country as a leading producer and potential exporter of green hydrogen.
It’s also worth looking into ways to scale up the cross-sector use of green hydrogen (starting with the transportation and power sectors), as well as the refurbishment and use of existing natural gas pipelines for green hydrogen transport.
Regulatory support for domestic manufacturing of supply chain components (with a focus on electrolyser systems) in the form of an extension of the government’s production-linked incentive scheme to cover domestic manufacturing of key green hydrogen system components, as well as the prescription of green hydrogen purchase obligations for various industries where green hydrogen is a po
This would fulfill the promises and statements made by various government officials and stakeholders over the past year.
The extension of tax benefits applicable to the infrastructure sector to green hydrogen-related activities is one example of fiscal incentives that could be announced as part of the roadmap.
This includes 100 percent accelerated depreciation on new investments in green hydrogen technologies and tax deductions under Section 80IA of the Income Tax Act of 1961 (i.e. a deduction of a specific percentage (up to 100 percent) of income and profits of an enterprise involved in developing green hydrogen for specified assessment years after commencement).
Similar encouragement was given to renewable energy in its early stages, and extending these benefits to hydrogen projects with renewable energy connections is a natural next step.
Furthermore, duties and taxes on the import of green hydrogen supply chain components should be kept to a minimum until the aforementioned incentives for domestic manufacturing of these components create a robust domestic market.
State offtake guarantees for hydrogen components such as electrolysers, as well as low-interest loans for the establishment of green hydrogen system demonstration and production facilities, could be explored in the budget.
All of these measures and incentives will ensure that India does not fall behind in the current global green hydrogen race.
The budget
The budget for 2022 will be submitted to Parliament on February 1st. Throughout the Union Budget 2022-23, the government might provide targeted financial incentives and cash allocations to develop green hydrogen in the country. In 2021, the government launched the Nation Hydrogen Mission. RK Singh, the Minister of Power, New and Renewable Energy, announced earlier this month that a green hydrogen policy will be established in February, with many incentives to encourage the use of green hydrogen throughout the country.
According to Venkatesh Raman Prasad, a partner at J Sagar Associates (JSA), the National Hydrogen Mission will begin in 2021. The budget is anticipated to include targeted financial incentives for R&D in the green hydrogen sector. To boost green hydrogen generation, create a domestic hydrogen supply chain and lower customs duties on electrolysers.
According to Prasad, the government’s pledge at COP-26 to attain Net Zero Emissions by 2070 and renewable energy to fulfill 50% of total electricity demand by 2030 demonstrates that the administration plans to prioritize sustainable energy sources. holds.
Green hydrogen, according to Hemant Mallya, senior program director at the Council for Energy, Environment and Water (CEEW), has several industrial applications and might play a role in making the iron and steel sector carbon-free.
Green hydrogen production will become more indigenous.
He believes that the forthcoming budget’s spending of Rs 1,200 crore by 2024 will be useful in launching various pilot initiatives in this area. Green hydrogen readiness tests are carried out on natural gas pipelines, underground hydrogen storage, and equipment such as furnaces, boilers, and process heaters.
They propose allocating additional Rs 165 crore for R&D, focusing on catalyst and electrolyser membranes, as well as finding replacements to essential minerals, establishing testing labs, and implementing safety standards. These investments, they hope, will aid in the indigenization of green hydrogen generation and its use as an industrial fuel.
As a result, India will be able to become a worldwide leader in this industry.
According to Davinder Sandhu, Co-Founder and President of Primus Partners, electrolysers that produce hydrogen are currently costly, and lowering their cost will help to lower the cost of Green Hydrogen.
He believes that by doing so, India would be able to accomplish its goal of building 10 GW of local manufacturing capacity and will become a worldwide leader in this industry.
The PLI plan can provide assistance.
In this regard, he recommends that the government explore a Generation Linked Incentive Scheme (PLI scheme), which might aid in the indigenization of electrolysers and promote green hydrogen production at a lower cost.
Union Minister RK Singh said earlier this month that a new green hydrogen policy will involve 25 years of free power transmission, dollar demonetised bids, and the allocation of land in renewable energy parks and ports to create bunkers for green hydrogen or ammonia. Incentives such as land allocation will be included.
