Centre plans green hydrogen incentives of at least 10% of cost

The government will give incentives worth at least 30 Indian rupees per kg for production of green hydrogen fuel, an official said

India plans to give green hydrogen fuel producers incentives worth at least 10 per cent of their costs under a $2 billion scheme set to begin before the end of June, a top government official said.

New Delhi this year approved a Rs 174.9 billion incentive plan to promote green hydrogen in a bid to cut carbon dioxide emissions and become a major exporter in the sector.

The government will give incentives worth at least Rs 30 per kg for production of green hydrogen fuel, the official, who is directly involved but did not want to be identified because the discussions are private, told Reuters.

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The cost of manufacturing green hydrogen, which is made using renewable energy rather than power derived from fossil fuels, in India is currently at about 300 rupees per kg.

In response to a query from Reuters, India's Renewable Energy Secretary Bhupinder Singh Bhalla said the incentives will be awarded through a competitive bidding process, and the incentive amount will taper down annually.

"Draft concept notes on the programme have been circulated to industry chambers and associations for consultations," he said.

Of the total incentive plan for the sector, the government will award about Rs 130 billion for producing green hydrogen and rest will be for manufacturing electrolysers, which are used to split hydrogen and oxygen molecules using electricity.

India has set targets for half of its installed electricity capacity to be from non-fossil fuel sources by 2030 and for the country to attain net-zero carbon emissions by 2070.

The government will start the bidding for firms seeking incentives before the end of this quarter, the source said, adding that the government expects to support 3.6 million tonnes of hydrogen production capacity in the next three years under the scheme.

The government will invite bids in three tranches for green hydrogen supply and in two tranches for electrolysers, the official said, adding that this will help gain market insights and to absorb new technologies and realise cost reductions.

The auction for green hydrogen supply is expected to be open to companies which have renewable energy plants or produce hydrogen and ammonia. Companies seeking the lowest incentive will be awarded the contracts, the source said.

Indian companies such as Reliance Industries, Indian Oil, NTPC, Adani Enterprises , JSW Energy, ReNew Power and Acme Solar that have already announced plans for green hydrogen are expected to be interested in the contracts.

Each tranche for manufacturing of electrolysers is likely to be for 1,500 megawatts (MW) of capacity, with the incentive fixed at Rs 4,440 per kilowatt, the official said.

The government expects to support about 3,000 megawatts of annual electrolyser capacity for five years through the scheme, with the first tranches in this quarter and the next in the third quarter of 2023.