INTRODUCTION
As the world transitions towards more sustainable energy sources, green hydrogen has emerged as a pivotal element in the global clean energy landscape. Transactions in the green hydrogen space are becoming increasingly prevalent, driven by technological advancements, regulatory support, and growing environmental awareness.
India's push towards green hydrogen has been driven through focused policy in the form of the National Green Hydrogen Mission ("GH Mission"), which aims to make India a global hub for production, usage and export of green hydrogen and its derivatives. As part of its goals till 2030, India aims to develop green hydrogen production capacity of at least 5 million metric tonnes ("MMT") per annum ("MMTPA"), with an associated renewable energy capacity addition of 125 gigawatts ("GW"). It is expected that this increase in green hydrogen and renewable energy production will abate nearly 50 MMT of annual greenhouse gas emissions, reduce import of fossil fuels of over approximately USD 12 billion, generate over 600,000 jobs and attract investment of over approximately USD 95 billion.1
However, with a dynamic environment involving several stakeholders - including the government, hydrogen users and renewable energy producers - it is important to understand the best practices that can guide transactions in the green hydrogen space. Successful transactions require a keen awareness of the unique regulatory framework, financial structures, and technological innovations that underpin this emerging industry.
This primer aims to provide an overview of these best practices, offering insights into the legal and operational considerations essential for success in this burgeoning sector. Understanding these will be crucial in maximizing opportunities and mitigating risks in the green hydrogen market.
1. MARKET OVERVIEW
Currently, India produces approximately 6.5 MMTPA of hydrogen. Most of this demand is currently met by conventional sources of energy thereby making such hydrogen generated to be considered as grey hydrogen or blue hydrogen. This demand is expected to rise to approximately 11-12 MMTPA by 2030, positioning it for a sustainability transition.2
As part of the incentive schemes under the GH Mission, India has awarded tenders for setting up of more than 412,000 tonnes of green hydrogen manufacturing and 1.5GW of electrolyser manufacturing capacity already.3 With Government of India ("GoI") schemes currently in force and pending full utilisation of their budgetary allocation, there are opportunities for companies to obtain benefits of subsidised production through financial incentives for electrolyser manufacturing and green hydrogen production. These incentives schemes and measures introduced in the GH Mission are broadly discussed in further detail in section 2.2 below.
1.1. MAJOR PROJECTS, SEGMENTS AND MARKET PLAYERS
The GH Mission has propelled several projects harnessing green hydrogen, across sectors. For example, some of these projects, such as Sembcorp India's Tamil Nadu plant and ACME's Odisha plant are focused on providing green hydrogen primarily for export to Japanese companies. Several green hydrogen projects are also set up with an intent to drive the mobility space such as hydrogen fuel cell locomotives, buses, refuelling stations, etc. Such projects are being set up largely via by public-sector undertakings such as NHPC, NTPC, Indian Railways and Oil India Limited, amongst others. Most projects by private companies domestically, however, are focused towards greenification of existing hydrogen demand, such as glass and steel production, ammonia production and oil refining. Some key private players domestically include ReNew Power, Adani Group, Tata Group, Reliance Group, L&T, JSW Energy, and Essar Group.
1.2. CLUSTERS PRIME FOR GREEN HYDROGEN PRODUCTION
As per the goals under the GH Mission set by GoI, India has an estimated renewable energy potential of around 500GW from commercially exploitable sources such as wind, hydro, and solar power. This potential is due to the country's 7600 km-wide coastline, strong tropical and sub-tropical sunlight throughout the year, and more than 400 rivers in 8 river systems.4 As such, a large portion of central, western, and southern India along the peninsula is ripe for green hydrogen production.
States of Andhra Pradesh, Maharashtra, Rajasthan, Uttar Pradesh, and West Bengal have also released dedicated green hydrogen policies for specific promotion of industrial activity surrounding the sector. In comparison, the states of Madhya Pradesh and Odisha have released integrated renewable energy policies that cover green hydrogen as well.
Additionally, under the GH Mission, the Department of Science and Technology has also allocated funds to certain green hydrogen 'valley innovation clusters', particularly in the State of Kerala and the cities of Pune, Bhubaneswar, and Jodhpur. These areas are focused to boost research, innovation, and the capacity of scientific and industrial actors in green hydrogen, showcasing the use of green hydrogen across the entire value chain.
2. POLICY FRAMEWORK FOR GREEN HYDROGEN IN INDIA
Recognizing the importance of hydrogen, more specifically green hydrogen, as part of India's broader climate goals and to make India a global hub for the production, use, and export of green hydrogen, India has been consistently and progressively introducing policy reforms aimed at promoting and incentivising production of green hydrogen. As one of the first key policy outcomes, the Ministry of Power, GoI, released the Green Hydrogen Policy in February 2022, outlining several initiatives marking the beginning of the policy change towards developing a conducive environment for production and adoption of green hydrogen. Since then, India has since seen several regulatory changes including the introduction of the GH Mission and green hydrogen standards which have been briefly discussed below.
2.1. POLICY FRAMEWORK
2.1.1. Green Hydrogen Policy
Effectively the first policy regarding green hydrogen in the country, the Green Hydrogen Policy (2022), proposed the introduction of a number of measures to incentivise production of green hydrogen, including (i) waiver of Inter-State Transmission System (ISTS) charges for electricity used for production of hydrogen; (ii) open access sourcing of renewable energy for production; (iii) land allocation in renewable energy parks; and (iv) single window clearance system for clearances required to institute and operate a green hydrogen plant. Several proposals set forth in the Green Hydrogen Policy saw prompt enactment by the GoI with others in the pipeline, according to reports.
The Ministry of Power has granted complete waiver of ISTS charges for green hydrogen and green ammonia for a period of 25 years from the date of commissioning of the projects. Similarly, Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022 have been notified facilitating ease of obtaining input power for generation of green hydrogen. Further, to alleviate concerns regarding the obtaining of several central and state licenses and approvals required to operate a green hydrogen plant and to provide operational ease to businesses, the GoI has set up a single window clearance system through the National Single Window Portal5 and also exempted standalone green hydrogen/ ammonia plants from the requirement of obtaining environmental clearance.6
2.1.2. National Green Hydrogen Mission
In January 2023, the GoI introduced the GH Mission with a financial outlay of approximately USD 2.35 billion. At the core of which is the Strategic Intervention for Green Hydrogen Transition programme with a financial outlay of approximately USD 2.08 billion. The rest of the outlay has been divided as approximately USD 174 million for pilot projects; approximately USD 47 million for R&D and approximately USD 46 million for other components. Non-financial measures outlined in the GH Mission include (i) support for infrastructure development; (ii) establishment enabling policy framework; and (iii) skill development programmes. In March 2024 and July 2024, the Ministry of New and Renewable Energy, GoI ("MNRE") introduced scheme guidelines for skill development under the GH Mission and funding of testing facilities, infrastructure, and institutional support of development of a regulatory framework, respectively.
While the GH Mission is primarily focused on generating robust supply generation, it also emphasises demand creation through exports and the introduction of competitive bidding procedures for procurement to facilitate domestic supply generation. Further measures from the GoI on this front are expected to be introduced in the near future.
2.1.3. Foreign collaborations
The GoI has also entered into memorandums of understanding/bilateral agreements with countries such as Germany, USA, Australia, France, UAE and Saudi Arabia to facilitate knowledge and technology sharing and facilitate green hydrogen discussions underway for agreements with countries such as Singapore and South Korea.7
2.2. INCENTIVES FRAMEWORK
2.2.1. Strategic Intervention for Green Hydrogen Transition ("SIGHT")
The SIGHT programme is bifurcated into two separate financial incentive mechanisms focussing on supporting the domestic manufacturing of electrolysers (component 1) and production of green hydrogen (component 2). Tranche 1 of both component 1 and component 2 attracted substantial interest with component 1 attracting bids of 332.5 megawatt ("MW") (from 21 participants) against the proposed capacity of 1500 MW. Successful bidders under component 1 included companies such as John Cockerill Greenko Hydrogen, Jindal India, Reliance Electrolyser Manufacturing and Adani New Industries. Component 2 attracted bids of 551,500 metric tonnes per annum ("MTPA") (from 13 participants) against the proposed capacity of 450,000 MTPA with successful bidders including companies such as Reliance Green Hydrogen, ACME Cleantech Solutions and Greenko ZeroC.8
After successful tenders of tranche 1 of the SIGHT scheme last year, in July 2024, the MNRE introduced guidelines for the second tranche of component 2. The capacity of tranche 2 has been set at 450,000 MTPA with 40,000 MTPA capacity reserved for biomass-based pathways.
2.2.2. Pilot projects
The GH Mission sought implementation of pilot projects for the replacement of traditional fossil fuels with green hydrogen in sectors such as steel, commercial mobility, shipping etc., to identify operational gaps and measures to modify technology and infrastructure and ascertain the requirement of viability gap funding. In furtherance of the same, the MNRE introduced schemes and guidelines for pilot projects in the shipping sector and steel sector, with a cumulative financial outlay of approximately USD 68 million. The objectives of the schemes include the provision of support for (i) retrofitting of existing ships to run on green hydrogen; (ii) development of bunkering and refuelling facilities on ports for green hydrogenbased fuels, for the shipping sector; (iii) substitution of fossil fuels with green hydrogen in the DRI process; and (iv) use of green hydrogen in blast furnaces, for the steel sector.
In March 2024, the Automotive Research Association of India (the designated scheme implementation agency for green hydrogen pilot projects in automotive sector) floated a request for proposal with the provision of viability gap funding of approximately USD 59 million. The proposal aims to promote development of commercially viable technologies for the utilization of green hydrogen in the commercial transportation sector.
2.2.3. Research & development
After recognition of R&D as a critical component of India's green hydrogen commitment, the MNRE introduced the R&D Roadmap for Green Hydrogen Ecosystem in India. The roadmap outlines the current research progress and provides key milestones, identifies research priorities, and presents a vision of research targets in sector. The roadmap recommends research and development actions for each part of the value chain and aims to foster a robust research and development ecosystem to drive the commercialization of green hydrogen. Key proposals under the roadmap include enabling public private partnerships for developing research infrastructure, establishing a specific R&D fund and establishment of centres of excellence. In furtherance of this, the MNRE released a call for proposals for such research projects in March 2024.
2.2.4. Comparison with global incentives
Worldwide, incentives to make green hydrogen competitively priced are offered in a variety of ways, and there does not appear to be any clear standard for optimal encouragement yet, given the nascent field. For example, the United States currently offers a Clean Hydrogen Production Tax Credit of up to $3/kg of hydrogen produced to the supplier, depending upon the carbon intensity of the hydrogen production pathway.9 A similar tax incentive scheme is also in place in Australia.10 As another example, Germany is offering grants in aid through a competitive bidding process, in the form of direct grants per kilogram of green hydrogen produced.
On the other hand, countries such as the United Kingdom and Japan are using a multi-pronged approach to incentives. While the UK is offering funding support via an accelerator fund and the UK Infrastructure Bank,11 Japan is set to put in place a 'contract-for-difference' ("CfD") scheme to bridge the price gap between grey and green hydrogen, alongside support in the form of regulatory exemptions. Interestingly, Japan's CfD scheme requires the submission of a business plan from both the supplier and the user of green hydrogen, making the scheme a unique demand-plus-supply incentive mechanism.
As the industry continues to evolve, it appears that the sector's incentives are experimental in nature, involving diverse approaches.
In this light, however, while several initiatives have been introduced by the GoI aimed at addressing supply side constraints and bringing down the cost of production in India, as on date, there is limited development on the provision of demand-side incentives. On the other hand, to boost domestic demand, instead of incentivisation through subsidies or other programmes, the GH Mission contemplates statutory green hydrogen/green ammonia consumption targets which will be imposed on specific industries such as mining, steel, cement, textile, chemicals, etc. However, given the broad nature of the GH Mission objectives, we expect that the range of incentives provided by the GoI will be diversified in the years to come.
2.3. GREEN HYDROGEN STANDARDS IN INDIA
In August 2023, the MNRE issued an office memorandum providing a definition for green hydrogen and specific emission standards which must be met in order for the hydrogen produced to be classified as 'green'. This notification provided that green hydrogen shall mean hydrogen produced using renewable energy including production through use of electrolysis, conversion of biomass, and electricity generated from renewable sources which is stored in an energy storage system or banked with the grid. The well-to-gate emission thresholds, i.e., non-biogenic greenhouse gas emissions from water treatment, gas purification, biomass processing etc., have been set as 2kg of CO2 per kg of hydrogen produced i.e., 2kgCO2 e/kgH2 . It has also been specified that MNRE will provide a specific methodology for tracking lifecycle emissions for the produced green hydrogen which will include monitoring compliance and on-site inspection.12 The proposed tracking methodology and compliance to the standards would become critical for project developers under component 2 of the SIGHT scheme to successfully claim incentives, and these also can act as a guarantee of origin for the Offtaker.
This measure has brought India on the same front as countries such as the United States, United Kingdom, Japan, and the EU as one of the first few countries to provide emission thresholds for green hydrogen.
| Sr. No. | Country | Carbon emission threshold (in kgCO2 e/kgH2 |
| 1. | India | 2 |
| 2. | United States | 413 |
| 3. | European Union | 3.38 |
| 4. | United Kingdom | 2.414 |
| 5. | Japan | 3.4 |
Most countries are yet to implement clear standards for green hydrogen production and there is yet to be a global consensus on what the standard should be. However, emissions tracking remains vital for the sector, at least for private consumption and ESG reporting. In this regard, the Australian government is in the process of developing hydrogen standards and a guarantee of origin scheme (Hydrogen GO Scheme) to ensure accounting for wellto-gate emission tracking of the produced hydrogen. Several other certification programmes have also been introduced by independent organisations such as the GH2 standard which sets a maximum threshold of 1kgCO2 e/kgH2 taken as an average over a twelve-month period.15
As India's standards are more stringent or at par with most other jurisdictions, export of green hydrogen from India is unlikely to face any hurdles regarding level of emissions. Readily acceptable low-emission hydrogen alongside geographical advantages makes India a prime destination for green hydrogen export projects. Especially in regions/ countries such as the European Union, Japan, Singapore and South Korea, India may play the role of a key hydrogen hub in the years to come.
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Footnotes
1. The currency amounts in this primer are calculated using exchange rates as on September 6, 2024.
2. Niti Aayog, Harnessing Green hydrogen Opportunities for Deep Decarbonisation in India, dated June 2022, available at https://www.niti.gov.in/sites/default/files/2022-06/Harnessing_Green_Hydrogen_V21_DIGITAL_29062022.pdf
3. The Hindu Business Line, India awards tenders for 412,000 tonnes green hydrogen production, 1.5 GW electrolyser manufacturing, dated May 16, 2024, available at https://www.thehindubusinessline.com/economy/india-awards-tenders-for-412000-tonnes-green-hydrogen-production-15-gw-electrolyser-manufacturing/article68181467.ece
4. Ministry of Power, 500GW Non-fossil Fuel Target, available at https://powermin.gov.in/en/content/500gw-nonfossil-fuel-target.
5. National Single Window System under the National Green Hydrogen Mission, available at https://www.nsws.gov.in/portal/scheme/greenhydrogenpolicy.
6. Ministry of Environment, Forest and Climate Change, Clarification on the applicability of EIA Notification 2006 for manufacturing Green Ammonia / Green Hydrogen - reg., dated July 28, 2023, available at https://environmentclearance.nic.in/writereaddata/OM/654851120$7.%20OM_28_07_2023.pdf.
7. Ministry of New and Renewable Energy & EY, India's Green Hydrogen Revolution - An Ambitious Approach, dated May 2024, available at https://static.pib.gov.in/WriteReadData/specificdocs/documents/2024/may/doc2024510336301.pdf, p.36.
8. Institute for Energy Economics and Financial Analysis, India's $2.1bn Leap Towards its Green Hydrogen Vision, dated March 2024, available at https://ieefa.org/resources/indias-21bn-leap-towards-its-green-hydrogen-vision.
9. U.S. Department of Energy, Financial incentives for hydrogen and fuel cell projects, available at https://www.energy.gov/eere/fuelcells/financial-incentiveshydrogen-and-fuel-cell-projects.
10. Australian Taxation Office, Hydrogen Production and Critical Minerals Tax Incentives, available at https://www.ato.gov.au/about-ato/new-legislation/indetail/businesses/hydrogen-production-and-critical-minerals-tax-incentives.
11. Department of Energy Security and Net Zero, Government of the United Kingdom, Hydrogen net zero investment roadmap: leading the way to net zero, available at https://www.gov.uk/government/publications/hydrogen-net-zeroinvestment-roadmap/hydrogen-investment-roadmap-leading-the-way-to-netzero#innovation-and-incentives.
12. Ministry of New and Renewable Energy, Green Hydrogen Standard for India, dated August 18, 2023, available at https://static.pib.gov.in/WriteReadData/specificdocs/documents/2023/aug/doc2023819241201.pdf.
13. As per the Clean Hydrogen Production Standard Guidance introduced in the US in June, 2023, clean hydrogen is defined as hydrogen generated with a well to gate carbon intensity not exceeding 4kgCO2e/kgH2 produced which is likely to be achieved by projects with less than 2kgCO2e/kgH2 at the site of production. This is also aligned with the definition of 'qualified green hydrogen' under the Inflation Reduction Act of 2022, which mandates lifecycle greenhouse gas emissions rate no higher than 4kgCO2e/kgH2.
14. The UK Low Carbon Hydrogen Standard sets an emission threshold of 20 grams of carbon dioxide equivalent per megajoule of hydrogen product, which translates to 2.4kg CO2e/kgH2; UK Department for Energy Security & Net Zero, UK Low Carbon Hydrogen Standard, dated December 2023, available at https://assets.publishing.service.gov.uk/media/6584407fed3c3400133bfd47/uk-low-carbon-hydrogen-standard-v3-december-2023.pdf
15. Green Hydrogen Organisation, GH2 Green Hydrogen Standard Fact Sheet, available at https://gh2.org/sites/default/files/2023-03/GH2_Standard_Fact%20Sheet_v2_DIGITAL.pdf
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