Apart from fiscal incentives, mandated usage of green hydrogen in some sectors may accelerate investments in the ecosystem
BY G BALACHANDAR
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The government may soon announce mandates for green hydrogen (GH) consumption in segments such as fertilizer and refining industries, a move that industry analysts hope would help in the rapid development of a green hydrogen ecosystem and can spur early consumption in the country.
Apart from fiscal incentives such as those given in SIGHT (Strategic Interventions for Green Hydrogen Transition), there will also be a need to have compulsory GH consumption obligations (GHCO) for sectors that are already producing and consuming hydrogen, albeit grey hydrogen and not green hydrogen, says a report of Kotak Institutional Equities.
Firm announcement of GHCO for hard-to-abate sectors, such as the fertilizer and refining sectors initially, and other industries in the next few years, could accelerate the investments in th GH chain, it said.
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More expensive
But, a shift to green hydrogen may not provide any advantage to refiners apart from reducing carbon emissions since green hydrogen is more expensive now than grey hydrogen. Similar to the refinery sector, at current costs, green hydrogen is not competitive versus natural gas-based grey hydrogen that is used to make most ammonia-based fertilizers in the country.
However, increased reliance on GH will curb natural gas usage in both the fertilizer and refining sectors. GH costs are likely to become competitive post-2030 and the pace of the transition to GH may become faster.
Earlier drafts of NHGM (National Green Hydrogen Mission) had contemplated having consumption obligations for current large users and hard-to-abate sectors such as oil refining and fertilizers. However, in the final version of NGHM, an obligation for each sector is not specified. However, the NGHM says that to create bulk demand an scale up green hydrogen production, the Indian government will specify a minimum share of consumption of green hydrogen (or its derivatives such as green ammonia or methanol) by consumers as energy feedstock.
For other sectors such as steel, long-range heavy-duty mobility, energy storage, and shipping, NGHM has proposed pilot projects for using green hydrogen/derivatives to replace fossil fuels.
Pilot projects will help identify operational issues and gaps in terms of current technology readiness, regulations, implementation methodologies, infrastructure, and supply chains. These will serve as inputs for future scaling commercial deployment, it said.
The year-wise trajectory of such a minimum share of green hydrogen consumption will be decided by an Empowered Group (headed by the Cabinet Secretary), considering the availability of resources for green hydrogen production, relative costs, and other factors.
Meanwhile, the government, in August this year, notified the green hydrogen tandard that defines emission norms for hydrogen to be termed green. The standards require well-to-gate emissions (including water treatment, electrolysis, gas purification, drying, and compression of hydrogen) to stay below two kg of CO2 equivalent per kg of hydrogen produced as a 12-month average.
The Bureau of Energy Efficiency (BEE) would be the nodal authority to accredit agencies for monitoring, verification, and certification of GH production projects.
Starting with Reliance in 2021, several other corporates have joined the GH bandwagon and announced investment plans. “So far, the actual progress is slow. However, this will be an emerging area of investment,” said the report.