The Indian government could soon announce an incentive program worth $2.2 billion to help reduce the production of cost of green hydrogen.
According to Reuters, the incentive package could be part of next year’s budget scheduled to be tabled in the Sansad (India’s parliament) on 1 February.
The incentive package is expected to enable manufacturers of electrolyzers to reduce the cost of green hydrogen production. According to Reuters, the current cost of production of green hydrogen is around Rs 300-400 ($3.60-4.80) per kilogram. The Indian government aims to reduce that by a fifth over the next five years. The global aspirational goal is to reduce this cost to less than $1 per kilogram by 2030.
Oil refineries and fertilizer manufacturers are the leading consumers of hydrogen in India, representing an annual demand of 5 million tonnes. Currently, this hydrogen is produced either as a byproduct in the petroleum refining process or from natural gas. Both these processes generate greenhouse gas emissions. India lacks any significant reserves of natural gas, making it highly dependent on costly imports.
Over the last few months, the Indian government has been looking to push green hydrogen as an alternative to hydrogen produced from conventional process. It announced plans to introduce mandates for large industrial consumers to procure green hydrogen. The so called green hydrogen procurement obligation will likely cover oil refineries, fertilizer manufacturers, and steel producers. Such an obligation will take care of the demand, however, cheap supply of green hydrogen remains a key challenge.
Ohmium International is currently the only manufacturer of electrolyzers in India. While the company has announced to increase production capacity its current capacity in nowhere near the impending demand.
A number of Indian and international companies have announced plans to establish electrolyzer manufacturing facilities. However, most of these plans are yet to reach the drawing board. Renewable project developers like ReNew Power and Acme have announced technology partnerships. Energy companies like Reliance have made acquisitions to get access to electrolyzer technology and plan to set up gigafactories.
The government is also looking to develop India as a major export hub of green hydrogen for other Asian and European countries. Earlier this year, renewable energy project developer Greekno Energy Holdings signed an agreement with Singapore-based Keppel Infrastructure to supply green hydrogen starting 2025.
Acme Solar, another private renewable energy company, has announced ambitious plans to set up green hydrogen and green ammonia production facilities to fulfill the demand of Indian and international markets. The company is looking to set up a 7 gigawatt renewable energy project in the southern state of Tamil Nadu to produce green ammonia. The company is also working on large-scale solar power projects in Oman to produce green hydrogen. The project is expected to produce 100,000 tonnes of green ammonia every year in the first phase. This will eventually increase to 1.2 million with 3.5 gigawatts of electrolyzer and 5 gigawatts (peak) of solar power capacity.
The incentive scheme is expected to be on similar to that implemented for solar module manufacturing. The scheme will offer incentives to companies that set up module manufacturing units with backward integration of up to polysilicon production.