Policy Watch: An ambitious policy move for green hydrogen
The move positions India as one of the world’s pioneers.
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Two years ago, Member Pratik Dattani wrote this piece on how global investors at looking at green hydrogen more seriously:
“AFC Energy and Ceres Power, which make fuel cells, and ITM Power, which makes electrolysers, are all listed on the Alternative Investment Market (AIM) in London, and all have provided 5x 3x and 10x returns, respectively, for their investors in recent times. Others like Plug Power, Powercell and Ballard have also returned at least 3x.” Read more.
While the UK struggles with both an industrial strategy as well as as a renewable strategy of any kind, India has made significant strides in its policy environment.
Diya Iyer and Kaviesh Kinger write this week’s Policy Watch on a significant move from the Modi administration that shows the pioneering work that India is doing in the green hydrogen space.
Policy Watch: India Sets Emission Limit For Green Hydrogen in Ambitious Policy Move
On 19th August 2023, the Ministry of New and Renewable Energy, under the Green Hydrogen Policy, announced that for hydrogen to qualify as “green”, it must adhere to a strict emission limit of two kilograms of carbon dioxide for every kilogram of hydrogen produced. This move positions India as one of the world’s pioneers to define green hydrogen and establish comprehensive guidelines for its production.
India has set ambitious targets, aiming to produce five million metric tons of green hydrogen by 2030. This move is expected to reduce carbon emissions by approximately 50 metric tons, save over $12 billion on fossil fuel imports and align with its objectives to achieve net-zero emissions by 2070. Despite these ambitious goals, the country anticipates its first green hydrogen production only in 2026.
The National Green Hydrogen Mission, approved by the Union Cabinet in January 2022, seeks to establish India as a leading green hydrogen producer and supplier, reduce dependence on fossil fuels, and stimulate indigenous manufacturing capabilities. To support these efforts, the government has allocated substantial funds, including INR 17490 crore for strategic inventions, INR 13050 crore for incentivising production, and INR 4400 crore for electrolyzer production.
However, India's green hydrogen journey faces domestic challenges such as cost fluctuations in renewable energy and demand uncertainties. Industry experts emphasise the need for proactive demand generation mechanisms to anchor the market. Globally, India’s green hydrogen producers are navigating divergence in emission standards, especially when exporting to Europe. Variations in emission standards add complexity to India’s efforts to position itself as a reliable global green hydrogen supplier.
India’s transition to green hydrogen is bolstered by its advantageous position in renewable energy generation. Power and New and Renewable Energy Minister, Mr RK Singh highlighted that India’s cost of renewable energy generation is among the cheapest globally. With a 43% non-fossil fuel based power capacity, India’s renewable energy sector is expanding rapidly. Efficient transmission connectivity, with the ability to complete projects in just 60 days, sets India apart from many other countries.
Despite India's strides in green hydrogen, the global market remains competitive, with countries like Saudi Arabia, the UAE, and Oman making substantial investments. India's partnership with the UAE, an emerging player in green hydrogen, demonstrates the global reach of its ambitions. The cooperation agreement signed in 2023 paves the way for knowledge sharing and investments in green hydrogen, a move that helps mitigate India’s green hydrogen competitors into its cooperating partners.
Furthermore, India's cost advantage in renewable energy generation positions it as a competitive green hydrogen producer in the long run. A report from NITI Ayog estimates that green hydrogen could achieve cost parity with natural gas-based hydrogen by 2030. This could lead to a cumulative market value of $8 billion by 2030 and an impressive $340 billion by 2050, while also reducing CO2 emissions and saving billions in energy imports.
The introduction of the Green Hydrogen Policy signifies not only a significant leap towards India's renewable energy ambitions but also a diplomatic statement on the global stage. As Dr. Arunabha Ghosh, CEO of the Council on Energy, Environment, and Water, who was a speaker at our last Ideas for India conference, aptly puts it, "India's actions on climate change are currencies for its soft power", and green hydrogen is undoubtedly a valuable asset in this currency.
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