1. INTRODUCTION
1.1 The Ministry of Power, Government of India, notified the green hydrogen and green ammonia policy through notification No. 23/02/2022-R&R dated February 17, 2022 ("Policy"). The Policy aims at boosting the domestic production of green hydrogen to 5 million tonnes by the year 2030, reducing dependence on fossil fuels and import of crude oil, and making India an export hub for the clean fuel - green hydrogen and green ammonia. Hydrogen (H2) and ammonia (NH3) are expected to replace fossil fuels soon and are expected to be future fuels.
2. WHAT IS GREEN HYDROGEN AND GREEN AMMONIA?
2.1. Hydrogen, a clean fuel, is produced through water electrolysis, i.e., a process whereby molecules in water (H2O) are split into hydrogen gas and oxygen gas (O2) when electricity is passed through it. Green hydrogen is produced when the same process of water electrolysis is conducted by using electricity from renewable energy sources.
2.2. Similarly, using renewable energy sources, hydrogen (derived from electrolysis of water) and nitrogen (N2) (separated from the air) are made to react at high temperatures and pressures to produce green ammonia.
3. WHAT ARE THE INCENTIVES PROVIDED UNDER THE POLICY?
3.1 The Policy addresses some of the crucial demands of the industry in terms of open access to the grid to wheel power free of cost to the plant where hydrogen/ammonia is to be produced; banking of unconsumed power with distribution companies; priority connectivity to the grid; and faster approvals for green hydrogen and green ammonia projects through a single portal. The Ministry of Power has also proposed to set up manufacturing zones for the production of green hydrogen and green ammonia.
3.2 Under the Policy, the green hydrogen and green ammonia manufacturers have been given several incentives for procuring renewable energy. The manufacturers can purchase renewable power from the power exchange or set up renewable energy capacity themselves or through any other developer, anywhere. The manufacturers will be granted open access for sourcing of renewable energy within 15 days of receipt of application.
3.3 To further reduce the cost of green fuels, the Policy has also waived off inter-state transmission charges for a period of 25 years for any new renewable energy plants commissioned to supply power for green hydrogen and green ammonia production before June 30, 2025. This would mean that any green hydrogen or green ammonia producer will be able to set up a solar power plant in one part of the country to supply renewable energy to a green hydrogen or green ammonia plant in another part of the country without requiring to pay any inter-state transmission charges. This will help in boosting the domestic production of green hydrogen and green ammonia.
3.4 Further, the green hydrogen and green ammonia manufacturers have been permitted to bank their unconsumed renewable power for up to 30 days, with power distribution companies and take it back when required. The charges for banking shall be fixed by the state commission as per the formula provided in the Policy.
3.5 To facilitate export of green hydrogen and green ammonia, the Policy states that port authorities will provide land at applicable charges to the manufacturers of green hydrogen and green ammonia for setting up of bunkers near ports for storage prior to exporting.
3.6 Power distribution companies are also permitted to procure renewable energy for supplying to the manufacturers of green hydrogen and green ammonia at a concessional rate which shall include the cost of procurement, wheeling charges and a small margin as determined by the state commission. Such procurement would also count towards a state's renewable purchase obligation (RPO) under which it is required to procure a certain proportion of its requirements from renewable energy sources.
3.7 Further, in order to ensure ease of doing business, a single portal will be set up by the Ministry of New and Renewable Energy for all statutory clearances and permissions required for setting up of green hydrogen and green ammonia production in a time bound manner, preferably within 30 days from the date of application.
4. INDUSLAW VIEW
4.1. Green hydrogen and green ammonia have immense potential for use across multiple sectors such as fertilizers (carbon free), maritime fuel, transportation, chemicals, and can be a replacement for the Indian energy sector which is predominantly reliant on traditional non-renewable energy sources. A key challenge until now had been to make production of green hydrogen and green ammonia affordable and viable for the Indian market. As a first step towards developing a green hydrogen economy, this Policy attempts to incentivise the manufacturing and production of green hydrogen and green ammonia and also lays down the groundwork for export of the same.
In future policies, the regulators must address other issues like methods of transition and incentives for transition to green hydrogen. We expect policies to be issued requiring mandatory use of green hydrogen and green ammonia in certain sectors like transportation to boost demand of such fuels. In addition to the manufacturing incentives, tax incentives, particularly lowering the rates on applicable goods and services tax, may also be adopted by the regulators. We understand that the Government of India has plans to introduce an INR 15,000 crore production linked incentive (PLI) scheme for manufacturing of electrolysers (i.e., the equipment which is used to split water into hydrogen and oxygen for the production of green hydrogen). Demand side incentives may also be provided to industries adopting the use of green hydrogen and green ammonia instead of traditional sources of energy to lower the cost, especially in heavy industries like aviation, shipping, locomotive production, etc. Investment in research and development (R&D), including establishment of R&D centres, grants, etc., may also be examined to develop the technology to enable production of green hydrogen and green ammonia at economical rates. The regulators may also introduce procedures so that developers can take advantage of both renewable energy incentives and incentives provided for green hydrogen and green ammonia. The mechanism for use of renewable energy for production of green hydrogen and green ammonia towards the fulfilment of renewable energy purchase obligations is also required to be elaborated in future policies that may be introduced on this subject.
Green hydrogen and green ammonia from renewable energy sources are the new avenues in the Indian market with their own limitations and risks. We expect the regulators at different levels to introduce regulations, notifications, standard operating procedure, orders, etc., and to bring in amendments to the existing legislations (both at the center and the state levels) which will incorporate and detail the procedures for availing the benefits provided by the Policy and future policies to aid the objective of widespread adoption of green hydrogen and green ammonia based fuels. It remains to be seen how these modifications will contribute to faster adoption and commercial exploitation of green hydrogen and green ammonia based fuels in India.
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