Scheme Guidelines For Implementation Of 'Strategic Interventions For Green Hydrogen Transition Programme – Component I: Incentive Scheme For Electrolyser Manufacturing Tranche – II'

In January 2023, the Union Cabinet approved the Mission with an initial outlay of INR 19,744 crore (Indian Rupees nineteen thousand seven hundred and forty-four crore), allocating funds for various components including the Strategic Interventions for Green Hydrogen Transition (“SIGHT”) Programme ("SIGHT Programme”), pilot projects, research and development, and other mission components. The SIGHT Programme proposes 2 (two) distinct financial incentive mechanisms to support domestic manufacturing of electrolysers and production of Green Hydrogen. Tranche I of the SIGHT Programme awarded tenders to 10 (ten) companies on January 9, 2024, for establishing green hydrogen production facilities in India with a total capacity of 4,12,000 (four lakh twelve thousand) tons per annum.

Building on this, the MNRE on March 16, 2024, issued the 'Scheme Guidelines for implementation of Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme – Component I: Incentive Scheme for Electrolyser Manufacturing Tranche – II' (“Scheme for Electrolyser”). The objectives of the Scheme for Electrolyser include maximizing indigenous electrolyser manufacturing capacity, achieving a lower levelized cost of hydrogen production, ensuring globally competitive performance and quality of products, progressively enhancing domestic value addition, and supporting established and promising technologies.

Salient Features

1. Budget allocation: The Scheme for Electrolyser, allocated a total outlay of INR 4,440 crore (Indian Rupees four thousand four hundred and forty crore), will span from FY 2025-26 to FY 2029-30.
2. Implementing agency: MNRE is empowered to oversee the Scheme for Electrolyser's execution through the Solar Energy Corporation of India Limited (“SECI”). SECI's responsibilities encompass administrative, managerial, and implementation support, including application evaluation, issuance of acknowledgments and letters of award, verification of incentive claims, and quarterly progress reporting to MNRE. SECI is entitled to 0.5% of the disbursed incentive amount as administrative charges and holds authority to conduct physical inspections and enlist third-party agencies for technical verification.
3. Guiding principles: The Scheme for Electrolyser adheres to specific guiding principles:
   1. Support for electrolyser manufacturing will be provided in terms of INR/kWh (Indian Rupees/per kilowatt hour) corresponding to the manufacturing capacity;
   2. The base incentive will commence at INR 4440 (Indian Rupees four thousand four hundred and forty) perkW in the inaugural year and will gradually decrease annually; and
   3. Incentives are required to be disbursed for 5 (five) years from the onset of electrolyser manufacturing.
4. Penalties: Bidders participating in the Scheme for Electrolyser are mandated to submit earnest money deposit (“EMD”) as specified in the tender document. Non-compliance with the tender terms may lead to forfeiture of the EMD. Successful bidders, upon acceptance of the award, must furnish performance bank guarantees (PBG) or analogous instruments, as stipulated in the tender document. Failure to adhere to project commissioning timelines or default in project execution may result in forfeiture of the commensurate bank guarantees or similar performance guarantee instruments by SECI. Detailed modalities regarding penalties, including encashment of EMD, bank guarantees, accrued interest, or other penalties collected by SECI, will be outlined in the tender documents.
5. Monitoring: Oversight will be conducted by a Scheme Monitoring Committee (“SMC”) chaired by the Secretary of MNRE. The SMC, comprising representatives from MNRE, SECI, and relevant experts, are required to periodically review the implementation status and performance of electrolyser manufacturing capacities awarded under the Scheme for Electrolyser, facilitating resolutions for any encountered difficulties.

Implementation methodology

1. The Scheme for Electrolyser is designed to promote the manufacturing of efficient and toptier electrolysers within India. It outlines a detailed selection process for bidders, evaluating them based on the following specific parameters:
   1. Performance quotient based on the Specific Energy Consumption; and
   2. Local value addition for each year of production
      
      Additionally, verification of local value addition must be conducted annually to ensure compliance with the Scheme requirements.
      
      
2. Eligibility: The Scheme for Electrolyser imposes stringent eligibility criteria, requiring bidders to meet financial stability and manufacturing capability standards. Bidders, whether single companies or joint ventures/consortiums, must demonstrate a net worth equal to or exceeding INR 21,00,00,000 (Indian Rupees twenty-one crore) per MW for bucket 1 or 2A, and INR 30,00,000 (Indian Rupees thirty lakh) per MW for bucket 2B, with the option to showcase financial capability through affiliates. Additionally, electrolysers produced must adhere to technical specifications including specific energy consumption of 56 kWh per kg of Hydrogen production, a guaranteed life of at least 60,000 hours, and a minimum Local Value Addition of 40% for alkaline electrolyzers and 30% for other technologies in the first year of production, ensuring the production of highquality equipment fostering efficient green hydrogen generation.
3. In order to promote indigenously developed electrolyser technologies, bids in the second tranche of 1500 MW (one thousand five hundred megawatt) must be called in 3 (three) separate buckets. 
4. Payment incentives for the selected bidders are also set in the Scheme for Electrolyser guidelines.

Conclusion

In light of the burgeoning global interest in green hydrogen initiatives, the Mission, has set forth a promising trajectory towards sustainable energy production. The issuance of the Scheme for Electrolyser for the SIGHT Programme's Electrolyser Manufacturing Component marks a pivotal step in bolstering domestic manufacturing capabilities and fostering a competitive market landscape. By incentivizing electrolyser production and green hydrogen generation, the Scheme for Electrolyser aims to elevate India's position in the renewable energy sector while aligning with global sustainability objectives.

The guidelines present an opportunity for stakeholders to strategically position themselves in the growing green hydrogen market. The Scheme for Electrolyser outlines stringent eligibility criteria and incentive structures, ensuring the participation of qualified entities and the delivery of high-quality electrolysis technology. Moreover, the emphasis on indigenous manufacturing and technical standards underscores a commitment to innovation and competitiveness, offering clients a pathway to contribute to India's energy transition while capitalizing on emerging market trends. As the green hydrogen landscape evolves, stakeholders must navigate these guidelines adeptly to leverage the Scheme for Electrolyser 's potential for growth and innovation, fostering a sustainable energy future for India and beyond.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.