India's ambitious foray into the green hydrogen sector is set to receive a major boost as costs are projected to fall by up to 40%, according to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA).
India's ambitious foray into the green hydrogen sector is set to receive a major boost as costs are projected to fall by up to 40%, according to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA). This anticipated reduction, which could see the levelized cost of green hydrogen drop to Rs. 260-310 per kg ($3-3.75 per kg), is largely attributed to robust government support and incentive schemes.
The nation's commitment to clean energy is exemplified by its National Green Hydrogen Mission, launched in January 2023 with a substantial outlay of Rs. 19,744 crores ($2.38 billion). This mission aims to establish a formidable green hydrogen production capacity of 5 million tonnes annually by the end of 2030, a crucial step towards achieving its net-zero emissions target by 2070.
Key policy measures underpinning this cost reduction include the provision of affordable renewable electricity to hydrogen manufacturers, a waiver on Inter-State Transmission Charges for open access, lowered distribution and transmission charges, and a significantly reduced Goods and Services Tax (GST) rate of 5% for hydrogen. These financial and regulatory incentives are designed to make green hydrogen economically viable and competitive with conventional energy sources.
Furthermore, the IEEFA report highlights that electrolyser manufacturers are expected to benefit from a 7-10% reduction in total system costs over the first five years, starting from 2024. This will be facilitated by an average annual realisable base incentive of Rs. 2,960/kW ($36/kW), fostering domestic manufacturing capabilities and further driving down overall production expenses.
While acknowledging the enthusiastic reception of the Green Hydrogen Mission by the industry, the report also suggests the need for further refinements to ensure long-term investment and project viability. It emphasizes the importance of fine-tuning the scheme to attract startups, enhance global competitiveness, and establish a robust supply chain and secure demand for the industry's sustained growth.
If successful, the green hydrogen initiative holds immense potential to transform various sectors, including agriculture, transport, and manufacturing, contributing significantly to India's energy security and decarbonization goals. This aligns with India's "Panchamrit" pledge made at COP26 in 2021, which includes ambitious targets such as achieving 500 GW of non-fossil electricity capacity and generating half of all energy requirements from renewables by 2030.
The anticipated drop in green hydrogen costs is a pivotal development for India as it seeks to navigate the global energy transition and solidify its position as a leader in renewable energy and climate mitigation. The continued strategic interventions and policy evolution will be key to unlocking the full potential of India's green hydrogen economy.
