Riding the Green Wave: Investing in Hydrogen Infrastructure in India

Posted On - 14 October, 2023 • By - King Stubb & Kasiva

Introduction

In an era marked by a collective urgency for sustainable energy solutions, India has launched a new initiative to promote green hydrogen production with the introduction of the National Green Hydrogen Mission.[1] This program, led by the Ministry of New and Renewable Energy, is not only a national commitment but also a clarion call to action for the entire world. India positions itself strategically with a significant investment of INR 19,744 crores (USD 2.4 billion), exploiting its vast and cost-effective renewable resources to become a global leader in the production of green hydrogen.[2]

India has emerged as a clear focal point for investors navigating the evolving energy landscape. The mission’s primary purpose is nothing short of transformative: to exponentially scale up renewable hydrogen production, with an ambitious goal of at least 5 million tonnes by 2030 and aiming to double exports. With domestic demand for hydrogen in India estimated to reach 11 million tonnes that year, the mission intends to secure a significant 46 per cent share of this demand through innovative policies, hence creating a universe of attractive investment prospects.[3]

In essence, the National Green Hydrogen Mission is more than a strategy for India’s long-term sustainability; it is an invitation to investors to be the architects of this transformative journey. This article aims to highlight the investment opportunities in Hydrogen Infrastructure in India in the following manner:

The Indian Hydrogen Landscape
Government Support and Incentives
Key Investment Areas and Considerations

The Indian Hydrogen Landscape

Historically, India has relied on hydrogen for producing fertilizers and a variety of industrial activities. Conventional production methods, on the other hand, have a substantial environmental impact. To solve this issue, a shift to “green hydrogen” is underway, utilizing enhanced electrolyzer technologies fuelled by renewable energy sources, which has the potential to completely remove carbon emissions.

The Indian government is entering the global green hydrogen economy. The National Hydrogen Mission (NHM) aims to build a 5 million-metric-ton green hydrogen generation capacity by 2030. NHM also views India as a key export hub for green hydrogen, with a target of 10% of world import demand, boosting investment and innovation across the whole green hydrogen value chain.[4]

India has the potential to produce significantly more green hydrogen than other nations thanks to its abundant renewable energy resources. This enables India to achieve some of the lowest levelized prices in the world for green hydrogen and green ammonia. Investors should consider investing in electrolyzer manufacturers, renewable energy developers, and storage companies to capitalize on the growing green hydrogen market.

Government Support and Incentives

A comprehensive policy framework and strategic initiatives, including the Green Hydrogen Mission[5], guide India’s commitment to energy independence and attaining Net Zero by 2070.

ISTC Fee Waiver and Storage Encouragement: According to the NHM, green hydrogen initiatives commissioned by December 31, 2030, will be exempt from Inter-State Transmission System (ISTS) fees for 25 years.[6] The policy encourages storage by permitting distribution companies (DISCOMs) to store excess renewable energy for up to 30 days, thereby addressing the challenge posed by intermittent renewable energy.[7]
Export Facilitation through Port Authorities: Port authorities are permitted to allot land for bunker storage to promote domestic consumption and position India as a global green hydrogen supplier, thereby facilitating renewable hydrogen exports.
SIGHT Programme for Indigenous Capacity Building: Aligned with NHM, the Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme emphasizes establishing indigenous capabilities, especially in electrolyzer production. This incentive is intended to foster a robust ecosystem for the development of renewable hydrogen technologies in the country.[8]
International Cooperation and Technology Advancement: Initiatives such as the Three-Day International Conference on Green Hydrogen illustrate the government’s proactive approach to working with industry partners.[9] India will be at the forefront of the global green hydrogen revolution by emphasizing international cooperation and the development of cutting-edge technology.
Financial Incentives for Producers: The government has undertaken to offer incentives of at least 10 percent of production costs as part of a $2 billion program, starting from June 2023. The $21.2 billion incentive plan includes funding for hydrogen production electrolyzers to promote the industry and reduce carbon emissions.[10]
Incentive Structure for Green Hydrogen Fuel Production: The government will provide incentives of at least $0.36 (Rs. 30) per kg for the production of renewable hydrogen fuel, where the production costs are approximately $3.63 (Rs. 300) per kg.[11]
Development of Green Hydrogen Hubs: Green Hydrogen Hubs will be designated by NHM for regions that facilitate large-scale hydrogen production. Till 2025-26, the mission allots 400 crore rupees to support infrastructure development for these centers. In the initial phase, a minimum of two Green Hydrogen Hubs are envisioned, representing a strategic step towards the widespread adoption of green hydrogen technologies in India.[12]

Key Investment Areas and Considerations

Investments can be anticipated in several areas of India’s hydrogen industry. Some of the key focal points of investment are as follows:

Investment Potential: The investment required to satisfy the surge in demand for green hydrogen from a variety of industries is estimated to be approximately $23.3 billion.[13] In addition, the entire green hydrogen value chain, including production, storage, transportation, and distribution, necessitates substantial infrastructure and technology investments.
Distribution Infrastructure: The distribution of green hydrogen requires cost and logistics considerations, with varying tariffs for vehicles, tankers, pipelines, ships, and marine transport. Furthermore, establishing an effective distribution network necessitates substantial infrastructure investments, particularly for long-distance pipeline transport or the modification of existing pipelines for hydrogen transport. The creation of “Hydrogen Highways” has been proposed where green hydrogen production projects, distribution infrastructure, and refuelling stations will be built.
End Uses and Market Potential: The potential end-uses include applications in steel production, refineries, and electricity storage. Market estimates project India’s hydrogen market valuation to reach US$81 million by 2025, with a growth rate of 6.3% from 2017 to 2025, presenting significant market potential for investors.[14]

Conclusion

The future of India’s hydrogen industry looks promising, thanks to strong industrial demand, smart investments from big players like Reliance and Adani, and government efforts like the National Hydrogen Mission. Due to projected reductions in production costs and the sector’s crucial role in decarbonizing large sectors, India is a big participant in the global green hydrogen landscape. As technology breakthroughs and policy frameworks grow, the country is set for a revolutionary shift towards the production of sustainable and competitive green hydrogen.

FAQs

u003cstrongu003eWhat is the government’s financial commitment to support the development of Green Hydrogen Hubs in India?u003c/strongu003e

The government has allocated ₹400 crore up to 2025-26 for the development of Green Hydrogen Hubs and associated projects.

u003cstrongu003eWhat is the estimated investment potential in India’s green hydrogen value chain, and what does it include?u003c/strongu003e

The total investment potential in the green hydrogen value chain is estimated to be around US$23.3 billion. This includes production, storage, transportation, and distribution infrastructure.

How much investment does the government scheme for green hydrogen projects in India allocate for the industry’s development?

The initial outlay for the National Hydrogen Mission in India is ₹19,744 crore. This includes allocations of ₹17,490 crore for the SIGHT program, ₹1,466 crore for pilot projects, ₹400 crore for Ru0026amp;D, and ₹388 crore for other Mission components.

[1] https://www.india.gov.in/spotlight/national-green-hydrogen-mission.

[2] https://mnre.gov.in/img/documents/uploads/file_f-1688557917362.pdf.

[3] https://static.pib.gov.in/WriteReadData/specificdocs/documents/2023/jan/doc2023110150801.pdf.

[4]https://www.india.gov.in/spotlight/national-green-hydrogen-mission#:~:text=The%20mission%20outcomes%20projected%20by,lakh%20crore%20in%20total%20investments.

[5] https://www.india.gov.in/spotlight/national-green-hydrogen-mission.

[6] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1928128.

[7] https://mnre.gov.in/img/documents/uploads/file_f-1673581748609.pdf.

[8] https://mnre.gov.in/img/documents/uploads/file_f-1687963916599.pdf.

[9] https://pib.gov.in/PressReleasePage.aspx?PRID=1937584

[10] https://www.ibef.org/news/india-plans-green-hydrogen-incentives-of-at-least-10-of-cost.

[11] https://www.ibef.org/news/india-plans-green-hydrogen-incentives-of-at-least-10-of-cost.

[12] https://mnre.gov.in/hydrogen_energy_government_of_india.