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A report prepared by Bain & Company for the World Economic Forum on “Green Hydrogen: Enabling Measures Roadmap for Adoption in India” has called for a ‘green hydrogen purchase obligation’ to spur domestic demand.
The report will be presented at a panel discussion at the World Economic Forum, Davos, next week.
The report looks into actions required on the demand and supply sides and suggests measures to be taken to achieve the target of green hydrogen for $2/kg, down from $4-5 a kg today.
Speaking to businessline about the report, Sachin Kotak, Partner, Bain & Company, one of the authors of the report, said that State governments should allow ‘banking’ of renewable energy so that there is no cost of storage added to green electricity supplied to the electrolysers. The report notes that electricity accounts for 50-70 per cent of the cost of green hydrogen.
Banking
The report stresses on the need for banking, saying that banking does not incur additional capital costs. “States such as Maharashtra and Gujarat, which receive surplus solar and wind energy, have developed systems for banking renewable energy. However, these facilities are not available throughout the country,” the report says. It quotes an executive with a leading steel manufacturing company as saying, “While banking facilities are provided in policy, there is lack of clarity on the mechanism of banking about cost, physical infrastructure and capacity.”
“To make banking available in every state throughout the country, greater clarity on the banking process is needed, including precise details on facility and ownership costs, banking capacity, award mechanisms, and the processes for renewable energy certification, among other issues,” the report says.
To reduce the cost of renewable energy, the report notes that the “stakeholders might consider interventions to reduce the capital costs associated with setting up renewable energy plants.” Capital expenditure costs account for at least 90% of wind and solar energy generation costs currently.
“Interventions that can effectively reduce capital costs include direct capital cost subsidies, goods and services tax (GST) waivers, reduced land fees, and stamp duty waivers, among others. For example, GST exemptions on solar panels (currently taxed at 12%) can reduce the cost of electricity generation by 10 per cent,” the report says.
The report also wants intra-state transmission charges reduced or eliminated.
The report underscores the need for more pumped storage facilities. It says that “drawn-out clearance processes have delayed timelines and restricted private-sector contributions to only about 8 per cent of the total installed hydro capacity today.” It calls for expeditious clearance of environmental clearances.
Alongside, the government should give more subsidies for the manufacture of electrolysers, which account for about “30-50 per cent of green hydrogen production costs.” The PLI (an incentive) that the government gives electrolyser manufacturers today can only reduce the cost of green hydrogen by $ 0.5, the report says.
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