The government of India is in no mood to bring in a purchase mandate to force some industries, such as refineries and fertiliser, to buy green hydrogen for a part of their hydrogen consumption, three persons familiar with the issue have told businessline.
This is a reversal-of-sorts of the government’s earlier thinking.
Previously, the Ministry of New and Renewable Energy (MNRE) had said: “The Government of India will specify a minimum share of consumption of green hydrogen or its derivative products such as green ammonia, green methanol etc. by designated consumers as energy or feedstock. The year-wise trajectory of such minimum share of consumption will be decided by the Empowered Group (EG).”
The government is now thinking that there is no need, at present, to mandate purchases to spur demand, because the market itself will take care of the demand.
At the India Energy Week, held in Bengaluru earlier this week, the Secretary of MNRE, Bhupinder Bhalla, said that the provision for bringing in a purchase obligation was there in the Mission and the government would think of bringing it in when it deems necessary.
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The reasoning is as follows: India consumes 5 million tonnes of hydrogen every year, most of it by refineries (to remove Sulphur from crude oil) and fertiliser plants (to make ammonia). The entire production is hydrogen comes from imported natural gas.
Today, imported natural gas (LNG) costs around $15/MMBTU. At this price, green hydrogen produced in India is competitive with grey hydrogen, extracted from natural gas. As such, there is no need for any purchase obligation—so goes the government’s thinking.
The other side of things
While this sounds logical, many in the industry feel that a green hydrogen purchase obligation is necessary to give financiers the confidence of sustained demand, especially when the domestic green hydrogen industry is in its infancy.
“There is no market (in India) right now for green hydrogen. We need a mandate for that,” Sumant Sinha, Chairman and Managing Director of ReNew Power, India’s largest renewable energy company, said. ReNew Power has tied up with engineering major L&T, and power generator, NTPC, for a green hydrogen venture.
The government also believes that Indian green hydrogen, (in the form of green ammonia), is easily exportable. Indeed, Greenko, the renewable energy company that is building a large green hydrogen, green ammonia plant at the port city of Kakinada with a view to exporting it—a German company called Uniper has agreed to buy.
However, industry insiders like Sumant Sinha have pointed out that one cannot put up projects trusting only export markets, because ‘you never know how the markets will behave.’ Sinha pointed out at the India Energy Week that the US Inflation Regulation Act has had the effect of providing $3 per kg of subsidy to green hydrogen produced in the US – a market-distorting subsidy.
Thus, the industry is of the view that the government should mandate purchases, to buttress the nascent green hydrogen industry.