Editorial. New policy can spur green hydrogen investment

The Centre’s much-awaited green hydrogen policy is finally here, with an allocation of ₹19,744 crore for promoting the production of electrolysers, green hydrogen gas (produced when power from renewables is passed through water, as opposed to splitting methane), setting up pilot projects and R&D. The draft policy had been put out in February last year, so it has been a long wait for the industry.

However, the government seems to have more than made up for keeping the industry waiting by making a bumper allocation; most in the industry had been expecting not more than ₹3,000-4,000 crore. The policy is expected to generate five million tonnes of green hydrogen annually from 2030, which is the quantity of (non-green) hydrogen consumed by the industry today. The government has said that this would entail an investment of ₹8-lakh crore and create six lakh jobs. These numbers are broadly in agreement with those put out by the National Chemical Laboratory (NCL), Pune, which has been working on developing electrolyser technologies. According to NCL, five million tonnes of green hydrogen production would mean 32 GW of electrolyser capacity, which would consume 115 MLD of water. This would require the setting up of 90 GW of solar and 38 GW of wind power that would use 340,000 hectares of land. This shift would save 30-40 million tonnes of carbon dioxide emissions annually and avert purchase of ₹60,000 crore worth of LNG. All through 2022, there had been many corporate announcements with respect to green hydrogen. But there was little work on the ground in the absence of a policy. Now, the action can begin.

However, for the policy to work, the government needs to create an assured demand and resolve ecosystem issues. It can be presumed that the promised ‘green hydrogen purchase obligation’ is round the corner. The government has promised separate frameworks for the creation of a green hydrogen ecosystem, standards and regulations, public-private partnership for R&D and skill development. The success of the Mission depends much on how these frameworks are crafted. The government should incentivise green hydrogen transportation and storage. Green hydrogen can be used to make steel, chemicals and in refineries, besides powering vehicles and ships.

Finally, the big question is the price of hydrogen, which depends on the cost of green power. By all accounts, the holy grail of ‘$1 per kg’ is unattainable. Rough calculations show that with the best of technologies, the cost of production of a kilogram of green hydrogen would be not less than $3, which would be higher at the point of use. If green hydrogen is to be cheaper, the cost of green power needs to come down. Since it is not always possible to co-locate renewable power and hydrogen production plants, reducing green energy costs would mean slashing open access charges and removing other policy niggles. This should be done simultaneously so that the promise of green hydrogen power is realised.

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