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Thursday, October 28, 2021

R K Singh: ‘Green hydrogen push for refining, fertiliser sectors; PLI for electrolysers in the works’

Union Power and Renewable Energy Minister R K Singh said the coal shortage situation this time is serious and is being handled at an inter-ministerial level, and that the situation presents both a challenge and an opportunity at the same time. He also talked of a bundling plan for future renewable energy bids.

Written by Karunjit Singh , Anil Sasi |
October 5, 2021 3:11:09 am
Power and Renewable Energy Minister RK Singh

The government is working on plans to boost the use of green hydrogen in the oil refining and fertiliser production sectors, including a likely announcement on a Production Linked Incentive (PLI) scheme for electrolyser manufacturing to give an impetus to the domestic hydrogen value chain. Speaking to The Indian Express, Union Power and Renewable Energy Minister R K Singh said the coal shortage situation this time is serious and is being handled at an inter-ministerial level, and that the situation presents both a challenge and an opportunity at the same time. He also talked of a bundling plan for future renewable energy bids. Edited excerpts:

The coal shortage in China is leading to serious disruptions in power supplies. How serious is our own depleting coal stocks situation?

China seems to be having a huge crisis. Thank God, we are managing. The demand has gone up tremendously. We touched 200 Gigawatts (one GW is a thousand mega watts) during the Covid period, and the demand has been hovering around 170-180 GW, continuously. I expect the demand to go up again to near about 200 GW and stay there. So, this is stretching our resources… We have had to manage coal (supplies). I had a meeting with the Minister for coal and the Minister for railways and we planned as to how we shall meet this, because the requirement of coal is going to go up substantially.

How much of this is something that is seen annually post-monsoons, when there is inevitably a coal shortage phase?

This is beyond the (normal) post monsoon (supply crunch). I have been here for some years now, I haven’t seen something like this on a continuous basis… Demand is not going to go away, it’s going to increase more and more. That’s what I tell my officers, it is not something that is just a passing phase… because we’ve added so many new consumers… Most of them are lower middle class consumers and poor so they are buying fans, lights, televisions sets so their demand is growing. The good thing also is that we also see that this is an indication of the increased economic activity in the country, so that is a good thing. I see it as a challenge but I see this also as an opportunity. opportunity in the sense that I had some units which were not being utilised now they are all being utilised.

There is an anomaly in the case of renewables in terms of those who’ve bought power from developers earlier end up paying more. So, thereis a perverse incentive to perhaps wait.

This has struck us. We are working on a proposal which should be taken up in a few days that in the future, bids will be bundled. If there is one bid, suppose you get a rate of Rs 2.5 (per unit) and the PPA (Power Purchase Agreement) is signed (between the generation utility and the Discom). In the next bid, suppose SECI (Solar Energy Corporation of India) gets Rs 2.40 per unit then it will be averaged out. The person who signed it at Rs 2.50 (per unit) will get it at the average of Rs 2.50 and Rs 2.40 and the fresh PPAs will be at that average. Similarly, if a third bid comes at (Rs) 2.30, so now it will again be aggregated and the PPA will be at the new resultant rate and all the people who signed earlier will also pay only at that resultant rate. This will take care of it.

What about the government’s green hydrogen push?

What we are going to do is that we are going to put a mandate. Now, grey hydrogen and grey ammonia (both generated from natural gas or methane, through a process called steam reforming) will be gradually replaced by the green hydrogen and green ammonia (generated using renewables). Now where is grey hydrogen used? One is of course refining, it’s a major sector. So we are going to put a mandate, let’s say beginning with 15 per cent or 20 per cent, where 20 per cent of what they are consuming to begin with will have to be green hydrogen and then it will go up to maybe 30-40 percent. And in four years we expect the price of green hydrogen to match that of grey hydrogen. In a maximum of four years, the prices will come down. After that no mandate will be necessary…

Similarly we are going to put up a mandate for blending of PNG and LNG with green hydrogen. You can blend up to 15 per cent without any change in the chemistry of the pipes. For fertilisers, the total grey ammonia which is used is 15 million tonnes, which has to be replaced. What is imported is 2.6 million tonnes. So the total which has to be replaced is 17.6 million tonnes. As far as grey hydrogen is concerned, it comes to 5.2 million tonnes which has to be gradually replaced.

Is there a scheme for pushing domestic manufacturing of electrolysers?

Earlier, we had started the talks of mandates at 10 percent in refining and 5 per cent for fertiliser manufacture, but we will raise that to 15 or 20 per cent (for refining). But, in the earlier trajectory (10 percent) alone our requirement for electrolysers is about 8,800 MW. There isn’t that much capacity in the world. In the world, the total manufacturing capacity for electrolysers which is installed is just about 2,000 MW. So, naturally we have to make our own electrolysers. So, that is one of the proposals that we need a PLI (production linked incentive scheme) for electrolyser manufacturing because there is no world supply.

How much production capacity for electrolysers are we aiming to create in India?

I am thinking of something in the range of about 15,000 MW over five years. In fact we want at least 10,000 MW in the next two years or three years because without that we will not be able to start. One green hydrogen plant has been set up (by a private player). That is just about 1 mega watt. That electrolyser had to be imported. For them the cost was I think $350 or $300 per kilowatt.

The cost of setting up a plant for manufacturing is not very much. The capital cost of setting up a 1,000 MW electrolyser plant is about Rs 125 crore. The PLI we are proposing is $50 per kilowatt. There will be bidding, but the ceiling would be $50 per kilowatt.

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