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Explained: What is the government’s green hydrogen policy?

The Centre's new policy offers 25 years of free power transmission for any new renewable energy plants set up to supply power for green hydrogen production before July 2025. What are the incentives and what's next?

Nearly all of the hydrogen currently produced in India is grey hydrogen using natural gas and ammonia. (Representational: AP)

The Centre on Thursday (February 17) notified the green hydrogen and green ammonia policy aimed at boosting the domestic production of green hydrogen to 5 million tonnes by 2030 and making India an export hub for the clean fuel.

What is green hydrogen?

Green hydrogen is hydrogen gas produced through electrolysis of water — an energy intensive process for splitting water into hydrogen and oxygen— using renewable power to achieve this.

How is the policy set to boost domestic production of green hydrogen production?

The new policy offers 25 years of free power transmission for any new renewable energy plants set up to supply power for green hydrogen production before July 2025. This means that a green hydrogen producer will be able to set up a solar power plant in Rajasthan to supply renewable energy to a green hydrogen plant in Assam and would not be required to pay any inter-state transmission charges. The move is likely going to make it more economical for key users of hydrogen and ammonia such as the oil refining, fertiliser and steel sectors to produce green hydrogen for their own use. These sectors currently use grey hydrogen or grey ammonia produced using natural gas or naphtha.

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What are the incentives?

The government is set to provide a single portal for all clearances required for setting up green hydrogen production as well as a facility for producers to bank any surplus renewable energy generated with discoms for upto 30 days and use it as required.

“The requirement of time bound clearances for these projects would spur investment while grid connectivity on priority will ease operational processes,” said Vikram Kirlosar, chairman, CII Taskforce on Green Hydrogen and vice chairman of Toyota Kirloskar.

The power ministry has also said that energy plants set up to produce green hydrogen/ammonia would be given connectivity to the grid on a priority basis.

Power distribution companies may also procure renewable energy to supply green hydrogen producers but will be required to do so at a concessional rate which will only include the cost of procurement, wheeling charges and a small margin as determined by the state commission, under the new policy. Such procurement would also count towards a state’s Renewable Purchase Obligation (RPO) under which it is required to procure a certain proportion of its requirements from renewable energy sources.

What are the facilities to boost export of green hydrogen and ammonia?

Under the policy port authorities will also provide land at applicable charges to green hydrogen and green ammonia producers to set up bunkers near ports for storage prior to export. Power minster RK Singh has previously noted that Germany and Japan could be key markets for green hydrogen produced in India.

What next?

The government is set to come out with mandates requiring that the oil refining, fertiliser and steel sectors procure green hydrogen and green ammonia for a certain proportion of their requirements. Singh has previously noted that the mandate for the refining sector could start at 15-20 per cent of the sectors total requirement.

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