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Green Hydrogen – ‘Fuel Of The Future’ – Renewables



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On its 75th Independence Day (15 August, 2021), India
launched the National Hydrogen Mission
(“Mission“) to meet its climate targets
and with an aim to make India the global hub for manufacturing of,
and largest exporter of, green hydrogen.

Interestingly, India had realized the potential of hydrogen
early on, and sometime in 2006, the then Government had issued the
‘National Hydrogen Energy Road Map’. The idea of this
initiative was to achieve sustainable energy security with the
focus on hydrogen being used as a green fuel for transportation and
in power generation. This road map envisaged the development of
hydrogen to be in public private partnership model. However, much
did not materialize post that.

Subsequent to the launch of the Mission, the Indian Government
(“GoI“) issued the Green Hydrogen Policy
on 17 February, 2022 (“Policy“).
Unfortunately, the Policy (though in line with the past practice of
the Ministry of Power) was bare bones and sketchy; and did not
offer the details, which the industry was expecting.

The Policy

The Policy defines green hydrogen/ green ammonia as -
hydrogen/ ammonia produced by way of electrolysis of water
using renewable energy; including renewable energy which has been
banked and the hydrogen/ ammonia produced from biomass’
.
Some of the key features of the Policy are:

  • Grant of waiver of inter-state transmission charges for a
    period of 25 years to the producers of green hydrogen and green
    ammonia for the projects commissioned before 30 June, 2025;

  • Grant of open access to green hydrogen and green ammonia plants
    for the purposes of sourcing renewable energy within 15 days of
    receipt of an application;

  • Connectivity at the power generation end and manufacturing
    facility end to be granted on priority basis;

  • Banking of renewable energy to be permitted for 30 days for
    manufacture of green hydrogen and green ammonia;

  • Setting up of manufacturing zones for green hydrogen and green
    ammonia;

  • Setting up of bunkers by the manufacturers of green hydrogen/
    green ammonia near ports for storage of green ammonia for export/
    use by shipping. The land for the storage purpose would be provided
    by the respective port authorities on payment of applicable
    charges;

  • Establishment of a single portal for all statutory clearances
    and permissions required for manufacture, transportation, storage
    and distribution of green hydrogen and green ammonia, and grant of
    clearances and permissions within 30 days from the date of
    application.

In order to further incentivize, the Policy envisages that the
renewable energy consumed for the production of green hydrogen and
green ammonia would count towards the renewable purchase obligation
of the consuming entity. And, the renewable energy consumed beyond
the obligation of the producer would count towards the renewable
purchase obligation of the DISCOM (distribution utility) in whose
area the project is located.

Probably because the Policy was devoid of details, a month after
the notification of the Policy, the GoI (through the Ministry of
New and Renewable Energy) in March 2022 reiterated its plan to
issue the National Hydrogen Energy Mission (“Mission
Document
“). The Mission Document aimed to set out (i)
the specific strategy for the short term (4 years) and broad
strokes principles for long term (10 years and beyond); (ii) a
framework to promote manufacturing of green hydrogen through
suitable incentives and facilitate its demand creation/ volume in
identified segments such as fertilizer, steel, petrochemicals etc.;
(iii) step-plan on (a) promoting infrastructure development
required for providing the impetus to growth of green hydrogen, and
(b) promoting research and development; (iv) facilitate policy
support; and (v) putting in place a robust framework for standards
and regulations for hydrogen technologies.

It appears that once notified, this Mission Document would act
as a primer for the development of green hydrogen ecosystem. And,
more importantly effective implementation of the same would be
critical to achieve the objectives envisaged by GoI over a year
ago.

Where do we stand currently?

Considering the GoI’s push to promote this sector, a number
of public sector undertakings launched pilot projects to explore
viability of green hydrogen projects. Additionally, some government
companies have also floated tenders for the development of green
hydrogen generation project at their existing refineries. The
private players in the energy sector (both global players and large
domestic players) are also very keen in participating in the Indian
green hydrogen and green ammonia growth story. This interest is
being demonstrated by a number of private players signing
‘memorandum of understanding’ with various state
governments (such as, Tamil Nadu and Karnataka) for development of
green hydrogen/ammonia projects.

While it seems that the initiatives of the GoI have created good
interest in this sector, if our ambitious target (of becoming a
green hydrogen hub) is to be achieved, then an action plan needs to
be prepared and implemented right away. Now, we briefly discuss
below some of the steps/interventions that may be required to
attract the much-needed investment for the development of this
sector.

Interventions

  • Well defined regulatory framework -
    as a first step, the much-awaited Mission Document should be issued
    by the GoI. Hopefully, this Mission Document would provide clarity
    on a number of factors, such as, how manufacturing of green
    hydrogen would be pushed, what all manufacturing zones are being
    contemplated, how would the demand of green hydrogen be created,
    how technological development (for manufacturing green
    hydrogen/ammonia) in India would be promoted, the steps to promote
    research and development activities in India for green hydrogen,
    etc.

From publicly available information, it seems that to create
demand for green hydrogen/ammonia, the concept of green hydrogen
purchase obligation is being considered akin to ‘renewable
purchase obligations’ used to promote renewable energy growth
in the country. This certainly would be a good policy
initiative.

It seems that green hydrogen may be an option to address the
issue of integration of renewables with the grid. The GoI is
probably considering this already, however establishing technical
certainty of the same and then putting together a step plan of how
in fact the various stakeholders can adopt using green hydrogen to
achieve grid stability while injecting greater renewable energy in
the grid, may be another means of demand creation.

Further, it would be imperative to issue specific regulations/
rules (or amendments to the existing rules/regulations or
notifications) to ensure that the incentives contemplated by the
Policy (such as, faster grant of open access or connectivity,
banking facilities) are recognised by our regulatory regime. This
would assist in ensuring that the same are then smoothly
implemented by the relevant regulatory authorities. One of the
biggest issues that the power industry has grappled with is issuing
policies which are either not blessed by the parent legislation or
inconsistent with the existing policies/ regulations.

Another aspect which requires clarity is the manner of export of
green hydrogen, the process for land allocation and charges for
building the infrastructure at ports for storage, the incentives
that would be provided to exporters, etc. The good part is that the
Policy contemplates (albeit without any details) setting
up of bunkers near ports for storage of green ammonia for onward
exports; with the land to be provided by the port authorities at
applicable charges.

  • Land support – the GoI’s support
    for development of green hydrogen/ ammonia production plants, such
    as assistance with land allocation and grant of approvals would be
    critical. The pet peeve of the foreign investors has been
    procurement of land for their projects and obtaining approvals in
    India. While, broadly the Policy suggests that the GoI would set up
    manufacturing zones and also allocate land in renewable energy
    parks for the development of green hydrogen plants, no detail has
    been provided. It would be helpful if the regulations under various
    state statutes can be issued detailing the process for setting up
    manufacturing zones, identifying and demarcating the land bank for
    the same, setting out the process of land allocation (if it would
    be on long term lease basis or would be sold), streamlining the
    process for obtaining the various land use and zoning approvals for
    developing hydrogen plants, defining the developer’s right to
    create mortgage over the said land in favour of its lenders,
    etc.

  • Financial Support – currently, the
    biggest concern of this sector is the commercial viability of green
    hydrogen and green ammonia development projects. Unless the cost of
    production of green hydrogen and green ammonia is reduced, the
    transition from fossil fuels seems to be an uphill battle. One
    incentive that may be considered to control the cost of green
    hydrogen would be viability gap funding support that may be
    provided by the GoI to developers.

It appears that majority of the production cost of green
hydrogen is the cost of electrolysers (i.e., a device used to
extract hydrogen from water). And, considering this, it seems that
the GoI plans to launch a production linked incentive scheme worth
INR 15,000 crore for manufacturing of electrolysers. Policies like
this would not only assist in controlling the cost of green
hydrogen but also making India a manufacturing hub.

Additionally, the GoI may consider other financial incentives
that can be granted to developers of green hydrogen, such as,
concessional goods and services tax on manufactured electrolysers
or initially reducing or exempting customs duty on import of the
equipment required for manufacture of green hydrogen/ ammonia.

  • Renewable energy availability – the
    low cost of renewable energy is a huge advantage and makes India
    well placed to become a leader in the green hydrogen/ ammonia
    development. However, continuing the development of renewable
    energy at low prices and at the same pace would be crucial to
    achieve the development of green hydrogen. Unexpected regulatory
    changes (such as those in relation to basic customs duty, safeguard
    duties, approved list of models and manufacturers requirements) and
    recent increase in module prices have impacted a number of
    renewable energy projects. The GoI would need to equally consider
    the requirements and support/incentives that are needed for the
    continued development of the renewable energy sector.

  • Water requirement – as production of
    green hydrogen requires substantial amount of water (about 9 litres
    of water for 1 kg of production of hydrogen1),
    availability of water would be essential for this sector. Thus, may
    be useful for the GoI to examine the sources of water and the
    support it can provide in ensuring water availability. Of course,
    this would have its challenges as India is a water stressed
    country. One option to consider may be to require developers to set
    up desalination plants as part of the green hydrogen project to
    treat the waste water (to be supplied by relevant regulatory
    authorities) and then use such water for electrolysis.

Clarity on the aspects discussed above would perhaps provide
some comfort and certainty to investors keenly looking at the
Indian green hydrogen/ ammonia sector (and consequently boost the
overall growth of the sector).

Way forward

The GoI seems to recognize the importance of green hydrogen and
green ammonia in achieving India’s decarbonization and net-zero
emission targets. However, we need more concrete steps (and fairly
soon) to be taken if ‘green hydrogen’ is to become the fuel
of the future and if we genuinely want to transition from fossil
fuel/ fossil fuel-based feed stock. Hopefully, we can act in time
and capitalize on this opportunity.

Footnote

1 ACS Energy Letters 2021 6 (9), 3167-3169.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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