Pushing green hydrogen: Need to secure against ‘reneging on PPAs’ as costs fall

Green HydrogenMoreover, it’s a good idea to impose green hydrogen consumption obligations on producers of fertiliser and oil refiners. (Representative image)

Prime minister Narendra Modi talking about it ‘green hydrogen’ in his I-Day address signals a definitive push for the alternative-fuel in India. The PM announced a National Hydrogen Mission (NHM), with an outlay of Rs 800 crore, the details of which are awaited. Kerala, it would seem, wants to get going early; Business Standard reported the state has started talks with energy majors IOC, NTPC, BPCL, GAIL, among others to make green hydrogen from the solar power facility at the Cochin airport. However, it is Mukesh Ambani’s ambitious ‘1-1-1’ plan—$1 for one kg in one decade—that is making the headlines. Having committed Rs 75,000 crore over three years, the Reliance Industries chairman sounds determined to achieve this target. Even if this sounds too good to be true, the plan should be pursued.

Not only will green hydrogen save the country costly foreign exchange since we import some $160 billion worth of fossil fuels, the reduction in the carbon footprint would be significant. To be sure, making it is no mean task; experts point to the several challenges relating to scale, the adoption of new technologies as also setting up storage facilities and distribution chains. Hydrogen is highly reactive in its natural state and requires specialised storage facilities. However, given the tremendous benefits that this energy can bring, the government must frame liberal policies to encourage investments; the more the number of ventures the better for consumers. At present, green hydrogen registers virtually zero presence in the country’s clean energy mix of roughly 100MW.

India’s renewable energy plans, implemented largely through a competitive bidding process, have been fairly successful even if the capacity remains short of the targets projected. The sector has hit a rough patch thanks to PPAs being dishonoured by buyers in some states but production costs for solar energy have fallen as have the tariffs. The government must work to resolve these PPA-related problems.

Green hydrogen is produced in an electrolyser powered by green electricity sources like wind or solar energy. RIL hopes to build green hydrogen capacity—it is targetting 100MW by 2030—by using new technology and lowering the cost of production to $2 per kg and later to $1 per kg from levels of $3.5-$6.5 per kg currently. It is possible costs and prices could drop much the way they have for solar and wind power.

If India wants to build big capacities of green hydrogen, it must ensure there is a level-playing field for all entrants and that the policy regime is stable. Also, producers need to be protected from contracts being reneged on as costs fall. The advantages of using green hydrogen as a fuel for commercial purposes are several. The business risks will reveal themselves as and when capacities start getting created. The PLI scheme for making indigenous electrolysers is good news as is the proposed Viability Gap Funding for green hydrogen in heavy mobility. Moreover, it’s a good idea to impose green hydrogen consumption obligations on producers of fertiliser and oil refiners.

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