Hydrogen has now come into its element

The demand for clean, zero-emission energy is increasing dramatically, as the world moves away from its dependency on fossil fuels. India is very much part of this energy transition. According to the Updated First Nationally Determined Contribution under the Paris Agreement published in August 2022, India has committed to reducing its 2005 emissions levels to less than 45 per cent by 2030 and deriving 50 per cent of its cumulative electric power installed capacity from non-fossil fuel-based energy resources by the same year. The country aims to achieve net-zero emissions by 2070. The promise of green hydrogen is in supporting the nation to become atmanirbhar or self-sufficient in its growing energy requirements. It is a cheaper and less volatile source of hydrogen for industries currently using hydrogen produced from natural gas.

Recent developments in the green energy sector include the setting up of a pure green hydrogen plant by Oil India Corporation in Assam, a green hydrogen production plant by GAIL in Madhya Pradesh and a green hydrogen fueling station in Leh, and the establishment of green hydrogen ecosystems by leaders in the India market such as Reliance, ONGC and NTPCL.

Government policies and legal developments show India’s determination to adopt this new green energy source. The administration is encouraging the production of green hydrogen by launching the National Green Hydrogen Mission, thus embracing its commitment to achieving net zero emissions. At the COP26 summit, held in 2021 in Glasgow, the prime minister expounded on India’s panchamrit or five-point agenda to achieve net zero by 2070, in addition to achieving aggressive near-term emissions reduction and renewable energy targets.

In June 2022, the Ministry of Power introduced the Electricity (Promoting Renewable Energy through Green Energy Open Access) Rules, 2022 (2022 rules) to promote the purchase and consumption of green energy and to establish a simplified procedure for open access to green power. The 2022 rules are important, as they define green energy as electrical energy from renewable sources of energy including hydro and storage and include any mechanism that uses green energy to replace fossil fuels, including the production of green hydrogen or green ammonia. The Ministry of Power issued the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Amendment Rules, 2023 (2023 rules) in January 2023. The 2023 rules have revised the Green Energy Open Access charges. Banking charges and other fees and charges, such as load despatch centre fees and scheduling charges, deviation settlement charges according to the relevant regulations of the Central Electricity Regulatory Commission, may now be claimed from consumers using electricity from renewable sources. However, distributors can claim reimbursement for no other charges, particularly those derived from fossil fuel generation.

NITI Aayog (the primary government policy think tank) announced in April 2021 that the Production-Linked Incentive Manufacturing Scheme (PLI scheme) may be extended to the domestic manufacture of electrolyser machines. This would reduce the cost of manufacturing the equipment for five years, thereby boosting the production of green hydrogen.

The Ministry of Coal (MoC) set up a Task Force and an Expert Committee to produce a road map for coal-based hydrogen production. The MoC issued its Roadmap for Coal to Hydrogen Production report in May 2022, suggesting that India has many ways in which hydrogen produced from coal can be used, such as in refineries, fertiliser units, steel plants and the transport sector.

In February 2023, the Ministry of Finance, following the National Green Hydrogen Mission, announced that it will facilitate the transition to a low carbon economy and reduce dependency on fossil fuel imports. It will put INR350 billion (USD4.2 billion) into capital investment in such objectives.

The Central Electricity Authority, under its obligations in section 3(4) of the Electricity Act, 2003, issued the Draft National Electricity Plan 2022 for the five years from 2022. The plan emphasises the need for much research into the production of green hydrogen in the coming years.

These much-needed initiatives have already led to significant interest and investment from green hydrogen businesses, and are important steps in the right direction.

Prashanth Sabeshan is a partner and Swati Rawat is a senior associate and Ramya Parthasarathi is an associate at Dentons Link Legal