The green scheme

India’s journey towards a sustainable and green energy future has taken a significant leap forward with its ambitious plans to become a global hub for the production of green hydrogen. Chandu Gopalakrishnan reports

What is common among Reliance Industries, L&T and ONGC? Apart from the fact that they are India-listed companies, these three enterprises lead the pack of businesses that eye the pie of India’s nascent green hydrogen business.

The country aims to reduce its carbon emissions and minimise fossil fuel imports by revolutionising its energy sector with the use of green hydrogen. This shift marks a crucial milestone in India’s pursuit of becoming a net-zero carbon emitter by 2070.

“Hydrogen emits only water when burned but creating it can be carbon intensive,” wrote Emanuele Taibi, head of power sector transformation strategies at the International Renewable Energy Agency (IRENA).

“Depending on production methods, hydrogen can be grey, blue or green – and sometimes even pink, yellow or turquoise. However, green hydrogen is the only type produced in a climate-neutral manner, making it critical to reach net zero by 2050.”

As India’s green hydrogen production capacities expand, the potential for exports also grows. India’s vast coastline, abundant renewable energy resources and a strong industrial base position it as a potential global supplier of green hydrogen.

This aligns with the country’s goal of reducing carbon emissions and contributing to global efforts to combat climate change.

“Unlike renewable power, which is the cheapest source of electricity in most countries and regions today, electrolysis for green hydrogen production needs to significantly scale up and reduce its cost by at least three times over the next decade or two,” wrote Taibi. “However, unlike CCS [carbon capture and storage] and methane pyrolysis, electrolysis is commercially available today and can be procured from multiple international suppliers right now.” Akin to what the new space policy did for India’s moon mission, a host of public and private sector enterprises have hopped on the bandwagon.

Policy change fuels new sector

The groundwork for this transformation was laid with the announcement of the National Green Hydrogen Mission (NGHM) in January 2022, which is part of the larger plan of becoming energy independent by 2047, and achieving net-zero carbon emissions by 2070.

“Green hydrogen is considered a promising alternative for enabling this transition. Hydrogen can be utilised for long-duration storage of renewable energy, replacement of fossil fuels in industry, clean transportation, and potentially also for decentralised power generation, aviation and marine transport,” said an NGHM mission statement.

The NGHM aims to foster domestic manufacturing capabilities, attract investment and drive economic growth. It also prioritises job creation, and backs research and development initiatives in the sector.

This mission, aligned with India’s overarching goal of achieving “green growth”, received substantial financial backing in the Union Budget 2023, with an allocation of INR102 billion (USD1.2 billion) to the renewable energy sector.

The NGHM comes with incentives worth INR174 billion for the production and manufacturing of electrolysers. This mission signifies the government’s strong intent to make India a global player in the green hydrogen market.

The mission is set to be implemented in a phased manner and has an outlay of INR197 billion from FY2023-24 to FY2029-30.

In addition to this substantial financial backing, the government has also taken various other steps to promote green hydrogen production. These include extending waivers of transmission fees for renewable power to hydrogen manufacturing plants commissioned before January 2031, a move aimed at reducing operational costs for green hydrogen production facilities.

The policy change aligns with the global move towards green hydrogen. Public and private sector conglomerates in India were quick to seize the opportunity, pledging to accelerate India’s green hydrogen mission. Companies like Adani Group, Reliance Industries Ltd (RIL), Indian Oil Corporation Ltd (IOCL), and many others are investing billions of dollars to develop green hydrogen production capacities.

Public, private sectors pitch in

Praveen Raju, a partner at Spice Route Legal in Mumbai, classifies primary players in the hydrogen sector as: (1) producers; (2) electrolyser manufacturers; (3) distributors or retailers; and (4) consumers.

Apart from the four core players, there are also ancillary stakeholders such as EPC (energy performance contracting) contractors, O&M (operation and maintenance) service providers, storage providers and transporters.

“In India, large upstream oil & gas companies and power producers are the primary participants in the production of green hydrogen – the likes of OIL, NTPC, Adani and Reliance Industries,” Raju tells India Business Law Journal.

“Some renewable energy companies like ReNew Power and Greenko are also foraying into production. On manufacturing, while well-known international manufacturers like Ohmium and Blume Energy have already made an entry in the Indian market, domestic players like Avaada and Jackson Green are also making their mark.”

According to Raju, distribution or retailing of green hydrogen is too early in India, but it is expected that players will be the usual large downstream oil and gas distribution companies, which already have a wide network across the country.

At present, consumers of green hydrogen are largely from infrastructure sectors such as cement, steel and shipping.

“However, with innovation, we believe that hydrogen would also be a crucial and important source of fuel for transportation and other sectors,” says Raju.

Ramya Parthasarathy, an associate at Dentons Link Legal in Bengaluru, says that while it may be a little early to mention that the sector is thriving, “the plan and roadmap laid down by the government authorities make the sector open to investments by relevant dominant players in the Indian market, mainly renewable energy giants.

“With the relaxations and policy incentives announced by the central and state governments, it is fair to assume that the players in this new field of manufacture have weighed out risks both commercially and technically,” she says.

Indian companies including Reliance Industries, Indian Oil, NTPC, Adani Enterprises, JSW Energy and ReNew Power have announced their respective initiatives and investments in the green hydrogen sector, specific to setting up manufacturing units in India.

While it was expected that public sector energy giants such as IOCL, ONGC, BPCL and NTPC will have their operations aligned with the government’s green hydrogen plan, the private sector in India has not lagged in its commitment.

Many conglomerates have already made significant investments and set ambitious targets for green hydrogen production.

This brings us to a crucial question: What are the regulations that govern the green hydrogen manufacturing and distribution operations in India?

Regulatory landscape

Although India had been regulating hydrogen use through policies, there were no specific regulations in place for establishing green hydrogen enterprises.

The notification on 19 August this year, issued by the Ministry of New and Renewable Energy (MNRE), has outlined a clear definition for green hydrogen as hydrogen derived from renewable energy sources.

“Since there is no dedicated legislation for green hydrogen in India, it would be regulated by the currently existing legislation like the Manufacture, Storage, and Import of Hazardous Chemical Rules (1989), the Gas Cylinders Rules (1981), the Environment Impact Assessment Notification (2006), the Factories Act (1948), the Petroleum and Natural Gas Regulatory Board Act (2006) etc.,” notes Akhand Chauhan, a partner at Maheshwari & Co in New Delhi.

“The approvals and licence for the commissioning would include, without limitation: consent to establish and consent to operate; no objection certificate from the Fire Department; environmental clearance from the concerned regulatory body; registration under the Factories Act; and approval from the Petroleum and Explosive Safety Organisation [PESO],” says Chauhan.

Spice Route Legal’s Raju says the definition of green hydrogen notified by the MNRE “has removed some ambiguities around the criteria for classifying green hydrogen. Once the MNRE rolls out a detailed methodology for certification of green hydrogen, stakeholders will be able to check the quality and origin of green hydrogen with more certainty, and will incentivise investors to participate.”

According to Raju, the Electricity (Promoting Renewable Energy through Green Energy Open Access) Rules (2022) will play a significant role in facilitating supply and procurement of green energy for green hydrogen projects. The open access rules enable any person having a consumption requirement of 100KW or more to: procure renewable energy through open access; have provision of approval for open access within a timeline of 15 days; and have certainty on charges for availing renewable energy through open access, enabling consumers to make a cost-benefit analysis.

Banking of such renewable energy (subject to certain limits) with the distribution licensee is also permitted. Grid Controller of India Limited will act as a central nodal agency and provide a single window portal for the application of open access.

“Other than specific incentives and regulatory policies announced by the government for the green hydrogen industry, legal considerations for producers of green hydrogen in India are not very different from other energy companies in India,” says Spice Route Legal’s Raju. “Manufacturers of electrolysers will have to comply with the requirements that are generally applicable to manufacturers.

Rimali Batra, an associate partner at DSK Legal in New Delhi, says that states such as Andhra Pradesh, Rajasthan, Odisha, Uttar Pradesh, Kerala, Madhya Pradesh and West Bengal “have either implemented or are in the process of implementing policies, or amending their state acts, to promote green hydrogen production”.