Longer Rope for Green Hydrogen Units to Source RE Sans Transmission Costs

Exemption to bring production cost down by ~$0.01/kg


The government has extended the timeline for green hydrogen/ammonia projects to be eligible for an exemption from inter-state transmission system (ISTS) charges on renewable energy (RE) use. The decision aims to keep green hydrogen production costs down so India could emerge as a global hub.

The Ministry of New and Renewable Energy (MNRE) said that prevailing ISTS charges could add up to $0.75/kg to the cost of green hydrogen production.

The exemption would be available to solar, wind, and hydro, including hydro combined with pumped storage, battery energy storage systems, or projects of any hybrid combination of these technologies commissioned up to December 31, 2030. The waiver would be applicable for 25 years from the date of commissioning.

The ministry reasoned that green hydrogen/ammonia facilities would source renewable energy from different states as the former will likely be set up near export terminals and end-use industries.

“ISTS charges range from ₹1-2 ($0.01-0.02)/kWh depending on the location and would contribute significantly to the delivered cost of RE. Production of 1 kg of green hydrogen requires 55-60 kWh of renewable energy. Therefore, a ₹1 ($0.01)/kWh increase in delivered cost of renewable energy would increase the cost of green hydrogen production by about ₹0.75 ($0.007)/kg,” the ministry note said.

MNRE noted that “waiver of ISTS charges could significantly improve the economic viability for plants for the production of green hydrogen and its derivatives.”

It added that the current order allows for ISTS charges waiver for renewable projects to be commissioned by June 30, 2025. However, industry feedback indicated that the construction period for a large-scale green ammonia facility would likely be 30-36 months, meaning many facilities might miss the current ISTS exemption deadline.

The Green Hydrogen Mission targets producing 5 million metric tons annually by 2030, requiring an additional renewable capacity of 125 GW. The government said that India could be a global hub for production if it can keep the cost down to $1-1.5/kg. About 65-70% of the total production cost is renewable energy.