New Green Hydrogen Policy, Another Step Towards Reaching the Net Zero Emissions Target

ISTS charges for hydrogen and ammonia projects to be waived for 25 years


In line with the National Hydrogen Mission launched last year, the Ministry of Power announced a ‘Green Hydrogen Policy’ to help India meet the production target of 5 million tons of green hydrogen by 2030 and the related development of renewable energy capacity.

As per the new policy, green hydrogen and green ammonia will be defined as ammonia and hydrogen produced by way of electrolysis of water using renewable energy that has been banked and hydrogen and ammonia produced from biomass.

The policy states that the waiver of interstate transmission charges will be granted for 25 years to the producer of green hydrogen and green ammonia for projects commissioned before June 30, 2025.

Also, green hydrogen and green ammonia can now be produced from using renewable energy from a co-located renewable energy project or remotely located renewable energy projects, whether set up by the same developer or third party or procured from the power exchange.

The green hydrogen or green ammonia plants will be granted open access within 15 days of the receipt of the application.

The banking will be permitted for 30 days for the renewable energy used for making green hydrogen and green ammonia.

The banking charges will be determined by the state commission, which should not be more than the differential cost between the average cost of the renewable energy bought by the distribution licensee during the previous year and the average market clearing price in the day-ahead market (DAM) during the month in which the energy has been banked.

Land in renewable energy parks will be awarded to green hydrogen and green ammonia manufacturing units.

The government also proposes to set up manufacturing zones for the green hydrogen and green ammonia manufacturing plants.

Speaking on the Green Hydrogen Policy, Mayank Bansal, Chief Commercial Officer at ReNew Power, said, “Currently, manufacturing green hydrogen is a costly proposition, and in cognizance of this, the government has correctly waived off ISTS charges for 25 years, which will help in bringing down the cost of green hydrogen. The government has also allowed banking of power for 30 days, which will help improve the utilization of capital-intensive electrolyzer assets.”

“We believe that more clarity is needed on the application of cross-subsidy surcharge and additional cross-subsidy surcharge since the policy allows production at different locations by different parties. Further, the decision to include biomass as a fuel for the generation of green hydrogen is a step in the right direction,” Bansal further added.

The green hydrogen and green ammonia manufacturers will also be allowed to set up bunkers near ports to store green ammonia for export by shipping. The respective port authorities will provide the land for storage.

Renewable energy consumed in green ammonia and green hydrogen production will count towards the consuming entity’s renewable purchase obligation (RPO) compliance. The renewable energy consumed beyond the RPO target of the producer will be considered towards RPO compliance for the distribution company (DISCOM) in whose area the project is located.

The DISCOMs may also procure and supply renewable energy to the manufacturers of green ammonia and green hydrogen in the states. The DISCOMs will only charge for the cost of renewable energy procurement as well as the wheeling charges as determined by the state commissions.

The Ministry of New and Renewable Energy (MNRE) will set up a portal for all clearances and permissions required for manufacturing, transportation, storage, and distribution of green hydrogen and green ammonia.

To achieve competitive prices, MNRE might aggregate demand from various sectors and consolidate bids to procure green hydrogen and green ammonia.

Recently, MNRE signed a strategic partnership agreement with the International Renewable Energy Agency (IRENA), signaling its intent to strengthen further its collaboration with IRENA in the field of renewable energy. MNRE and IRENA would work closely to assess the potential role green hydrogen could play as an enabler of the transition in India as a new source of national energy exports.

Earlier, the Indian Renewable Development Agency (IREDA) launched a program to promote the manufacture and deployment of infrastructure for emerging technologies and green mobility. The emerging technologies include battery energy storage systems (BESS), projects involving the production of green hydrogen (electrolyzers), fuel cells, manufacturing and assembling plants of electric vehicles, and waste recycling units.

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