India has released guidelines for the second round of its clean hydrogen production funding scheme, offering subsidies to a total of 450,000 tonnes of hydrogen per year.
Tranche-II of the country’s Incentive Scheme for Green Hydrogen Production will offer producers a three-year incentive with caps set at $0.61/kg in the first year, $0.49/kg in the second and $0.37/kg in the third.
The programme’s auction will offer funding in under two “buckets”: technology agnostic pathways for 410,000 tonnes per year (tpy), and biomass-based pathways for 40,000 tpy.
Bidders in Bucket I will have to submit applications for projects producing between 10,000 tonnes and 90,000 tpy, while Bucket II projects will need to produce between 500 and 4,000 tpy.
With the Solar Energy Corporation of India (SECI) set to oversee the bidding process, bidders will be ranked on the average incentive cost over three years, with capacity planned to be allocated to bidders from the lowest average incentive to the highest.
The auction rounds comes after Tranche-I saw an oversubscription of around 100,000 tonnes of hydrogen per year. Selected projects, with a combined capacity of 450,000 tpy secured average incentives of $0.48/kg.
Coming under the Indian Government’s $2.1bn Strategic Initiative for Green Hydrogen Technologies (SIGHT) scheme, as part of the wider Green Hydrogen Mission, the funding is hoped to support the nation’s goal of producing five million tonnes of hydrogen per year by 2030.
However, an Institute for Energy Economics and Financial Analysis (IEEFA) report said India’s drive towards green hydrogen production could be slowed by low incentive rates.
The report said the levelised cost of hydrogen (LCOH) in India ranged between $4.5-6.3/kg and suggested the SIGHT scheme incentive rates did little to significantly reduce green hydrogen costs.
Read more: India’s green hydrogen push faces challenges amid low incentive rates, IEEFA reveals
“Considering the nascent stage of green hydrogen in India, bidders believe that higher incentives are essential to establish larger plants, benefit from economies of scale and gain a competitive edge, especially against global producers enjoying substantial incentives,” it said.
Why India is a country to watch when it comes to hydrogen production
It’s now almost a cliché that green hydrogen has become the new gold rush of our times and this is a global phenomenon. Yet it’s quite ironic that only three years ago we were being laughed out of ministers’ offices in many developing economies – particularly India – when we raised the prospect of green hydrogen to address energy imbalances and oil import deficits. Hydrogen was considered expensive and too “over the horizon” for active consideration by incumbent governments.
Now a confluence of factors have worked together to create a paradigm shift in the mindset for clean energy and mobility. The great Covid-19 lockdowns, supply chains collapsing, oil and freight price volatility, geopolitical instability (and recently war in Europe) have helped focus the minds of policymakers and regulators in many countries on implementing strategies to de-lever from our collective addiction to hydrocarbon based energy sources.
At the same time as this was happening, another breathtaking trend was taking place in the developed world: we witnessed massive PE/VC funding rounds for starts-up and companies working on technology to reduce the cost of generating green hydrogen. Both trends together seem to have helped give policymakers and regulators globally the confidence they needed at prioritise clean hydrogen generation as a short and mid-term objective…
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