India’s target of reaching 5 million tonnes per annum (mtpa) of green hydrogen production capacity by 2030 remains ambitious, with only around 10,000 tonnes per annum (10 ktpa) of operational capacity currently in place, according to a new report by SBICAPS.
The report says most announced projects remain in the pilot or early development phase, with a significant lead time associated with projects, owing to technological novelty, delays in equipment procurement, and time taken to build RE power farms. Further, the project economics depend on government support.
“These factors mean that the 1.2 mtpa of GH2 capacity auctioned under SIGHT Scheme acts as a ceiling for possible production by 2030, unless auction velocity surges by in the next 12 months,” states the report.
According to the report, India accounts for 10% of the global hydrogen consumption now. From current production of <10 ktpa, green hydrogen output could skyrocket to over 2 mtpa as per the IEA. Against this, 1.2 mtpa of GH2e has been auctioned as per SIGHT till now.
SBICAPS estimates that using the SIGHT outlay, 2.7 mtpa in total may be incentivised, implying a further runway of 1.5 mtpa. Much of this will have to be auctioned by CY27 at least to get onboard by 2030.
The National Green Hydrogen Mission’s SIGHT scheme has a budget of INR 175 billion, including INR 44.4 billion allocated for electrolyzer manufacturing and INR 130.5 billion for green hydrogen and derivative production, of which about 55% has been allocated.
Beyond direct incentives, the report points to a regulatory push supporting the green hydrogen and derivatives sector, including the interstate transmission system (ISTS) charge waiver for green hydrogen projects until 2034, duty benefits under Section 26 of SEZ ACT, 2005 for installation & O&M of RE equipment for captive consumption, selective exemptions from Approved List of Models and Manufacturers (ALMM) requirements for captive renewable energy projects located inside the SEZ, and 100% foreign direct investment under the automatic route.
State governments are also extending support. According to SBICAPS, 15 of the 24 States studied have announced green hydrogen policy, with eight more in early stages. The typical structure of State incentives comprises subsidies on on power charges, land sops, and project capex support.
The report notes under Mode 2A SIGHT auctions for green ammonia supply, capacity totaling 724 ktpa was awarded. Most of the offtakers are fertiliser companies which use ammonia as feedstock and seek to supplement it with green ammonia across. “The lowest price discovered was INR 52/kg after factoring incentive. While this is higher than grey ammonia price, it remains amongst the lowest for green ammonia discovered worldwide,” as per the report.
Under Mode 2B, which supports green hydrogen supply to oil and gas companies, of the first tranche of 200 ktpa, 30 ktpa has been awarded.
The report notes that electrolysers are a saturated space globally, with significant overcapacity in China. It recommends that investments here should mainly cater to building a national R&D base for newer technologies, while relying on imports during the initial green hydrogen projects. As far as end use is concerned, refining makes, by far, the best economic use case for adoption, following by ammonia (for fertilisers).
