Implementation of Hydrogen Mission is crucial

Context

• India has set goals to achieve Net Zero by 2070 and energy independence by 2047.
  • A key component of India’s energy transition is increasing the use of renewable energy across all economic sectors.
  • Green hydrogen is regarded as a promising substitute for making this transition possible.
• Hydrogen can be used for clean transportation, long-term storage of renewable energy, and possibly even decentralised power generation, aviation, and maritime transportation. It can also be used to replace fossil fuels in industry.
  • As a result, the National Green Hydrogen Mission was established last year with lofty goals.

Relevance

GS Paper -3: Climate Change, Green Energy, Hydrogen Mission

Mains Question

The Green Hydrogen Mission is what? What problems do these solutions potentially address? (250 Words)

Mission for Green Hydrogen:

• Green hydrogen is a potential replacement for fossil fuels and can be used for electricity generation, ammonia production, fertiliser production, steel production, and transportation (cars, trucks, trains, ships, and aircraft).
• Last year, the National Green Hydrogen Mission received approval, with the following goals:
  • Establishing India as a major global producer and supplier of green hydrogen.
  • Development of export markets for green hydrogen and its byproducts
  • Less reliance on imported feedstock and fossil fuels
  • Building up domestic manufacturing capacity
  • Attracting capital and commercial opportunities for the sector
  • Creating opportunities for economic growth and employment
  • Aiding R&D initiatives
• The following mission results are anticipated by 2030:
  • Creation of a green hydrogen production capacity of at least 5 MMT (Million Metric Tons) annually, along with an increase in the nation’s renewable energy capacity of about 125 GW.
• More than Rs. 8 lakh crores worth of investments in total
  • The creation of more than 6 lakh jobs
  • A cumulative decrease in imports of fossil fuels of over Rs. 1 trillion crore
  • Reduction of annual greenhouse gas emissions by almost 50 MMT

Varieties of hydrogen

• Hydrogen is divided into three groups, namely Grey, Blue, and Green, depending on the type of extraction method used.
• grey hydrogen
• It is created either through the gasification of coal or lignite (brown or black), or through the steam methane reformation (SMR) of methane or natural gas. (gray).
• These typically involve lots of carbon-intensive procedures.
• the blue hydrogen
• To cut down on carbon emissions, it is made by gasifying coal or natural gas with carbon capture and storage (CCS) or carbon capture use (CCU) technologies.
• Hydrogen that is green
• It is created by electrolyzing water with electricity produced from renewable sources.
• The carbon neutrality of the electricity source is ultimately what determines the carbon intensity.

Green hydrogen challenges:

• Cost :
  • Compared to the fossil fuel it can replace, green hydrogen is much more expensive.
• Various phases of development:
  • Worldwide, downstream uses are in various stages of development.
• Inducement of Demand:
  • The development of a green hydrogen economy, which can make the transition to net zero feasible, is receiving funding from governments in the advanced industrial economies.
• Additionally, this would give their companies a competitive edge.
• India is attempting this alongside the developed economies.
  • As green hydrogen production ramps up, it will be crucial to make sure that demand for downstream applications keeps pace with supply.
• The task at hand is more challenging than designing a Production Linked Incentive Scheme for a mature product in an established market because domestic demand for green hydrogen must be generated.

The use of competitive procurement as a remedy:

• Choosing a procurement method that is competitive may be a solution.
• It establishes a competitive industry structure that allows India to fully benefit from the likely global price decline by accelerating movement down the cost curve through successive bids.
• For instance, when the cost of solar power was initially about four times the cost of thermal power and has now obviously decreased, this approach gave us remarkably good results in the National Solar Mission.
• For the Hydrogen Mission, it would be necessary to establish the minimum size of plants for least expensive production for the upstream production of green hydrogen and its downstream uses.
  • As examples, it is possible to determine the minimum size of a new fertiliser plant, a green ammonia production unit, and a green hydrogen production plant.
• The supply and demand of green ammonia and green hydrogen would then need to match for the supply chain, working backwards from the fertiliser plant.
• In order to produce green hydrogen at the lowest cost, competitive bids may be requested.
• This green hydrogen cost allows for the competitive pricing of green ammonia.
• The price of the inputs would then serve as the starting point for soliciting bids for the production of green fertiliser.
• To close the price gap between the market-determined price of green fertiliser and the price set by the government for sale to farmers, a budgetary subsidy may then be provided for each tonne of green fertiliser produced.
  • This subsidy would obviously be much higher than the subsidy provided per tonne for the normal production of fertiliser.
  • The intermediate stages wouldn’t require any kind of subsidy, though.
• In a similar vein, the government could sign a long-term contract for all aspects of a green steel plant’s production.
  • Since this would be among the world’s first green steel plants, our major steel producers should be persuaded to join forces and establish the plant so that everyone can become familiar with the new technology.
  • A cost plus basis would then be required for the purchase price.
• The government, as well as its agencies, may use this more expensive steel in all of its construction projects.
• The budgets for the construction projects could easily absorb the impact on the final cost per square meter, which would be minimal.
• No direct assistance would be required.
• The supply chain for fertiliser production up to green ammonia would be the same for shipping.
  • A long-term contract indicating the price at which green ammonia would be supplied could be used to conduct a competitive procurement of green shipping services starting at a reasonable future date.
  • By doing this, the risk associated with building a cargo ship that uses green ammonia would be entirely eliminated.
  • Since freight costs make up a relatively small portion of the Indian user’s overall costs, he can easily absorb the higher cost of the shipping service.
• Again, a subsidy would not be required in this situation.

Need of the Hour

• Through a credit enhancement mechanism, the government, multilateral development banks (MDBs), and domestic development banks (DDBs) can support the green energy sector.
• Making green hydrogen’s cost comparable to the fuel it would replace could be accomplished by combining a lower GST rate and/or a direct subsidy per kg of green hydrogen used. This could be done for the market-based competitive chemical, pharmaceutical, and other industries.
• This would also need to be done if green ammonia was to be used to generate electricity in order to meet seasonal spikes in demand.
• However, the costs of transporting and storing hydrogen are high.
• If India is to reach the technological frontier, not only as a user but also as an innovator, public funding for technology development and cost reduction would be crucial.
  • There is a lot of young talent available, so this has a lot of potential.
• The challenge requiring leadership would be financing the private sector in partnerships with our research institutions to work to develop scalable outcomes.
• Through creative financing models and policies, public institutions can encourage the private players to contribute to the urgently needed green energy sector.

Conclusion:

• The future for the green energy sector appears to be very promising given the benefits it provides, the government incentives for the development of green energy infrastructure, and the rising demand from environmentally conscious consumers.