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India's pursuit of a future powered by sustainable energy has given major momentum to green hydrogen, which has been identified as a critical component in decarbonising numerous industries. Anticipated to be released in 2024, the Union Budget has the potential to address major issues facing the green hydrogen industry, especially manufacturing. Since the decarbonisation of the fertiliser and refinery industries depends heavily on hydrogen, lowering the cost of producing green hydrogen can significantly increase the fuel's acceptance.
Industrial leaders have requested assistance and incentives to reduce the cost of green hydrogen production to roughly $1 per kilogramme from the existing range of $3-$5 per kilogramme. There are benefits and sops to minimise the cost of electrolysers and electricity supply.
Current hurdles and incentives for Green Hydrogen
Despite fiscal support from both state and federal governments, problems remain in the green hydrogen landscape. These consist of discrepancies in pricing, excessive storage and transportation costs, underdeveloped supply chains, and a deficiency of testing infrastructure. The Union Budget 2023 allocated ₹19,700 crore for the Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme.
Current challenges include a pricing difference between green and grey hydrogen, storage and transportation costs, underdeveloped supply networks, and a lack of testing infrastructure. The Green Hydrogen Policy, 2022 and the production-linked incentive (PLI) programme provide subsidies, although other measures are required to cut costs further.
The Union Government now provides a $54 per kilowatt (kW) subsidy for electrolyser production in the first year via the PLI programme. Despite this incentive, the impact of lowering the cost of green hydrogen production is minor, with a $0.1 per kilogram decrease. Therefore, it is imperative to implement other steps, such as strengthening the PLI scheme's subsidy assistance, since this might lead to even greater savings on the cost of the electrolyser and, ultimately, the whole cost of producing green hydrogen.
Proposed Solutions in the Union 2024 Budget:
To address the issues and move the green hydrogen industry ahead, we anticipate that the 2024 budget will include the following solutions:
Cost-Effective Production Methods
The main obstacle in the manufacturing of green hydrogen is its cost. The government can promote the development of cost-effective and scalable production technologies, particularly electrolysis powered by renewable energy. Research and development (R&D) subsidies should be increased to spur technological improvements and increase the economic viability of hydrogen production.
Hydrogen Storage Technologies
Hydrogen storage technology advancements are critical for increasing energy density, safety, and ease of transportation. Funds for creating and applying cutting-edge storage technologies, including chemical carriers or solid-state storage, may be allotted in the budget.
Subsidies, Land Acquisition, and Tax Rebates
The government may provide subsidies to decrease the financial burden for green hydrogen producers. Reducing the GST rate for electrolyser manufacture from 18% is critical for the sector's growth. A streamlined land acquisition process can help implement a project more quickly. Tax credits for green hydrogen projects are another way to encourage private investment and promote the sector's expansion.
Transportation
The green hydrogen sector confronts a significant transportation gap, as hydrogen can fracture steel and other standard pipelines. Therefore, either the existing natural gas pipelines need to be updated or new infrastructure needs to be built to provide a steady, safe, and efficient pipeline system; these tasks would demand significant financial support. It follows that incentives targeted at resolving this issue are anticipated to be included in the 2024 budget.
As India sets itself at the forefront of the global green hydrogen revolution, the 2024 budget will be critical to the sector's growth. India can achieve its ambitious goal of producing 5 million metric tonnes per annum (MMTPA) of green hydrogen by 2030 and pave the way for a cleaner and more sustainable energy future by addressing the issues with electrolysers, storage, and transportation mentioned above.
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