Hydrogenate While Decarbonising

Context: Green hydrogen’ (H2) which is produced by splitting water (H2O) into hydrogen and oxygen using an electrolyser is emerging as a viable cleaner energy option.

Steps to be taken for promotion of hydrogen economy

• Provide subsidies and tax incentives: to industrial sectors for replacing gas and electricity with H2.
  • This shall cover the difference between the cost of H2 produced, and reference cost of production.
• Introduce regulated pricing for electricity obtained from RE sources, for production of H2, because the cost of electricity accounts for about 70% of total cost of H2 produced through the electrolysis.
• Involving Private Player: As public authorities may not be enough to cover investments needed for maintaining and operating the value chain.
• Engaging MSMEs: Since building expensive electrolysers for H2 generation is unsustainably expensive and logistically complex for small players, major investments shall be done in the entire value chain.
• Promotion of corporate Financing: Leverage funding options through secure senior debts, unsecured senior debt, and common equity.
  • Leasing of financing equipment: Equipment suppliers or commercial banks can lease financial equipment. Banks could provide a leasing agreement with a flat annual payment or pay-per-use agreement linked to the use of the financed assets.
• Promotion of green bonds: This can result in spill-over benefits as issuer of green bonds remains accountable to the investor not only for how the proceeds are applied, but also for the environmental and social impact of the project.

Conclusion: India, as a leader in renewable energy (RE), is in a unique position to take a lead role in the development of a H2 economy. The onus is on all stakeholders to take the lead by initiating right reforms.