INCENTIVE SCHEME FOR GREEN HYDROGEN PRODUCTION AND SUPPLY UNDER MODE 2B – SIGHT PROGRAMME 

Green hydrogen is a clean and renewable alternative to traditional fossil fuels, which is produced by using solar or wind power to split water into hydrogen and oxygen, a process called electrolysis. In line with global sustainability efforts, the Government of India announced the National Hydrogen Mission, aiming to establish India as a hub for green hydrogen production and export. The Ministry of Power has initiated the first phase of the ‘Green Hydrogen Policy’ to support this mission. To accelerate the adoption of green hydrogen, the Ministry of New and Renewable Energy (“MNRE”) introduced the “Strategic Interventions for Green Hydrogen Transition (“SIGHT”) Programme – Component II: Incentive Scheme for Green Hydrogen Production and Supply” (“Scheme”). 

The primary objectives of the Scheme are –

  • Maximise green hydrogen production;
  • Foster the overall transition towards sustainable energy practices;
  • Contribute to India’s energy security;
  • Address environmental concerns related to traditional energy sources; and 
  • Make green hydrogen economically viable to enable its integration into various industries.
KEY FEATURES OF THE GREEN HYDROGEN SCHEME
  1. Implementation Agency : The oil and gas companies, along with the Centre for High Technology, nominated by the Ministry of Petroleum and Natural Gas, will carry out the implementation of the Scheme.
  2. Green Hydrogen Standard :  The bidder is required to adhere to the ‘National Green Hydrogen Standard’ as notified by MNRE for the green hydrogen they produce and supply.
  3. Incentive : The incentive, determined at INR 50/kg for the initial year, INR 40/kg for the subsequent year, and INR 30/kg for the third year, will be granted based on the production and supply of green hydrogen. This support will be extended over three years, starting from the initiation of such production and supply.
  4. Restrictions : In the event that a bidder receives an incentive under Mode 1 of the SIGHT Programme, eligibility for an incentive under Mode 2B is limited to additional capacity only.
  5. Capacity Allocation : Under Mode 2B, oil and gas companies will solicit bids by aggregating demand and initiating a competitive selection process with a fixed incentive. This process aims to secure the production and supply of green hydrogen at the most economical rates, applicable to single or multiple refineries. For the initial phase, known as tranche 1 of Mode 2B, the available capacity for bidding is set at 200,000 Metric Tonnes (“MT”) of green hydrogen per annum. Any additional capacity beyond this will be communicated by MNRE in subsequent tranches.
  6. Bidding Process : Bidders must provide quotations for the following:
    • a consistent annual production capacity of Green Hydrogen to be supplied, which should remain unchanged throughout the Hydrogen Purchase Agreement’s duration; and
    • the price of Green Hydrogen in INR/Kg.
  7. Eligibility for Bidding : The bidder’s net worth, as of the final date of the previous financial year, must be at least INR 15 crores per thousand MT per annum of the quoted production and supply capacity of green hydrogen.
  8. Payment of Incentives : The allocated capacity to a bidder will remain consistent throughout the duration of the Hydrogen Purchase Agreement. The annual incentive payout for any given year will be determined based on either the allocated capacity or the actual production and supply in kilograms, whichever is lower.
  9. Miscellaneous : Other details such as earnest money deposit, performance bank guarantees and the draft of the hydrogen purchase agreement will be set out in the tender documents. 
THE WAY FORWARD

The implementation of the Scheme by MNRE signifies a crucial step forward in India’s commitment to fostering sustainable energy practices and creating a robust marketplace for green hydrogen. By involving oil and gas companies and the Centre for High Technology in the implementation process, the government aims to leverage industry expertise and technological advancements in the successful execution of the program. 

To summarise, the outlined features and parameters of the SIGHT Programme present a strategic roadmap for the systematic and sustainable growth of green hydrogen production. This roadmap aligns with India’s broader goals of achieving energy security and environmental sustainability. As an energy law firm and as legal advisor to various stakeholders in the green hydrogen market, we look forward to the issuance of tenders under Mode 2B. 

Feel free to reach out to our energy experts Praveen Raju, Amoolya Khurrana, and Janhavi Joshi, in case you have any queries.