Implementation of Pilot Projects for the use of Green Hydrogen in the Shipping and Steel Sector under the National Green Hydrogen Mission

INTRODUCTION

The Ministry of New and Renewable Energy (“MNRE”) has identified the shipping and steel sectors as sectors with significant potential for decarbonisation with the use of green hydrogen. To assess this potential, MNRE has introduced scheme guidelines for the implementation of pilot projects in the shipping and steel sector (“Scheme”). These projects will be implemented through the Ministry of Ports, Shipping and Waterways (“MoPSW”) and Ministry of Steel (“MoS”) in the shipping and steel sector, respectively along with Scheme Implementing Agencies (“SIA”) nominated by the respective ministries.

OBJECTIVE OF THE SCHEME 

1. Support the deployment of green hydrogen and its derivatives as fuel for ship propulsion, including bunkering and refuelling and steel production, on a pilot basis.
2. Validate the technical feasibility and performance of green hydrogen and its derivatives in ship propulsion and iron and steel manufacturing in real-world operational conditions.
3. Assess the effectiveness and economic viability of the use of green hydrogen and its derivatives in the shipping as well as iron and steel sectors.
4. Evaluate the performance of green hydrogen and its derivatives-based (i) propulsion, bunkering, and refuelling systems and (ii) low-carbon iron and steel, and identify the areas for improvement.
5. Evaluate the economic viability of the use of green hydrogen and its derivatives in the shipping and iron and steel sectors.
6. Demonstrate safe and secure operations of green hydrogen and its derivatives-based (i) propulsion, bunkering, and refuelling systems and (ii) production of low-carbon iron and steel.

SCOPE OF THE SCHEME

The Scheme aims to leverage existing resources and infrastructure available for transport, storage, and use of green hydrogen and its derivatives in the shipping and iron and steel sector. The SIA/executing agencies selected for the projects (“EA”) will share knowledge and the outcome of the pilot projects through project completion reports, monitoring reports, workshops, and publications to disseminate findings, best practices, and lessons learned from the pilot. 

For pilot projects in the steel sector, the Scheme would primarily fund capital equipment required for the use of hydrogen in the iron and steel manufacturing process and expenses on account of hydrogen production, land, etc. will not be funded under the Scheme. The funding of the approved projects must not exceed 50% of the total cost of the project but may be increased to 70% in the case of a consortium of independent steel producers and direct reduced iron (“DRI”) industry. The Scheme also outlines thrust areas to provide support for the development/selection/validation of commercially viable technologies for any innovative use of hydrogen which can reduce carbon emissions in iron and steel production including the use of hydrogen (i) in the DRI process using vertical shaft/kiln and substitute the use of fossil fuels gradually, and (ii) in the blast furnace.

For pilot projects in the shipping sector, the scope of the Scheme will include funding for the capital expenditure to retrofit existing ships with green hydrogen and its derivatives-based propulsion system (“Component A”) and creating bunkering and refuelling facilities on the ports (“Component B”). The expenses related to the production of green hydrogen will be excluded from such financial support. The Shipping Corporation of India (or its successor, in case of disinvestment) will be the SIA for Component A and the SIA for Component B will be subsequently notified by MoPSW.

IMPLEMENTATION APPROACH 

1. Selection of application areas/ships and ports: For the shipping sector, the SIA will identify ships suitable for retrofitting, considering factors like size, route, and existing technology and MoPSW will identify suitable ports and the SIAs for setting up green hydrogen and its derivatives based bunkering and refuelling facilities.
   
   For the steel sector, the MoS will explore possibilities of taking up projects in consortium mode. The SIA will identify the areas for implementation of pilot projects based on thrust areas or the scope of the Scheme in consultation with the MoS.
2. Call for proposals: The SIAs will issue calls for proposals for the project. CPSUs, state-PSUs, private sector, state corporations, Indian R&D institutions, research labs, academic institutions, and JVs/partnerships of such entities will be eligible to submit such proposals. The submission of each project should contain the name of the EA and in the case of a consortium, a lead agency should be identified, which will function as EA.

3. Evaluation and Award: The proposals will be evaluated in accordance with the criteria specified in the call for proposals. The letter of award will be issued to the EA by the SIA upon receipt of administrative sanction from MNRE.

4. Execution and Commissioning: Work will be executed as per the approved scope of work. For pilot projects in the shipping sector, the SIAs will make all necessary efforts to complete the pilot project, in all aspects, before 31.12.2027 for Component-A and before 31.12.2025 for Component-B.

5. Technical and Regulatory approvals: The EA will be solely responsible for obtaining the safety, environmental, and other required approvals.
6. Testing and Certification: The EA will get necessary testing and certification compliance from concerned agencies.

MONITORING FRAMEWORK

TIMELINES

The Scheme mandates that the grants released will be exclusively earmarked for the project and should not be diverted for any other purpose. If the EA fails to utilise the grant for the sanctioned purpose or fails to complete the project as per the detailed project report, for the steel sector pilot projects, the entire amount of the grant will be refunded with interest as per the general financial rules to MNRE and for the shipping sector pilot projects, appropriate actions will be taken as per the terms and conditions framed by SIA for the award of work.

An extension of up to six months may be granted for the completion of the project based on adequate justification, with the approval of SC, without any penalty. Any extension beyond six months may only be granted with the approval of the MNRE, with suitable penalties which will be specified by SIA in the call for proposals.

FUNDING AND DISBURSEMENT 

For the shipping sector, Rs. 80 crores are earmarked for retrofitting existing ships (Component A) and Rs. 35 crores for the creation of bunkers and refuelling facilities (Component B). For the steel sector, a total of Rs. 455 crores from the outlay of the National Green Hydrogen Mission will be allocated for the implementation of the Scheme till F.Y. 2029-2030. The stages of disbursement of CFA under the Scheme are as follows:

PROJECT  COMPLETION 

The SIA will submit the project completion report to the PAC within one month of project completion. This report will cover the technical aspects of the project, challenges faced, and project outcomes including technical know-how generated along with the data collection, and the recommendations for future projects based on lessons learned.

CONCLUSION

With the falling costs of renewable energy and electrolysers, it is expected that green hydrogen-based steel and shipping operations can become cost-competitive over the next few years. By leveraging these pilot projects, the Scheme aims to assess the technical feasibility, economic viability, and environmental benefits of utilising green hydrogen in steel-making and maritime transportation. The lessons learned from such pilot projects will serve as valuable inputs for scaling and commercial deployment of green hydrogen in both the steel and shipping sectors.