Electrolyser Program Receives Boost Through Incentive Measures
With the growing global interest in hydrogen as a fuel for mobility, the capacity of electrolysis to produce hydrogen has increased in recent years. Back home, the Indian government is actively investigating hydrogen as another option for greener mobility in the country.
This evolution resulted in a greater focus on electrolyzers, which are critical in producing low-emission hydrogen from renewable or nuclear energy.
The Indian government recently announced an incentive program for the production of electrolyzers. An electrolysis plant uses electricity to separate water (H2O) into hydrogen (H2) and oxygen (O2). It essentially produces hydrogen using water and electricity as inputs. The process is environmentally friendly, with no GHG (greenhouse gas) emissions.
The incentive program is a critical component of the Union Cabinet-approved National Green Hydrogen Mission. The Cabinet has approved a total investment of INR 19,444 crore for the Mission through 2029-30.
With an investment of INR 17,490 crore, the Strategic Interventions for Green Hydrogen Transition Programme is a major financial incentive under the National Green Hydrogen Mission. The Green Hydrogen Transition Program proposes several distinct incentive mechanisms to encourage the production of electrolyzers and green hydrogen locally.
The financial incentives are primarily aimed at “rapidly scaling-up” products. They are both aimed at technological advancement. Furthermore, these are expected to result in cost savings.
Solar Energy Corporation will solicit bids from prospective manufacturers on behalf of the Ministry.
“The net worth of the bidder, as of the last date of the financial year as specified in the tender document should be equal to or greater than INR1 crore per MW of the quoted manufacturing capacity,” the notification said. A bidder could seek qualification based on the financial strength of its affiliates, it further said.
The capacity available for bidding in the first tranche is 1,500 MW and will be divided into two categories: electrolyzer production using any stack technology (Mode I) and electrolyzer production using native stack technology (Mode II) (Mode II).
A maximum of 300 MW will be allocated to a single bidder. The allotment floor capacity is 100 MW. A bidder may bid for both Mode I and Mode II capacity, and any unsold capacity will be carried over to the next tranche.
The incentive scheme for electrolyzers, in particular, will cost INR 4,400 crore. The scheme has five objectives:
1. Maximising local production
2. Enabling lower cost of hydrogen production
3. Beefing up the quality of performance to global levels
4. Improving value addition 5. Promoting technology development
The Ministry of New and Renewable Energy (MNRE) (Hydrogen Division) stated in a notification that the scheme would be implemented through a selection process to award incentives.
MNRE has selected Solar Energy Corporation of India to carry out the incentive scheme; it will be in charge of a variety of activities as mandated by the Ministry. Solar Energy will be paid a fee (0.5% of the incentive amount) for administrative and other services provided.
The scheme offers incentives to electrolyzer manufacturers, with a base incentive of INR 4,400/KW in the first year. The incentive will gradually decrease each year and will be available for five years from the start of production.
The scheme is ostensibly intended to encourage the production of efficient and high-quality electrolyzers. Because the specific energy consumption of electrolyzers has consequences for Green Hydrogen, the incentives will be based on predetermined parameters.
The scheme’s primary goal is to promote indigenous production. Unsurprisingly, the scheme has established a minimum level of local value addition for each year. The local value addition (LVA) is intended to be gradually increased each year, beginning with 40% in the first year.
Any incentive-given electrolyzer producer must achieve an 80% local value addition by the end of the fifth year. The scheme specifies various annual LVA levels for alkaline electrolyzers, proton exchange membrane/solid oxide electrolyzers, and others.
The sale value of the electrolyzer is determined by the GST invoice, excluding net domestic indirect taxes and returns, under the scheme.
Import Value Calculation
The value of imports is calculated using the Bill of Entry filed with the Customs Department, which includes both direct and indirect imported materials and services (including customs Duty). A panel, chaired by the Secretary of MNRE, would review the scheme’s implementation progress regularly.