The 2024 scheme: the advent of Green Hydrogen Hubs in India

Sushant Shetty
Fox Mandal & Associates LLP, Mumbai, India
sushant.shetty@foxmandal.in

Disha Malkani
Fox Mandal & Associates LLP, Mumbai, India
disha.m@foxmandal.in

Background

The National Green Hydrogen Mission 2023 (NGHM) is the Government of India’s flagship mission to usher in a Hydrogen revolution in India’s energy sector, with a view to potentially make India a global leader in the Green Hydrogen sector. The NGHM intends to achieve this target by promoting Green Hydrogen production and incentivising the establishment of large-scale infrastructure projects.^[1]

Green Hydrogen Hubs are integrated ecosystems that consolidate the presence of various stakeholders involved in the production, transportation, distribution and consumption of Green Hydrogen products within a designated geography. Under the NGHM’s mandate, the Ministry of New and Renewable Energy (MNRE) is in the process of formulating an overarching regulatory framework for the promotion of Green Hydrogen production in India. In light of this, the MNRE has published ‘New Scheme Guidelines for Setting up Green Hydrogen Hubs under the National Green Hydrogen Mission’ (the ‘New Scheme’) on 15 March 2024. The New Scheme aims to encourage the establishment of Green Hydrogen Hubs and usher in their integration into the renewable energy eco-system. These hubs will be funded by the Central government in collaboration with State governments, local authorities and the private sector in order to propel the market for Green Hydrogen in India.

Notable highlights from the new scheme

The MNRE is inviting proposals from a variety of entities, including private and public sector enterprises, autonomous organisations, joint ventures, partnerships or a consortium of such bodies, referred to as ‘Executing Agency/Agencies’.

The initiative aims to provide financial assistance of up to INR 1,00,00,000 (Indian Rupees One Crore) each, for the creation of at least two Green Hydrogen Hubs.

The Proposals under this initiative will be evaluated on the basis of factors such as proximity to existing renewable energy plants (such as solar or wind parks) and the availability of supportive infrastructure facilities such as storage and transport.

Additional weight will be awarded to proposals where the Executing Agency has already acquired rights to land located in the vicinity of existing refining, steel, shipping, chemical, power, industrial units and/or export terminals/demand centres.

The regulatory landscape

India’s renewable energy capacity has increased by 396 per cent over the last 8.5 years, accounting for approximately 45.1 per cent of the country’s total installed power generation capacity as of April 2024.^[2] This growth in India’s renewable energy sector has been facilitated by several incentives. Opting for 100 per cent foreign direct investment (FDI) in the renewable energy sector through the automatic route, and not imposing sector specific restrictions or conditions for acquiring stakes in Indian renewable energy projects has attracted a considerable influx of capital. In that vein, the guidelines under the New Scheme are a part of the MNRE’s initiatives to further bolster investments into India’s renewable energy sector.

Evidently, efforts are underway to establish a robust framework of regulations and standards to facilitate the integration of Green Hydrogen projects into the existing renewable energy landscape. The NGHM endorses expanding the scope of the existing schemes and incentives in the renewable energy sector for Solar and Wind Parks, Special Economic Zones (SEZs) or other designated Industrial Zones to include Green Hydrogen projects. Extending the benefits of these schemes and incentives to include Green Hydrogen projects can facilitate the uniform, speedy and efficient execution of Green Hydrogen projects in accordance with the prevailing sectoral norms.

At the state level, various initiatives are underway to encourage the development of Green Hydrogen production. Under the NGHM, States were directed to create land banks and facilitate the allotment of land for Green Hydrogen projects in regions suitable for renewable energy infrastructure. Thus, several states have implemented regulations to support the mission. These measures include streamlining the process of land acquisition and obtaining non-agricultural status for the approved project land; and fiscal incentives such as exemptions for Stamp duty and Registration fees.^[3] In this manner, State governments are securing a conducive environment for the successful implementation of the NGHM. Consequently, the regulatory scenario in India shows promising prospects for positive collaborations with domestic and international partners in the development of Green Hydrogen Hubs.

The impact on Indian real estate

Green Hydrogen production faces high barriers to entry, one of which is the cost of acquiring large land parcels. Having detailed guidelines for setting up Green Hydrogen Hubs can help streamline the entire process of land acquisition for this purpose by leveraging the existing real estate and renewable energy infrastructure.

When identifying land for Green Hydrogen Hubs, factors such as proximity to solar/wind parks, ancillary industries, ports and the existing energy infrastructure play a crucial role. Placing Green Hydrogen Hubs in close proximity to industrial zones and demand centres can ease the operation and management of Green Hydrogen infrastructure. Similarly, setting up Green Hydrogen Hubs within SEZs or dedicated renewable energy parks can offer several regulatory, logistical and fiscal benefits by means of streamlining the supply chain. Additionally, the structures and facilities within these zones, can be built and utilised jointly by all the stakeholders therein.

Traditionally, hydrogen supply chains face certain location-based limitations; however, the establishment of Green Hydrogen Hubs will help overcome these limitations by reducing the operational risks and costs associated with production, storage, and distribution of Green Hydrogen products. With the NGHM gaining momentum, the new scheme has come at an optimal time and will offer fresh growth opportunities for all stakeholders in the real estate and renewable energy sectors.

A forward glance

As per the New Scheme, the MNRE, in collaboration with the state governments, will be responsible for framing policies with regard to facilitating land acquisition for the establishment of Green Hydrogen Hubs. Thus, once the proposed projects are awarded, the MNRE is expected to issue detailed guidelines regarding the realisation of the approved plans. These forthcoming policies and regulations along with the incentives and initiatives under the NGHM will augment the presence of Green Hydrogen Hubs in the Indian renewable energy sector.