Budget 2024: Sustainability through clean energy- From Nitin Gadkari to Hardeep Singh Puri and Nirmala Sitharaman to Narendra Modi, all have laid emphasis on this concept for more than half a decade now to ensure high and continued economic growth. Even in the interim Budget 2024, the finance minister highlighted the ‘Panchamrit’ goals– promoting non-fossil fuels– critical to development.“This will work towards energy security in terms of availability, accessibility and affordability,” she had said.Like the Blue economy, an integral part of the development factors has become something called the Green Hydrogen economy. When India hosted the G20 Energy Ministers’ meeting last year, PM Modi acknowledged that it is imperative to lay focus on fuels for the future. “The High-level Principles on Hydrogen are a step in the right direction,” he said.With a focus on green hydrogen, the Modi 3.0 budget could introduce new financial incentives, subsidies, and infrastructure investments aimed at bolstering this nascent industry, which bears the crown of ‘fuel of the future’.The buzz around green energy, net-zero targets by 2070 and electric vehicles has consumed the energy sector and in the vote-on account budget, Nirmala Sitharaman did lay out a few focus points for the government in FY25. However, is this enough and something which puts New Delhi on the map to go green?Moreover, a report by the World Economic Forum and Bain & Capital titled “Green Hydrogen: Enabling Measures Roadmap for Adoption in India” released in January noted that widespread adoption of green hydrogen can significantly reduce India’s carbon emissions and reliance on fossil fuels. It also presents a once-in-a-lifetime opportunity for economic growth through the development of a green hydrogen ecosystem and potential energy export market, it added.Also Read: These infra measures will give a roadmap for the infrastructure for the next five yearsNotably, India currently does not have a sector-specific emissions reduction pathway for achieving the net zero emissions goal 2070, as per energy specialist at Institute for Energy Economics and Financial Analysis (IEEFA), Charith Konda.What has fueled the Hydrogen Sector thus far?In January 2023, the Modi cabinet first approved the National Green Hydrogen Mission (NGHM) which marks the nation’s maiden step towards energy transition via hydrogen. This was set with an aim to meet certain goals by 2030 including developing a green hydrogen production capacity of at least 5 million metric tonnes (MMT) per annum, accompanied by an addition of approximately 125 GW of renewable energy capacity.This ambitious initiative is projected to attract over Rs 8 lakh crore in total investments and create more than six lakh jobs. Additionally, it is anticipated to reduce fossil fuel imports by over Rs 1 lakh crore, contributing to a cumulative abatement of nearly 50 MMT of annual greenhouse gas emissions.The initial outlay for the Mission was set at Rs 19,744 crore, with specific allocations including Rs 17,490 crore designated for the Strategic Interventions for Green Hydrogen Transition (SIGHT) programme, Rs 1,466 crore for pilot projects, Rs 400 crore earmarked for research and development, and Rs 388 crore allocated towards other crucial Mission components.On July 10, ET reported that more than half of the eight companies awarded bids for electrolyser manufacturing under the production-linked incentive (PLI) scheme in January have informed the government they will commission their units by next year, well before the 2026 deadline. John Cockerill Greenko Hydrogen, L&T Electrolysers, Reliance Electrolyser Manufacturing, and Adani New Industries are among those planning to have their manufacturing units operational by 2025.Also Read: ‘More FAME, Less GST’ – What the EV industry wants from FM SitharamanIndia’s hydrogen plan: Work needs to be doneWhile industry experts are happy with the progress the schemes have made, they believe that ‘considerable’ work still needs to be done in certain aspects.Anvesha Thakker, Partner and Industry Lead – Clean Energy, KPMG India noted that several states including Maharashtra and Rajasthan, and the centre have issued policies to accelerate the Green hydrogen ecosystem and many other states are also in the process of doing so.“In general there is good progress. However, considerable work still needs to be done on aspects such as standards, regulations, governance, institutional strengthening, capacity building including at state/ local levels, which otherwise could pose significant challenges as projects move towards implementation,” she said. “As far as states are concerned, there is some progress with memorandum of understanding being signed with developers. However, clarity is still to emerge on which projects are eligible for incentives under the state policies, to what extent and how these would be administered,” Thakker told ET. Vaibhav Kaushik, founder & CEO of Shark Tank India featured start-up Nawgati praised projects like NTPC’s blending of green hydrogen with compressed natural gas (CNG) and the development of hydrogen fuel cell buses. He said that they have demonstrated the feasibility of hydrogen applications in the transport sector.“The government has facilitated bids for substantial renewable energy projects, with a focus on integrating green hydrogen production. This has attracted considerable investment and participation from major industrial players, indicating strong interest and future potential, such as GAIL, which has started India’s maiden project of blending hydrogen, 2% by volume, is being blended into the compressed natural gas (CNG) network and 5% is being blended into the piped natural gas (PNG) network,” he added.Foundation laid in Interim BudgetThe interim Budget for 2024-25 has significantly increased the allocation for the National Green Hydrogen Mission to Rs 600 crore, marking a 102 per cent rise from the previous year’s Rs 297 crore and a fivefold increase from the revised estimate of Rs 100 crore.Budget may be used for boosting manufacturing and R&D with a focus on cost derivation, Konda said.“The allocated budget will be most likely used for providing up to 10 per cent of the cost of producing green hydrogen for the first three years of production of a newly set up hydrogen plant and an incentive per kW for manufacturing of electrolysers starting from Rs 4,440/kW in the first year tapering off to Rs 1,480/kW in the fifth year. In addition, part of the budget may also be allocated for R&D and for establishing export hubs for green hydrogen,” he said.Just last week, the Ministry of New and Renewable Energy also issued norms for funding of testing facilities, infrastructure, and institutional support for development of standards and regulatory framework under the flagship scheme, NGHM. Further, the scheme will have a total budget of Rs 200 crore and will be implemented till FY26, as per the government.The water hurdleThe production of green hydrogen requires water for the electrolysis process, underscoring the need for access to clean water as a resource. Given that several states are dealing with water scarcity, it is only imperative to address the potential impacts and explore sustainable solutions.Anvesha Thakker highlighted that to address the same, India needs to plan for water desalination plants, which would have a minimal burn on the pocket.“Production of hydrogen requires a very high amount of water. For delivering 5 MT of green hydrogen per year as per the National Hydrogen Policy ambition, we would require 45 to 60 MT of demineralised water, translating into roughly 99 MT to 132 MT of freshwater. This can be quite a challenge in water scarce regions of India, thus necessitating the utilisation of seawater desalination,” she explained.What the sector needsAs already established, the NGHM is on its path to lay the foundation for the Hydrogen ecosystem. However, as per industry experts, certain challenges need to be addressed.“Despite progress, challenges such as high production costs, regulatory ambiguities, and infrastructure limitations have constrained the rapid adoption of green hydrogen. Currently, there is a need for a more robust supply chain infrastructure and clearer mandates for hydrogen use in domestic industries,” Kaushik said.As per KPMG, a focus on incentivising is needed when it comes to facilitating manufacturing in this particular sector.“The manufacturing incentives need to move beyond just electrolysers and incentives are needed to create a holistic manufacturing base for all parts of the hydrogen value chain, especially for end use sectors involving fuel cell vehicles, hydrogen ICE (internal combustion engines), Type-III and IV cylinders for mobility, fuel cell modules, hydrogen and ammonia power generation turbines etc.,” Thakker said.Given the huge amount of renewable energy capacity needed to produce green hydrogen, the players may have to plan for the evacuation of infrastructure. Thakker noted that the network planning for Centre as well as states would need to consider the additional demand for evacuation infrastructure for green hydrogen projects.What the Budget can do?The forthcoming budget has vast potential to boost the hydrogen sector and fast-track things per se, as per experts.Vaibhav Kaushik believes that Aatmanirbharta in local manufacturing may be given a push in the Budget 2024 alongside targeted subsidies and tax breaks for indigenous green hydrogen projects.“Building on the Strategic Interventions for Green Hydrogen Transition (SIGHT) program, we can expect more robust financial incentives aimed at scaling up domestic manufacturing of electrolysers and the production of green hydrogen. The SIGHT program had previously received an outlay of Rs 17,490 crore, and further funding could enhance the competitiveness of Indian manufacturers in the global market,” the Nawgati CEO said.To promote the adoption of hydrogen fuel technologies among consumers and industries, as per Kaushik, the budget can propose several targeted measures such as grants and subsidies for hydrogen production and infrastructure.“…Building hydrogen refueling stations, pipelines, and storage facilities, offering tax credits to companies investing in hydrogen production and infrastructure and lowering the GST on hydrogen fuel and related technologies to make them more affordable for consumers and industries,” he said.Thakker expects the government to address and provide clarity on areas as basic as building an ecosystem.“The broader expectation of the industry is to hear more on debottlenecking the demand side since offtake currently is a key challenge being faced by the green hydrogen/ ammonia developers. Additionally, the industry is also expecting more focus and clarity on areas beyond electrolyzers such as developing ecosystem for hydrogen in transport including fuel cell development, vehicles development, etc,” she said.Thakker highlighted that offtake remains the biggest challenge in the industry. “There is not only scope for more allocations but also for non-monetary measures to bring down cost as well as debottleneck supply of green hydrogen/ derivatives and to create demand. Offtake remains one of the biggest challenges as the price differential between green hydrogen and grey hydrogen is more than 2X which poses significant challenges in securing demand.”Energy specialist Charith Konda also expects budget allocations towards electrolyser manufacturing, green hydrogen and its derivatives like ammonia production, and finally toward the development of green hydrogen hubs.”The development of green hydrogen hubs would entail the development of primary as well as ancillary infrastructure for the production and export of green hydrogen and its derivatives,” he said.