The hydrogen economy is in nascent phase, and the regulatory framework will be the guiding factor in determining how sooner, hydrogen economy can help in decarbonization, particularly in difficult-to-abate sectors. Currently, it is used in fuel cells to power vehicles and to generate electricity.. It is also used as a fuel for rockets and in some industrial processes.
Hydrogen is a highly versatile natural resource. It can be used to produce electricity by reacting with air, or can be combusted to produce heat or can be used as a mean of storing renewable energy from other sources like wind energy. This property of hydrogen, particularly, its ability to be used as a medium of storage makes it a great alternative to other methods such as large-scale batteries that produce huge amounts of toxic waste.
India’s current regulatory framework
On India’s 75th Independence Day, the Honourable Prime Minister unveiled the National Hydrogen Mission for making India a global centre of green hydrogen. The Ministry of New and Renewable Energy is slated to release the draft document for National Hydrogen mission that is currently under inter-ministerial consultations.
Some of the key aspects regarding the Hydrogen Mission that are expected to be featured in the upcoming draft are:
1. Targeted policy directions: In the budget highlights released by MNRE, there is expected to be a short term and long-term framework for promotion and development of green hydrogen supply chain.
2. Mandatory consumption in certain industries: Consumption obligations of green hydrogen are likely to be made mandatory in petroleum and fertilizer industries. This expected policy is similar to the existing policy for mandatory purchasing of certain minimum amount of renewable energy by electricity distribution companies.
Recently, the government proposed amendments to the Oilfield (Regulation and Development) Act, 1984 by bringing hydrogen within the ambit of ‘mineral oils’ to allow the government to grant a licence for its exploration and production while promoting ‘ease of doing business’ in the country.
Prior to any such regulations on hydrogen in the country, it would be delusional to think that in the legal and regulatory framework, hydrogen can be treated similar to other energy resources. To develop a sufficient marketing and distribution model for hydrogen in India, various factors have to be taken into considerations, that are unique to this sector. Attraction of investment, financing structures, operational requirements, revenue stream arrangements among many other facets have to be taken into consideration, and this requires a streamlined regulatory framework.
Thus, prior to enactment of laws or policy, it is pertinent to spend resources on R&D to understand if there is a need for a separate hydrogen regulation or if it can be accommodated by amending the existing frameworks similar to Petroleum ministry’s suggestion of including it under the definition of “Mineral Oils”.
Every country closely monitors and regulates aspects of private or public behaviour that may be harmful to governmental and societal interests. To ensure compliance, the rules are backed up by either penalties or incentives. Uniform regulation is required to prevent market failure, to rein in anti-competitive practises, and to promote public interest. Public and private sectors can be encouraged be more indulging by investing in this sector, and foreign investment should be welcomed.
The article thus, discusses the policies and initiatives brought in by Government of India and provides a comparative analysis with the global trend regarding hydrogen policy framework.
Developments around the world USA
The US in 2020 released the Hydrogen Program Plan also known as H2@scale which primarily focuses on “the near-, mid-, and long-term production, delivery, storage, and use of hydrogen derived from diverse domestic energy sources” . The H2@scale plan focuses on mainly “research, development and demonstration of activities related to Hydrogen.”
In the USA, the federal government undertakes research, development and demonstration of hydrogen products and infrastructure which can be implemented by the State or by the industry players.
The US H2@scale plan focuses mainly on research and developments and does not really aim to push the US to becoming a “Hydrogen Economy” like the EU Hydrogen Strategy. Additionally, the H2@scale does not give any preference to “Green Hydrogen.” Thus, this plan mainly concentrated on the R&D related to Hydrogen rather than laying down policies and guidelines to be followed for commercialisation of Hydrogen.
South Korea
In South Korea the Hydrogen Economy Promotion and Hydrogen Safety Management Law (“Hydrogen Law”) was passed in January 2020 and will be applicable from 2021 . The law mainly deals with “hydrogen vehicles, charging stations and fuel cells.” The law provides for framework “subsidies, commercialisation processes, loans and tax exemptions.” It also encourages investment companies to be registered as “hydrogen investment companies” and provides appropriate benefits for being registered as the same.
The law provides for: 1) transparency in the Hydrogen pricing system, 2) safety checks at three stages namely, “technological safety at the design stage, an on-site examination upon completion of a facility, and annual safety checks” and 3) it allows the government to instruct industry operators to install hydrogen charging stations and to install hydrogen fuel cells.
These aspects of the Hydrogen law will help the South Korean government push its agenda for “Hydrogen economy.”
After analysing these foreign frameworks, we can conclude two important takeaways.
1. These countries booming hydrogen economy, have chosen to regulate hydrogen under a separate framework and not including it under the already existing legislation.
2. Both South Korea and the EU have focused on market growth and promoting the concept of a “hydrogen economy” by establishing proper governance.
We shall now analyse these factors under the Indian context and provide a way forward for the currently developing hydrogen policy in India.
On 17th February 2022, the Ministry of Power released the Green Hydrogen Policy. This was released in pursuance to National Hydrogen Mission launched by the Prime Minister.
The Policy provides for the definition of Green Hydrogen and Green Ammonia which is based on the method of production. The policy recognises Hydrogen or Ammonia produced by “the electrolysis of water using Renewable energy, including Renewable energy which has been banked and the Hydrogen/Ammonia produced from biomass.”
The features of the policy:
1) Waiver of Charges: The policy provides for a waiver of inter-state transmission charges for a period of 25 years to the producer of Green Hydrogen/Ammonia if the project was commissioned before 30th June 2025.
2) Using Renewable energy for production: From the definition of Green Hydrogen/Ammonia, it is clear that Renewable energy sources must be used during the production of the Hydrogen/Ammonia for it to be classified as “Green.” The policy provides that a producer can source Renewable energy from Renewable energy plants, from Third parties or can procure Renewable energy from the Power Exchange. The policy also provides for Open access for sourcing Renewable energy within 15 days of receipt of application.
It should also be noted that the policy provides for Banking of Renewable energy used for making Green Hydrogen/Ammonia . It allows Banking for 30 days . The policy also fixes the maximum rate a State Commission can charge for the Banking .
3) Connectivity: The policy provides that ISTS connectivity will be provided for Green Hydrogen/Ammonia on a priority basis under the Electricity (Transmission System Planning, Development and Recovery of Inter-State Transmission Charges) Rules, 2021 .
4) Land/Manufacturing Parks: The policy provides that Land in Renewable energy parks can be allotted for the manufacturing of Green Hydrogen/Ammonia. Additionally, the policy also states that the Government will set up Manufacturing Zones in which a Green Hydrogen/Ammonia production plants can be set up.
5) Port provisions: The policy allows for manufacturers of Green Hydrogen/Ammonia to set up bunkers near Ports for storage of Green Hydrogen/Ammonia. This move will help with the import/export of Green Hydrogen/Ammonia.
6) RPO Compliance: The Renewable energy used for the production of Green Hydrogen/Ammonia in excess of the manufacturer’s obligation shall count towards the RPO compliance of the DISCOM in whose area the project is located.
7) Portal for Statutory Clearances and permissions: The Ministry of New and Renewable Energy (MNRE) will establish a portal for all statutory clearances and permissions required to manufacture, store, transport and distribute Green Hydrogen/Ammonia . The policy also provides that all the relevant authorities and agencies will strive to provide clearances 30 days from the date of the application.
Hydrogen has the potential to becomes the future fuel, however, there are several disadvantages attached to hydrogen fuel, first of all it is difficult to store and transport hydrogen. Unlike other fuels, such as gasoline or natural gas, hydrogen is a gas at room temperature and pressure, so it requires specialized storage and transportation infrastructure. This require additional expenditure on infrastructure which ultimately would not lead to increase in cost of fuel. Further, hydrogen fuel cells are currently not as efficient as gasoline engines, so they are not as widely used in transportation. Also, the production of hydrogen relies heavily on fossil fuels, which means that a transition to a hydrogen economy would require a significant shift to renewable energy sources.
