The Ministry of New and Renewable Energy (MNRE) of the Indian government has now released its detailed guidelines to boost the local production of electrolyzers. These electrolyzers will be used to produce Green Hydrogen, preferably cheaper than the existing ones.
It comes almost five months after the government launched its Green Hydrogen Mission in January. The Union Budget this year also made special budgetary allocations to boost the production of Green Hydrogen. The mission document also talked about increasing the local production of electrolyzers in India.
The latest norms are related to the Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme-Component I, which discusses incentives for electrolyzer manufacturing for Green Hydrogen Mission. Following are the major takeaways from the norms-
1. Funding and timeline
The ministry has allocated a total of Rs 4440 for this component of the National Hydrogen Mission, which is exclusively meant to boost the production of electrolyzers in India. This incentive support from the ministry has been planned between FY 2025-26 to FY 2029-30.
2. Nodal implementing agency
The ministry has designated the Solar Energy Corporation of India (SECI) as the nodal agency for implementing the incentive scheme. SECI will issue tenders in the coming days to award incentives to the manufacturers. SECI will receive applications from parties, inspect them, and issue the contracts.
3. Quantum of incentives for manufacturers
MNRE has decided to provide the incentive based on the per Kilowatt capacity of the electrolyzers. It has planned a decreasing incentive payment pattern where the support will decline gradually. The ministry has proposed a base incentive of Rs 4440/Kw for the first year. It will come down to Rs 3700/Kw in the second year, Rs 2960/Kw (3rd year), Rs 2220/Kw (4th year) and Rs 1480/kw (5th year).
4. Performance-based incentives
The ministry has planned to incentivize electrolyzer manufacturers based on their units’ efficiency. MNRE claimed that as the performance of these units is linked to the total cost of production of Green Hydrogen, it was pertinent to give incentives based on the electrolyzers’ Specific Energy Consumption (SEC). The ministry has created a slab based on the specific energy consumption (kwh/kg of hydrogen) and its corresponding performance quotient for the purpose.
5. Local Value Addition (LVA) Prescription
The ministry has also prescribed a certain minimum level of Local Value Addition (LVA) for each year for the production of electrolyzers. Only compliance with these would make the bidders eligible for government incentives. The ministry has specified different minimum LVAs for alkaline electrolyzers and for proton exchange membrane (PEM) and solid oxide electrolyzer or anion exchange membrane electrolyzers.
While the minimum LVA for alkaline for the first year is 40 percent, it is 30 percent for all others. The year-wise minimum LVA trajectory hinted at higher adoption of localization measures to become eligible for the scheme.
6. Eligibility of bidders
The guidelines also talk about the eligibility of bidders. It said the bidder could be a single firm or a joint venture/consortium of more than one firm. It also said that the net worth of the bidder should be equal to or greater than Rs 1 crore per MW of the quoted manufacturing capacity. It also mandates the beneficiary to demonstrate a minimum of 50 percent of annual sales of electrolyzers for the installation of projects in India.
7. Special allocation for indigenous electrolyzers
The norms also said that to promote local electrolyzers, the first trench of bid for 1500 MW would be allowed in two separate buckets. In one bucket of 1200 MW electrolyzer manufacturing capacity, any stack technology would be accommodated, while for the rest 300 MW capacity, indigenously developed stack technology would be considered.
8. Calculation of incentive payout
The ministry has planned a special predefined formula to come at the final figures of incentive disbursement. The formula said that the final incentive amount would be arrived at by multiplying the electrolyzers sales volume with quoted base support rare, performance multipliers, and domestic value addition.
The ministry, meanwhile, has also laid out the guidelines for component II of the scheme, where the government has planned to give incentives to boost the production of Green Hydrogen in the country. For this, it has planned to provide a total incentive of Rs 13,050.