India has extended a waiver of transmission fees for renewable hydrogen power manufacturing facilities commissioned before January 2031, as it seeks to become the world’s cheapest producer of the fuel, a government official said.

Hydrogen facilities are facilities that produce, store and distribute hydrogen, a clean and versatile energy carrier. These facilities use various methods to produce hydrogen, including electrolysis, steam methane reforming, and coal gasification. 

Hydrogen can be used as fuel for vehicles, power generation, and industrial processes, and it has the potential to play a significant role in the transition to a low-carbon energy system.

Hydrogen facilities typically include hydrogen production plants, storage tanks, and distribution pipelines. The hydrogen produced at these facilities can be compressed and stored in tanks or transported through pipelines to end users. 

Hydrogen can also be produced on-site using small-scale production units, such as electrolyzers, which convert water into hydrogen using electricity.

The measure is expected to reduce the cost of green hydrogen – hydrogen produced by dividing water using electricity from renewables – by a fifth.

The move will make more green hydrogen manufacturing projects eligible for the 25-year waiver of transmission charges, previously available for projects set up before July 2025, said the source, who declined to be identified because he is not authorized to speak to media.

Building large-scale hydrogen and ammonia projects takes three to four years, and it was unlikely many would be commissioned by June 2025, the government official said.

The country aims to produce renewable hydrogen at the lowest rate in the world, at $1-$1.50 per kilogram, down from the present $4-$5 per kilogram.

Reliance Industries and Adani Enterprises have announced cost targets of $1 per kg by 2030.

Larsen & Toubro, Indian Oil, NTPC, JSW Energy, ReNew Power, and Acme Solar are a few other prominent Indian corporations that have announced plans to produce renewable hydrogen.

Renewable energy, including transmission, makes up 65%-70% of the expense of generating renewable hydrogen, according to industry estimates.

The inter-state transmission charges range from 1-2 rupees per unit of electricity transmitted. Every one rupee decrease in renewable energy costs reduces the cost of green hydrogen by 60 Indian rupees ($0.73), the official said.

The Ministry for New and renewable energy did not immediately respond to an email seeking comment.

India’s hydrogen mission is estimated to require investments worth 8 trillion Indian rupees ($98 billion) by 2030, including 125 gigawatts of non-fossil-based generation capacity and new transmission lines.

India also intends to grant green hydrogen producers incentives worth at least 10% of their costs under a $2 billion initiative scheduled to commence before the end of June.

The country opposes diluting the definition of green hydrogen to include fuel derived from low-carbon energy, as some developed nations have proposed in G20 meetings, Power and Renewable Energy Minister R K Singh recently told Reuters.