‘Gradual mandates on green hydrogen may not be enough’

“The size of the opportunity in green hydrogen is almost limitless in a way based on just what governments have stated as being their plans. But a lot of that has to translate from government targets to actual demand, and that has not happened so far,” Sinha said in an interview at the Energy Transition Working Group Meeting and the Clean Energy Ministerial under India’s G20 presidency in Goa.

ReNew is one of India’s largest renewable energy companies, with an operational capacity of 8 gigawatts (GW) and commissioned capacity of 6GW in wind and solar energy.

“It will happen slowly. For demand to manifest, we’ll need to have mandates by governments on the use of green hydrogen because, without that, it’s always going to be more expensive. No one will voluntarily shift. So, either there’ll have to be subsidies or mandates, or both. In the European Union (EU), it is partly subsidies and partly mandates; in the US, it is subsidies. In India, we still don’t know what it’s going to be,” he added.

However, the Indian government is likely to take the route of gradual mandates to drive the shift from fossil fuels to green hydrogen, he said.

“The government doesn’t have the money to subsidize, certainly not in India. So, demand will have to be created via mandates, but because it puts a burden on the buyer, it’ll have to be done gradually. And that gradual mandate may not equal 5mt of green hydrogen capacity by 2030, which is the government’s current target. Now, of course, part of that is meant to be exported, and that depends on how competitive India is in the export markets and what’s happening in other parts of the world in terms of demand creation,” Sinha said.

Last year, ReNew signed memorandums of understanding (MoUs) with Indian Oil Corp. Ltd (IOCL) and Larsen & Toubro (L&T) Ltd to form a joint venture to develop industrial-scale green hydrogen projects in India. It has outlined a capital expenditure of ₹35,000 crore over the next 12 months, which will primarily be met via debt funding.

“A lot of it (funding) we have already sitting on our balance sheets, and the rest will come from internal accruals. Our projects are funded 75% by debt and 25% through equity, and that’s the ratio that’ll remain,” Sinha said.

The independent power producer signed MoUs at the Clean Energy Ministerial last week in Goa worth ₹64,000 crore or $7.9 billion, with central power financiers REC and PFC to fund its long-term renewable energy projects.

Sinha said demand from power distribution companies (discoms) is still not robust and is delaying India’s transition to renewable energy.

“The kinds of issues that cause delays are things around demand coming from utilities or discoms is still not robust. It needs to be strengthened. If the government has taken a position to auction 50GW of renewable energy every year, someone has to buy that power. So, the utilities have to buy that power, or otherwise, we will have an issue with the government holding auctions and the states not buying. It’s been a problem with two parts for some time now—through the LPS system, the payments issue has been resolved, and we can now use capital to fund capital projects instead of funding discoms, but the other issue on demand needs to be solved, he said.

“So far, the central government’s stand is it wants new power generation to come from renewables, but states have to buy into the same promise with the same conviction and voluntarily move forward. The Centre found a way to solve the payments problem, and now it might have to make sure that states have a central RPS, RPO trajectory imposed on them, which they then have to adhere to, to solve demand as well,” Sinha added.

Updated: 25 Jul 2023, 12:18 AM IST