India has passed a key piece of legislation that will allow it to force energy consumers and chemicals producers to buy a certain amount of “non-fossil” energy or feedstock, potentially paving the way for green hydrogen to penetrate India’s energy sector as well as its vast fertiliser industry.
The Energy Conservation (Amendment) Bill 2022, which was this week passed by the Indian Parliament’s upper house, the Rajha Sabha, makes provisions for the government to mandate “a minimum share of consumption” of non-fossil energy or feedstock for certain “designated consumers”.
But it gave no further detail on what the share might be or who might be a “designated consumer”.
However, power and renewable energy minister Raj Singh told Parliament that the government plans to mandate the use of green hydrogen in sectors such as steel, oil refining, fertiliser production and cement production — and that India has the potential to reach 25 million tonnes of green H2 production capacity a year.
A mandate for green hydrogen in India’s fertiliser industry could generate significant levels of demand. According to the University of Oxford, the nation is the world’s second largest producer and consumer of nitrogen-based fertiliser, a category that includes ammonia made from H2, gobbling up around 17 million tonnes per year.
And this figure is only set to rise. The Institute for Energy Economics and Financial Analysis (IEEFA) estimated before this legislation passed that the Indian fertiliser sector's demand for H2 (either fossil-based or renewable) will reach 7.5 million tonnes per year by 2050.
Today, Indian-made fertiliser is produced almost exclusively from grey hydrogen derived from unabated fossil gas, and is heavily subsidised by the government.
In fact, for the past three years in a row, New Delhi has subsidised fertiliser production to the tune of 1.05trn rupees ($12.7bn), a figure that is set to rise in line with skyrocketing international gas prices.
Even a mandate for just 1% of nitrogen-based fertiliser production to use a feedstock of renewable hydrogen would generate demand for around 170,000 tonnes of green ammonia per year, based on today’s production figures.
The bill — which has already been approved in the lower house of Parliament and still requires final assent from President Droupadi Murmu — also lays the groundwork for India to launch its own carbon market, which will itself incentivise major emitters to reduce their CO2 intensity.
India, which is targeting 5 million tonnes of green hydrogen capacity by 2030, is also targeting a 45% reduction in carbon intensity by 2030.
