“It is not the strongest of the species that survives, nor the most intelligent, it is the one most adaptable to change”
– Charles Darwin
Although every century is fraught with change, it is the 21st century that possibly brings us to face the most devastating consequences of unsustainable human expansion and industrialization and demands change for the sake of sheer survival. Concerns about climate change and recent worldwide events of unprecedented floods, wildfires, and droughts have triggered even a developing nation like India to consider a rapid shift towards sustainability and promote sustainable goals through its policy framework. On India’s 75th Independence Day, Hon. Prime Minister Narendra Modi unveiled the National Hydrogen Mission aiming to make India a global center for green hydrogen production, export and establish a ‘hydrogen economy’. The phrase ‘hydrogen economy’ is not a new concept. It envisions the use of low-carbon energy sources to replace traditionally used carbon-rich sources like petroleum and coal to produce energy and sustain the ever-growing need for electricity to power our industrial economies. However, a myriad of factors unique to each country and its economy result in a staggered and asymmetrical approach. The best technology, in our era, is always a summation of three factors, namely, (i) the ultimate cost of production, (ii) the potential of carbon mitigation, and (iii) consumer need and affinity. India, is emerging as a hub of emerging technologies but is also simultaneously grappling with an immature web of policy and regulatory frameworks and thereby unable to harness the true potential of such technologies and their market.
Requirement of Change
Following the declaration of bold green-energy targets by the year 2030 and 2050 by the government, in conjunction withmega-investment in the green energy sector by major private players like Reliance Industries and Adani Group, we are slowly but steadily maturing into a supporting system, prepared to welcome private sector investments to build a sustainable hydrogen economy. Due to the increasing effects of climate change, decarbonization of the industrial world in all its facets is unanimously being hailed as critical to survival. The Paris Agreement of 2016 committed 190 countries to achieve net-zero carbon emissions by 2050 for keeping global temperature below 2 degrees celsius thanpre-industrial levels. But the recently releasedUN-IPCC report highlights thefutility of current efforts being made bycountries. Drastic efforts to shore up the use of hydrocarbons and rapid adoption of alternative energy sources are mission-critical when the doomsday clock is nigh close to midnight. To facilitate this, companies across the globe in almost every industry are pursuing similar objectives and these promises are fueling a push to the use of hydrogen as a fuel and energy storage medium that can be generated and utilized without releasing carbon dioxide or other greenhouse gases into the atmosphere.
Contemporary Regulatory Environment
Hydrogen is a flexible resource i.e. it can be combusted to produce heat, reacted with air in fuel cells to produce electricity, or used as a way to store renewable energy from other sources like wind energy. This property of hydrogen, to be used as a medium of storage, makes it a great alternative to large-scale batteries which produce huge amounts of toxic wastes. This energy can then be utilized as a transportation fuel, electricity generator, or heating fuel to warm buildings. Currently in India, numerous regulatory bodies are regulating hydrogen in tangent ways. For instance, the Ministry of Natural Resources and Energy regulates renewable energy sources, Petroleum and Natural Gas Regulatory Board regulates the use of pipelines to transport fuel and the Petroleum and Explosives Safety Organisation regulates explosive substances, their storage, and fuel stationspecifications. Recently, the petroleum ministry has suggested amendments in the Oilfield (Regulation and Development) Act, 1984 (the Act) viaOilfields (Regulation and Development) Amendment Bill, 2021 (draft amendment bill) by including hydrogen in the definition of ‘mineral oils’ to enable the government to grant a license for its exploration and production while promoting ‘ease of doing business’ in thecountry. This has prompted a push for a streamlined regulation of hydrogen in India through a well-defined legal framework.
Prior to the formulation of any laws on the regulation of hydrogen, we must understand that it would bedelusional to think that hydrogen can be treated similarly to natural gas or other energy sources in terms of legal and regulatory frameworks. Concerns like the attraction of investment, financing structures, operational requirements, revenue stream arrangements among many other facets are to be given due consideration to develop a sustainable and efficient marketing and distribution model. Therefore,an in-depth research on the availability, infrastructure, production, and demand is required to distinguish the fact whether there is a need for separate regulation for hydrogen or if it can be included in already functioning energy regulatory frameworks, much like the petroleum ministry currently suggests, that is, including hydrogen under the definition of‘mineral oil’.
Aspects of private or public behaviour that may turn detrimental to governmental and societal interests are closely monitored and regulated by every country. The rules set down are supported either by penalties or by incentives to ensurecompliance. In order to preventmarket failure, keep a check upon anti-competitive practices and to promote public interest, it is necessary to have uniform regulation. The public and private corporations can be encouraged to invest in the growing hydrogen sector and foreign investment can be welcomed but a uniform legal framework stands as utmost important for such investment to take place. The Indian regulatory environment, which has although evolved over time still does not appear to be uniform across sectors, highlighted by the fact that India continues to rank low in terms of its business environment-enabling nature anduniform investor-friendly compliances.
Keeping these points in mind, this article makes an attempt to address some of these crucial points to indicate the need for a single legislative framework for regulating hydrogen in India by discussing the policies, initiatives brought by the government and comparing them to the global trend.
Separate Legal Frameworks around the World
In India, the commercial usage of hydrogen has just begun to traverse the road to large-scale use. Currently, India regulates hydrogen use through policies but legislations are required to fill in the loopholes created by these policies. Countries like South Korea and the EU are stepping forward to create dedicated laws and regulations for hydrogen, and other countries like Saudi Arabia, the USA, and Japan areinvesting heavily inResearch and Development (R&D). R&D projects on hydrogen started early in India but due to lackluster response in early adoption by industries coupled with a lack of effective implementation of policies, we are still at a nascent level on the world stage.
Among countries that have dedicated laws towards the regulation of hydrogen, South Korea stands out as the finest example in the Asia-Pacific region. It became the world’s first country to have codified hydrogen law. It had one of theworld’s largest markets for hydrogen last year in 2020. South Korea enacted theHydrogen EconomyPromotion and Safe Management of Hydrogen Act 2020 for operating hydrogen projects and hydrogen fuel cell production units. The country, at first, faced a wide array of issues due to a lack of governing policy as hydrogen projects were already underway but theimplementation of policy rolled out much later. Presently, South Korea has taken a lead through the enactment of the Hydrogen law which covers three major areas, namely,(i) hydrogen cars, (ii) charging stations, and (iii) fuel cells. The aim of the Act is to make the nation’s hydrogen pricing structure more competitive andtransparent.
Similarly, the proposedHydrogen Act of the European Union is designed to serve as a vision for a framework that would integrate all hydrogen-related activities and regulations of its member nations, under one umbrella legislation. The Hydrogen Act focuses on infrastructural and market elements, and it describes three stages of development, that is, (i) kick-start, (ii) ramp-up, and (iii) market growth.
Taking lessons and inspiration from these two enactments, one of which has been successfully adopted and one that is in the process of establishment, we can take heed of the following two crucial points:
1. Both South Korea and the EU have different regulatory frameworks for hydrogen and have chosen not to regulate hydrogen in a single definition under any previous legislation.
2. Both South Korea and the EU have comparable goals in establishing a framework, such as focusing on market growth and promoting the concept of a “hydrogen economy” by establishing proper governance.
Need for Precision
Hydrogen is an energy carrier rather than an energy source (like petrochemicals), it can store or deliver an enormousamount of energy.The National Hydrogen Energy Road Map – 2006 also states hydrogen to be an efficient energy carrier. If the Ministry of Petroleum and Natural Gas (MoPNG) wants to bring it under the blanket definition of ‘mineral oil’ under the Oilfield (Regulation and Development) Act of 1984 via an amendment, then it would have to change the definition altogether since section 3(c) of the Act states that – “mineral oil” includes natural gas and petroleum. Both of which are composed primarily of hydrocarbons and sources of energy rather than carriers. When burned, they produce greenhouse gases such as carbon dioxide, carbon monoxide, sulfur dioxide, nitrogen oxides and many other harmful compounds whereas hydrogen (devoid of any carbon), being a clean fuel,when consumed via fuel cells produces only water and heat as by-products. India’s intent to regulate it under the Oilfield (Regulation and Development) Act of 1984 via the Oilfields (Regulation and Development) Amendment Bill, 2021 (draft amendment bill), by including it under one definition and regarding it as mineral oil will be erroneous. As described above, a number of countries are tackling hydrogen with separate stand-alone legislations rather than amalgamating it with old laws. The absence of standardization and categorization under a separate law in India would be an issue amongst developers and investors due to a lack of understanding of incentives and compliances and subsequent misevaluation of opportunities in thesector and in India.
The Dilemma of ‘Type’
A major subject of discussion is the different types of hydrogen that can come from various production procedures. The following colors refer to hydrogen created from the given methods – (i) “grey” from methane gas, (ii) “black” from coal, and (iii) “brown” from lignite. Currently, 95 percent of the hydrogen produced in the world belongs to the grey or brown category, with natural gas accounting for 76 percent and coal accounting for 23 percent.“Blue” hydrogen is created by combining methane gas withcarbon capture. Although the hydrogen formed from this process is carbon neutral, it is not entirely renewable.“Green” hydrogen is produced through electrolysis, which is the process of splitting water (H2O) into hydrogen and oxygen, using electricity produced fromrenewable sources (wind or solar energy). TheEU taxonomy issued in March 2020, analyses what is to be treated as“low carbon” or “renewable” and under this classification, the manufacturing of hydrogen is considered to be renewable if:
1. Direct CO2 emissions from hydrogen manufacturing are 5.8 tCO2e/t;
2. The electricity used for hydrogen produced by electrolysis is at or less than 58 MWh/t;
3. The average carbon intensity of the electricity produced which is used for hydrogen manufacturing is at or below 100 gCO2e/kWh.
Investors, developers, and all other prospective players looking to participate in renewable hydrogen projects must be aware that the alternatives are limited to “green” and “blue” hydrogen.
India and its Exploration with Hydrogen
The energy transition in India is focused on the increasing use of renewable energy across all economic sectors and green hydrogen is seen as a viable option for making this shift possible. Despite the unique benefits and potential, supply constraints and cost economics have hindered the substitution of fossil fuels and the addition of green hydrogen torenewable energy sources.
While addressing the 3rd RE-Invest Conference in November 2020, the Prime Minister of India revealed the government’s ambitions to create a comprehensive National Hydrogen Energy Mission. It was then recommended in theBudget Speech 2021 by Mrs. Nirmala Sitharaman (Minister of Finance) that a Hydrogen Energy Mission is to be launched in 2021-22 to generate hydrogen usingrenewable energy sources.
The Ministry of Petroleum and Natural Gas(MoPNG) is launching several projects to increase the use of hydrogen in the energy mix. The first project is based on the Grey Hydrogen, or Hydrogen CNG (H-CNG) programme, in which hydrogen is blended with compressed natural gas (CNG) to the level of 18% for use as a transportation fuel at the Rajghat Bus Depot. In this experiment, 50 buses in Delhi run on a mixture of hydrogen and compressed natural gas (CNG).
Recently, the Secretary of MoPNG held a conference of businesses engaged in the petroleum sector, oil and gas marketing, and notable solar power providers toinvestigate the feasibility of using solar power to make hydrogen. As a result, five additional pilot programmes based on Green Hydrogen are being planned, in which the hydrogen produced would be used as a transport fuel and an industrial input to refineries.
The Report of the Group of Hydrogen Energy (July, 2004) of the erstwhile Planning Commission recommended the adoption of the following fiscal incentives for hydrogen development in India-
1. Investments into hydrogen-related activities as an energy carrier will be notified as infrastructure investments and would be eligible for all infrastructure-related tax incentives under the Income Tax Act.
2. Accelerated depreciation (100%) on new investments in the development and production of hydrogen and fuel cell technologies in the first year.
3. Low-interest financing for the establishment of demonstration and production facilities.
4. Establishment of a corpus fund for the development of hydrogen and fuel cell technologies, with contributions from both the government and industry. The fund will be handled by the means of public-private cooperation.
Recently, under the aegis of the Ministry of Petroleum and Natural Gas, The Energy Forum (TEF), and the Federation of Indian Petroleum Industry (FIPI) hosted a virtual Hydrogen Roundtable on the“Hydrogen Economy – the Indian Dialogue-2021” to discuss emerging hydrogen ecosystems and explore opportunities for collaboration, cooperation, and coalition. The aim of the dialogue was to get a better understanding of the evolution of the hydrogen ecosystem across continents, as well as to help think tanks, governments, and industry work together to create new andcost-effective solutions. The budget of 2021-22 proposes a short-term (4-year) plan as well as broad concepts for the long-term (10 years and beyond). The mission would include all key areas of the value chain and bring together different methods into a common framework and governance structure. Creating infrastructure; demonstrations in niche applications (including transportation and industry); goal-oriented R&D; facilitative policy support; and putting in place a robust framework for standards and regulations for hydrogen technologies are among the major activitiesenvisaged under the Mission.
Many countries are focusing on research and development efforts and to provide financing through grants to entities engaged indeveloping mobility sector choices, but concerns about the eligibility, stability, and sufficiency of such funding are frequently raised. If state assistance is made available to stimulate demand for hydrogen-powered vehicles, concerns of state aid and procurement must be carefully dealt with in an open and transparent fashion. On the premise that this can be done timely and efficiently, hydrogen fuel transportation could replicate the rapid uptake witnessed in some nations forelectric vehicles. The same is evident from the recent “Shoonya initiative” launched by Niti-Aayog to completely overhaul the urban freight vehicle traffic with electric vehicles in the next two years with notable companies like Mahindra Electric, Tata Motors, Zomato and Swiggy extending theirsupport.
Initiatives and Foreign Investment
The Ministry of New and Renewable Energy published the National Hydrogen Energy Road Map in 2006, highlighting transportation and power generation as two important green energy efforts. One of the most crucial factors for any novel incentive to prosper is the apriori requirement of having proper infrastructure and transportation facilities so that the idea can germinate. In the present case, it is so that a ‘hydrogen economy’ can benefit the industries, investors, government and the citizens as a whole. Mission Innovation (MI) is a worldwide effort led by 22 nations, in which India along the European Union is a member. This global initiative was undertaken to significantly accelerate renewable energy innovation throughout the world. Participating nations have agreed to quadruple their governments’ clean energy R&D spending over the next five years as part of the effort, while also supporting more private sector investment in transformationalclean energy technologies. India is taking an active part in theMission Innovation Challenge for Clean Hydrogen, intending to accelerate the establishment of a global hydrogen market by identifying and overcoming significant technological barriers to gigawatt-scale hydrogen production, distribution, storage, and usage. India also plans to indigenously create three-fourths of its hydrogen demand viarenewable sources by 2050.
The Gulf Cooperation Council (GCC) member countries and India have a strong energy partnership. In the past years, India has imported about 53% of its energy from the Persian Gulf, while the United Arab Emirates (UAE) and Saudi Arabia became India’s third and fourth-largest trading partners, respectively. India and the GCC, are natural energy allies with enormous potential for expanding cooperation in greener fuels such as hydrogen and the country already has signed a Memorandum of Understanding (MoU) on renewable energy with the majority of the GCC countries. Acme Solar Holdings Ltd, India’s largestpure-play solar platform aims to invest USD 2.5 billion in the port town of Duqm in Oman to create green ammonia and green hydrogen and additionally, hassigned an MoU with the Oman Company for the Development of the Special Economic Zone.
Apart from the efforts of the government of India, think tanks and research institutes like The Energy and Resources Institute (TERI) and FTI Consulting have come together for establishment of a hydrogen-based economy in India by investing in the development of policy and research initiatives for fuel-cell manufacturing, carbon capture systems, andother new and developing fields in the renewable energy sector.
There are ideas, a vision to implement those ideas, and a roadmap to build a strong infrastructure for regulating hydrogen buta legal framework would provide stability, structure, proper governance and regulate hydrogen in a deliberative and transparent way.
The greatest challenge is to make Hydrogen fuel cost-competitive to traditional fuels on a per-mile basis. This means that the cost of production regardless of any methodology used should be under the 70$/barrel of crude oil/ India has the capacity to do this by collaborating and making itself a hub and beacon of the hydrogen economy for the world. But the question that remains is if we can learn from other successful ventures across the globe and adapt them to our needs to create a sustainable program suited to the unique conditions of India, or would bureaucratically haggling and red-tape stifle a great opportunity in the bud once again. The promising budget of 2021-2022 stands as a hope because until now, there have been significant gaps in the implementation and cooperation of governmental policies despite having a presence in the field for the last two decades. It would require significant, focused, and persistent efforts by both the government and through private investment to make hydrogen a viable green fuel for mass use.
About the Authors
Kaustub N.S. Bhati is an Associate at Trilegal.
Bhavya Bose is a 4th year law student at School of Law, Bennett University and an Associate Editor at IJPIEL.
Managing Editor: Naman Anand
Editors-in-Chief: Akanksha Goel & Aakaansha Arya
Senior Editor: Nutan Keswani
Associate Editor: Bhavya Bose
Junior Editor: Harshita Tyagi
Preferred Method of Citation
Kaustub N.S. Bhai and Bhavya Bose, “Hydrogen Energy in India: Existing Policy Framework and a Prospect for Legislation” (IJPIEL, 1 October 2021).