India considers Contract for Difference subsidy for green hydrogen power plants
India’s Ministry of New and Renewable Energy is considering a subsidy scheme to support the use of green hydrogen to generate power as a way to provide “round the clock” renewable electricity, as well as peaking power to the grid.
One of the mechanisms that has been tabled is a Contract for Difference. In this type of subsidy, if the market power price is lower than a “strike price” agreed during the auction, the government fills in the difference.
However, during periods of high electricity prices, the power generator would be required to pay back the difference between the strike price and market price.
Government officials have been directed to draft a mechanism for this support.
However, while “various potential options” for using hydrogen in power were discussed, according to a government press release, it is unclear whether the subsidy scheme will only allow specific kinds of H2 power generation, such as 100% firing, co-firing with natural gas, co-firing ammonia with coal or gas, or the use of fuel cells.
Hydrogen’s use in power generation had not been specifically included as a target in India’s $2.4bn National Green Hydrogen Mission, which was published in January 2023.
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However, power generation or energy storage may account for the 4bn rupees ($48m) of funding for unspecified pilot projects announced in September last year.
In that same month, power minister Raj Kumar Singh had reportedly announced that the government planned to launch a 100MW pilot project generating power using green hydrogen as an energy storage medium.
While coal currently dominates India’s grid, accounting for 49.1% of generation capacity, the country had 44.7GW of wind and 73.3GW of solar installed at the end of 2023, according to government figures.
As such, in order to reduce the risk of intermittent generation while also decreasing fossil-fired power, India would have to introduce new technologies for energy storage to back up its grid.
Although the country has trialled the use of batteries to provide round-the-clock renewable power, these are generally limited to shorter storage timeframes than hydrogen, which can be used to back up seasonal or even year-to-year variation in windspeeds or solar irradiance.
Singh had previously also cited the fact that India currently imports its lithium batteries as a reason for the focus on H2 as an “entirely homegrown” solution.
