Challenges Faced by Emerging Enterprises in Bidding for Green Hydrogen Tenders
Government intervention is crucial to remove these roadblocks and create a more conducive environment for green hydrogen development. Allowing and encouraging companies to form clusters and bid for PLIs/other incentive schemes, coupled with benefits such as quick clearances for clusters, can significantly enhance participation and project success.
October 29, 2024. By News Bureau
Government intervention is crucial to remove these roadblocks and create a more conducive environment for green hydrogen development. Allowing and encouraging companies to form clusters and bid for PLIs/other incentive schemes, coupled with benefits such as quick clearances for clusters, can significantly enhance participation and project success.
One of the primary hurdles is the lack of land allocation by offtakers. Green hydrogen projects require vast amounts of land for setting up production facilities and other infrastructure, and the failure to provide this basic requirement is discouraging bidders from proceeding with their projects. The government can propose setting up Manufacturing Zones where Green Hydrogen and Green Ammonia production plants can be established. Land in Renewable Energy Parks can be allocated for these purposes, and manufacturers can set up bunkers near ports for storage and export.
To encourage innovation and promote local industry, it is essential to relax financial eligibility criteria to enable new entrants and startups to compete on a level playing field. High investment burden is another major bottleneck. The scale of investment required to establish green hydrogen plants is immense, making it difficult for a single entity to take on the entire financial burden. Commercial lenders, including banks, consider funding green projects risky due to potential delays in land acquisition, environmental approvals, and the pace of infrastructure development. The relatively smaller consumer base for green hydrogen also contributes to the perceived risk. Public sector grants and other concessionary funding will be crucial sources of project finance during this early development stage until sufficient private sector funding becomes more readily available.
Connectivity issues are also a major problem, with many project sites lacking access to the required power load. Without proper grid support, the viability of these projects is compromised. Refinery support is also crucial, with refineries providing land and power from their in-house power plants to support green hydrogen projects. This would reduce the logistical and financial challenges faced by bidders. Last but not least, promoting indigenous technology must take precedence, with the government mandating the use of Indian-made electrolysers and other equipment. This would not only boost the local economy but also reduce dependence on costly imports.
Due to the intermittent nature of renewable energy, green hydrogen production plants need energy storage systems (ESS) to ensure a stable power supply for their operations. Existing ESS are costly and drive up the cost of round-the-clock (RTC) renewable energy, as seen in recent national tenders.
To overcome these challenges, non-fiscal measures like improving the process for regulatory clearances coupled with preferential treatment in public tenders can also enable the environment for domestic manufacturing.
Key Considerations for Successful Tender Bidding
The Indian Oil Corporation recently cancelled its green hydrogen tender after receiving only two bids, highlighting the concerns raised by prospective bidders. The eligibility criteria, which required experience in operating hydrogen systems, EPC, and electrolysers, were seen as too stringent.
Specifically, a qualified bidder had to have EPC experience and have operated a refinery, petrochemical, or fertiliser plant for at least 12 months. This led to potential bidders requesting deadline extensions to form joint ventures with industrial gas producers, as only a limited number of companies were operating at this scale wih the required experience.
In July 2023, the Solar Energy Corporation of India (SECI) issued a Request for Selection (RFS) under Component-I of the SIGHT programme, aiming to establish 1,500 megawatts (MW) of electrolyser manufacturing capacity in India. Bidders were encouraged to emphasise lower specific energy consumption and higher local value addition (ranges from 30-40% in the first year to 70-80% in the fifth year, based on technology). They could choose from any stack technology or indigenously developed stack technology, categorised as Bucket 1 and Bucket 2, respectively. The total outlay for this incentive scheme is Rs 44.4 billion (US$541 million).
Understanding Bucket 1
Bucket 1 focuses solely on electrolyser manufacturing capacity based on any stack technology, with a total offered capacity of 1,200 megawatts (MW). The minimum bid capacity for Bucket 1 is 100MW, with a maximum of 300MW.
Most bids have been concentrated under Bucket 1. With key players such as Adani, Reliance Industries, Avaada, L&T, Greenko, Waaree and Jindal India collaborating with global electrolyzer producers. Subject to foreign technology transfer under global restrictions.
Indigenous Technology Focus in Bucket 2
Bucket 2 focuses on electrolyser manufacturing capacity utilising indigenously developed stack technology, offering a total capacity of 300MW. This category has no specified minimum bid capacity, with a maximum bid capacity of 300MW. Bids from technology start-ups and mid-size mechanical equipment manufacturers primarily occupy Bucket 2. This category requires a greater push and priority to support the development of a truly Atmanirbhar green hydrogen economy.
Greenzo Energy, manufacturer of indigenous alkaline electrolyzers, exemplifies how emerging enterprises can be effective bidding technology partners. Its Indigenous product suitable for domestic conditions and longer life with no dependency on noble metals is Power Efficient and provides modular and H2 delivery at high pressure at an affordable and competitive price. The company also has an extensive EPC experience and a highly-scalable orderbook, and the elctrolyzer is easy to maintain and upgrade.
Providing the company with a trifecta advantage in tenders: indigenous technology and manufacturing, extensive experience, and scalability. Giving it a competitive edge to address growing demand most effectively to meet the stringent requirements of India's green hydrogen tenders. As a proactive participant in the green hydrogen sector, Greenzo Energy is committed to collaborating with stakeholders to overcome existing challenges and drive forward India's clean energy ambitions.
Enhancing Support
India's roadmap should identify a timeline and scale of manufacturing support for electrolysers, aiming for 25 GW by 2030, while also investing $1 billion in R&D to catalyse the development of commercial green hydrogen technologies across the value chain. Radically improving the speed of regulatory clearances, coupled with preferential treatment in public tenders, will help catalyse local manufacturing.
please contact: contact@energetica-india.net.
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