India unveils subsidy guidelines for multi-billion-rupee spend on hydrogen-based green-steel pilot projects
Government to issue call for proposals that would provide funding for up to 70% of projects’ capital costs
India has unveiled guidelines on how it will spend 4.55bn rupees ($54.79m) for green steel pilot projects that utilise renewable hydrogen.
Minister for new and renewable energy, Raj Kumar Singh, stated last month that this sum could yet be boosted, if necessary.
With the world’s second-largest steel industry, India is keen to ensure it can retain such a status as the sector moves away from highly polluting coal-based iron and steel production towards renewable hydrogen and electric arc furnaces.
Of particular concern is that upcoming trade restrictions, such as the EU’s Carbon Border Adjustment Mechanism (CBAM) — which effectively puts a tariff on carbon-intensive imports — will limit the Indian steel sector’s export opportunities.
“With the falling costs of renewable energy and electrolysers, it is expected that green hydrogen-based green steel can become cost-competitive over the next few years,” the Ministry of New and Renewable Energy explains in the document, entitled Scheme Guidelines for implementation of pilot projects for use of green hydrogen in the steel sector under the National Green Hydrogen Mission.
“Provision of carbon credits and imposition of market barriers on carbon-intensive steel, in some countries, is likely to further enhance the viability of green hydrogen-based steel.”
However, India is playing catch-up in this sector, with places like the EU and Canada already subsidising large-scale green steel projects to the tune of billions of euros/dollars.
The 4.55bn rupees of funding — which will come from India’s 197bn-rupee National Green Hydrogen Mission — would cover up to 70% of capital costs for certain projects using hydrogen for direct-reduction iron (DRI) and up to 50% for other uses of H2 in the steelmaking process, including in blast furnaces or “any other innovative use of hydrogen for reducing carbon emissions in iron & steel production”.
“Considering the higher costs of green hydrogen at present, steel plants can begin by blending a small percentage of green hydrogen in their processes,” the Ministry of New and Renewable Energy explains in a new document, Scheme Guidelines for implementation of pilot projects for use of green hydrogen in the steel sector under the National Green Hydrogen Mission.
“The blending proportion can be progressively increased as cost-economics improves and technology advances. Further, upcoming steel plants should be capable of operating with green hydrogen. This would ensure that these plants are able to participate in future global low-carbon steel markets.”
A call for proposals will be issued by the Ministry of Steel through a yet-to-be-decided “scheme implementing agency” at an unspecified date, with funding available up to 2029-30.
“The scheme would primarily fund capital equipment required for use of hydrogen in the iron & steel manufacturing process,” the document explains, although it adds that “green-field projects aiming at 100% green steel will also be considered”.
“Expenses on account of production of hydrogen, land, etc, will not be funded,” but the cost or preparing a detailed project report may be covered.
“Financial support for projects will be evaluated and granted taking into consideration the specific needs, merits and feasibility of each project.”
The document adds that the pilots “will help identify operational issues and gaps in terms of current technology readiness, regulations, implementation methodologies, infrastructure and supply chains”.
“These will serve as valuable inputs for future scaling and commercial deployment of green hydrogen in the iron & steel sector.”