Owing to the abundance of renewable energy in India, India is posited to be a major exporter of green hydrogen and substantially cater to Europe’s burgeoning green hydrogen needs against the backdrop of its proactive decarbonatisation goals. Leveraging the National Green Hydrogen Mission (NGHM), India aims to export 10 million metric tonnes (MMT) of green hydrogen annually in the near future, predictably claiming 10% of the global green hydrogen market.

Parallelly, European countries, faced with strict regulatory mandates towards meeting its net zero targets, stand to benefit more from access to lower priced green hydrogen imported from India than from depending on the domestic production of green hydrogen in Europe and incurring high production costs.

Regulatory Rigmarole

A major roadblock in the otherwise synergistic export-import value chain of green hydrogen between India and Europe, is the disparity between the two entities in their legal characterisation of eligible green hydrogen.

Europe deems only such hydrogen eligible for consumption under its decarbonisation goals, which meets the classification criteria of Renewable Fuels of Non-Biological Origin (RFNBO) as laid out in the Renewable Energy Directive II (RED II) alongside the Commission Delegated Regulation (EU) 2023/1184

According to Article 2(36) of RED II, RFNBOs are those liquid and gaseous fuels which are produced using energy from renewable sources other than biomass. The delegated regulations further specify that :

  • The renewable electricity used in the production of the RFNBOs must be produced within the same month, until January 1 2030 and post that the same hour as the production.
  • The renewable electricity production plant must be located within the same bidding zone as RFNBO production facility. Under certain conditions, adjacent bidding zones will also be deemed eligible.

Concomitantly,  India operates as a synchronous interconnected network organised into separate bidding zones spread across the country. The Procedure for Grant of Temporary General Network Access (T-GNA) to the inter-State Transmission system through National Open Access Registry (NOAR), 2023 by the Grid Controller of India defines a bid area as the largest geographical area within which market participants are able to exchange energy without capacity allocation.

This is in tandem with the definition of a bidding zone under the EU regulatory framework.

Accordingly, both entities follow the same patterns of grid segmentation and market organisation. But, while Europe operates as disparate bidding zones across the borders, India has multiple bidding zones within the same country.

Indian producers are faced with the additional requirement of building and maintaining a new renewable energy facility connected exclusively to project level electrolysers instead of utilizing an existing power facility. This increases their capital expenditure substantially. This further offsets India’s unique grid system, whereby despite distinct bid areas, it operates as a unified grid, interconnected through high capacity EHVAC and HVDC links for power transfers. This effectively means that despite not adhering to the geographical correlation as per the EU Laws, India can demonstrate inter-regional price uniformity and grid integrity which are the core rationale for the same bidding zone requirement. Indian Energy Exchange (IEX) data suggests, only one price is discovered in the day ahead power markets for the whole of the country for more than 99.98% of the transacted volume over the last few years which further assures that India functions as ‘one nation, one grid’.

However, on account of the official definition of a bid area, this is not accepted by the European regulators and thus, India produced green hydrogen’s ability to be certified as RFNBO is jeopardised and Indian producers are at a risk of losing its export market opportunities in Europe, arguably the most lucrative overseas market for India’s green hydrogen produce.

Harmonisation Pathways

India’s grid boasts of near absolute price correlation with data from IEX demonstrating less than 2% variance in the day ahead market prices across all Indian bid areas for the last three years. Relying on this, one may assert that India is a functionally unified bidding zone. Art. 7.1(a) of Commission Delegated Regulation (EU) 2023/1184 becomes relevant here. It reads,

the installation generating renewable electricity under the renewables power purchase agreement is located, or was located at the time when it came into operation, in the same bidding zone as the electrolyser

Accordingly, if in a particular calendar year, a project displays price convergence, i.e., electricity prices in the bid area of the renewable energy installation are equal or similar to the electricity prices in the bid area of the RFNBO production, then the green hydrogen produced may be deemed  RFNBO compliant for its entire lifetime.

Another track to tread upon is leveraging India’s General Network Access (GNA) mechanism for power purchase. Under the GNA system, a grantee receives a predetermined power schedule every 15 minutes as per the power purchase agreement of the project. This provides legally admissible proof of injection of renewable energy into the grid in the same hour as that of the hydrogen facilities’ consumption. Further, systems like Temporary GNA doubly enables congestion less consumption of the entire quantum of energy released. Thus, not only ticking off the temporal correlation requirement but also by potentially simulating a single bidding zone operation, this method can foster compliance with the geographical correlation requirement.

The regulatory incongruity jeopardises the marketability of the domestically produced green hydrogen in the European markets and in turn is likely to impact the revenue generation capacity of the green hydrogen producers in India.

India currently has close to 200 green hydrogen projects at various stages of development. Facilitating a robust market, both globally as well as domestically becomes critical to catalyse the growth of the industry as a whole. Europe being a sought-after export destination for India’s green hydrogen, facilitating regulatory harmonisation between the grid realities of India and Europe is emerging as the most challenging cog in the wheel for driving the green hydrogen sector forward.

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