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CIHS – Centre for Integrated and Holistic Studies > environment
Technology
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Going green from grey!

Green hydrogen is the new energy frontier to conquer. India has the potential to decarbonize its economy, embark on clean journey to future and give tough competition to US and EU K.A.Badarinath Going green on energy front and decarbonizing Indian economy estimated to be US $ three trillion is a gigantic task for any government. Bharat i.e. India will have ‘first mover’ advantage in making a tectonic shift in energy production, consumption and exports. The advantages in moving to green hydrogen from the grey version are too many. Challenges are countless. Indian government’s announcement to set up a dedicated hydrogen mission in the federal budget of 2021-22 attracted the ire of usual sceptics that include the naysayers. When Prime Minister Narendra Modi launched the mission in September 2021post his independence day address from ramparts of the Red Fort not many were willing to get ready for a transformative change in the country’s energy matrix. On Wednesday, the Cabinet’s decision to in hydrogen energy and make an initial investment of Rs 20,000 crore (approximately $ 3 billion) demonstrates Indian government’s readiness to move away from carbon fuels, cut the massive import bill on crude oil and address serious environment sustainability apart from larger climate change issues. If India can take the lead in Conference of Parties (COP) 27 and make decisive push on solar energy in sync with civilizational life styles and tap the huge potential Sun offers, there’s no reason why green energy mission cannot deliver. In September 2022, US democratic administration led by President Joe Biden had decided to pump in US $ 7 billion in green hydrogen hubs to export the gas worth 10 million tonnes by 2030. Similarly, entire European Union has committed US $ 5.2 billion on hydrogen energy to decarbonize the economy in 27-member countries. In this context, India’s decision to increase the green hydrogen through dedicated hubs to five million tonnes, set up 125 megawatts green hydrogen based energy generation capacity and undertake research in this nascent area is forward looking and doable. In the process, the government proposes to reduce its hydrocarbon imports by a whopping Rs. 100,000 crore, mobilize investments worth Rs 800,000 crore and create 600,000 direct and indirect jobs in next seven years. Quickly creating cost competitive electrolysers capacity to produce green hydrogen will be the clincher. Most of public investments by the central government would be to create these capacities. Providing early fiscal and monetary incentives through this green hydrogen hubs and dedicated mission will go a long way in creating green energy economy. Outcomes from this green energy campaign could be enormous. The way our industries produce products, service providers operate, the way we move around or transport goods and changes in energy sector will be huge. Though hydrocarbons based crude, naphtha, gas and coal would continue to be our main stray for energy generation in short term, the tactical shift in this scenario seems inevitable. One big challenge in this shift is developing cutting edge technologies, keeping up the curve and optimizing the costs to derive the best for commercial users in electrolysers to produce hydrogen and its derivatives with multi-fold applications. Second big issue could be making available cost-effective debt and equity funds. Finance Minister Nirmala Sitharaman should use the budget to be unveiled on February 1 to set up a dedicated green hydrogen development finance company to take the lead. Indian government may invest about Rs 5000 crore as initial equity capital to mobilize funds from both bilateral and multi-lateral sources, if required. Hydrogen hubs, whether it is pilots or large scale, need not be limited to big corporates like the Reliance or Adanis that have big plans in tapping green energy. Mukesh Ambani led Reliance Industries Ltd had announced in January 2022 its plans to make a shift to green energy across the entire value chain beginning with 20 GW energy production capacities by 2025.  Gautam Adani has not minced words in his investment commitment in green hydrogen technologies, infrastructure and generation capacities after the Independence Day speech of Prime Minister Modi in 2021. Most corporate board rooms in private sector, state-run energy enterprises have already been abuzz with discussions on foray into the green hydrogen as the next energy frontier to be conquered. Third big challenge will be evolve partnerships globally that would not cannibalize Indian green hydrogen ecosystem, know-how and companies. Carefully choosing dependable partners in the international arena that add value to the Indian ecosystem could be another decider. Fourthly, success of this policy framework would be in democratizing the entire value chain with a slice of cake for both small and large companies while the energy start-ups providing the edge. Fifthly, states will have to now jump into the fray and make hay out the ecosystem for green hydrogen as was done in the solar power panels’ capacities, generation projects and the whole chain ending with end-consumers. Sixthly, since India is eyeing a huge export market for its electrolysers, their maintenance and services, a dedicated export promotion mission may have to be mounted. But, the biggest challenge will be to counter below the cost cheaper and low-grade Chinese products that are likely to flood the markets once the dragon country gets some relief from blanket envelope of Covid 19 pandemic. Seventhly, identifying dedicated institutions of excellence to pursue research into the green hydrogen technologies and setting aside funds against deliverables in innovation knowhow should be done concomitantly. Eighthly, data collation and tracking developments in this area internationally on real time basis should be prioritized to keep India above water in this sector. Ninthly, green hydrogen should become an effective instrument to diversify India’s clean energy alternatives that include hydro-electric power, solar energy apart from nuclear power. It’s also time for India to chug ahead with coal sequestration as a diversified enterprise as a green alternative. Tenthly, evolving a healthy mix of both hydrocarbon based energy sources with increasing shift to newer areas like green hydrogen may have to be

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Business Policy
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Sovereign Green Bonds for India’s Green Goals

Background In the budget speech of 2022, India’s Finance Minister, Nirmala Sitharaman had announced issuance of sovereign green bonds (SGBs) to achieve the country’s objective of carbon neutrality by 2070[1]. In October this year, the Finance Ministry approved the SGB framework which is designed to gather funds for supporting state-run projects which will reduce carbon emissions in the years to come. Explained What are sovereign green bonds (SGBs)? Sovereign green bonds are issued by the Indian government to assist those organisations and projects which will focus on climate change mitigation, reduction in greenhouse gas emissions, climate adaptation, and reduce environmental risks. These are debt instruments and are a crucial part of ESG (environmental, social, and governance) investing[2]. In India, green bonds have been issued since 2015. During 2018 – 2022, $8 billion worth green bonds were issued which accounts for about 0.7 percent of bonds[3] issued in the financial market. In a report, titled, “Green Finance in India: Progress and Challenges” compiled by the Reserve Bank of India in 2021, till February 2020, India accounted for an outstanding debt of $16.3 billion in green bonds[4]. This has made India the second largest emerging green bonds market in the world after China. Indian banks and other financial institutions (like NBFCs and Indian Railway Finance Corporation which issued bonds which raised $500 million[5]) have rolled out their instruments for public sector organisations and firms to catalyse them for green initiatives. For instance, in 2018, State Bank of India (SBI) raised $650 million by the issuance of the first tranche of green bonds[6]. These are sovereign debt and reflect the Government of India liabilities. These instruments are fully backed by the government.   How are green bonds issued in India? For the purpose of listing and trading in sovereign green bonds, the government designated India International Exchange (India INX) situated in Gandhinagar, Gujarat as the forum[7]. This allows global investors and high-networth individuals to purchase green bonds in multiple currencies. For instance, the green bonds that were issued by SBI in 2018 were listed on India INX, Luxembourg Stock Exchange, and Singapore Stock Exchange. Table 1 lists recent issuances of green bonds by Indian firms in 2021 and 2022. Apart from these, Rural Electrification Corporation listed their bonds in 2017 and Yes Bank in 2015. Table. 1. A few examples of recent green bonds issued by Indian firms Issuer Amount (in $ million) Tenure Issued in ReNew Energy Global [8] 400 <5 years January 2022 State Bank of India 650 5 years November 2021 Adani Green Energy Limited[9] 750 3 years September 2021 ACME Solar[10] 334 5 years July 2021 Adani Electricity Mumbai Limited[11] 300 10+ years July 2021 Most green energy companies or those into new and renewable energy resources have seriously taken these bonds as a sustainable route to raise debt funds for expansion of their greenfield projects. Fig. 1. Volume of Sovereign Green Bonds issued in India during 2017-21[12]. Source: Statista; Climate Bonds Initiative; CIHS Analytics. Most of these have been issued for a period of over five years, with an exception of Adani Electricity Mumbai Limited which issued them for a period over 10 years. At present, green bonds are not open for all investors but for those individuals and investors which have focused projects for the green economy. Global status Ever since nations pledged the Sustainable Development Goals (SDGs), there has been an increase in issuance of green bonds all over the world. Fig. 2 shows the cumulative amount of green bonds issued across the world during 2014 to 2021. Fig. 2. Amount of green bonds issued globally. Source: Climate Bonds Initiative; CIHS Analytics. Key insights from global issuance of green bonds during 2021-22[13]: Table. 2. Top 10 issuers of SGBs across the world (2021-22) Institution No. of debt instruments Bond value (in $billion) Société du Grand Paris 4 7.62 China Development Bank 3 6.17 India (cumulative) NA 6.11 ICBC Limited (London branch) 1 3.23 Queensland Treasury Corporation 1 2.21 DNB Boligkreditt AS 1 1.67 Geysers Geothermal 1 1.5 Republic of Chile 1 1.24 Westpac 1 1.21 Japan Rail Construction Transportation and Technology 5 1.21 Ferroive dello Stalo 1 1.18 Certified sectors for investment across the globe SGBs are certified by institutions across the world and are classified into five broad categories. These sectors have been certified by nations internationally. These have been shown in Fig. 3. Fig. 3. Certified sectors for issuance of SGBs. Source: Climate Bonds Initiative; CIHS Analytics. A gist of India’s SGBs Framework At the core of India’s framework for sovereign green bonds[14] is the need to create a mechanism which will ensure that only green projects are financed. For this, the framework has the following provisions: Concluding observations India’s newly launched framework for sovereign green bonds can aid in achieving India’s climate goals and its pledge towards the SDGs. The net value of these bonds has increased multifold in the last few years which is indicative of India’s seriousness in achieving net-zero carbon emissions by 2070. The framework will work in tandem with norms laid down by SEBI which requires companies to publish reports on their environment and climate related activities. With the framework in place, companies and high-net-worth individuals now have a plethora of options to choose from compared to earlier years where green bonds were largely limited to the private sector. This will also help India emerge as a key market in the green debt instruments. [1] Budget2022 is a step towards innovative & Sustainable Development in New India to strengthen our energy transition journey and fight climate change: Power minister (no date) Press Information Bureau. Available at: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1794473 (Accessed: November 16, 2022). [2] ESG investing and analysis (no date) CFA Institute. Available at: https://www.cfainstitute.org/en/research/esg-investing (Accessed: November 16, 2022). [3] Green Finance in India: Progress and Challenges (no date) Reserve Bank of India – RBI Bulletin. Available at: https://www.rbi.org.in/Scripts/BS_ViewBulletin.aspx?Id=20022 (Accessed: November 16, 2022). [4] Green Finance in India: Progress and challenges* – reserve bank of India (no date). Available at:

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