Making green hydrogen cost-competitive: Waiver of central transmission charges is a good first step in enabling green hydrogen in India

India is placing a big bet on green hydrogen to transition away from fossil fuels. Recently, the ministry of power took the first step with the notification of a policy on green hydrogen using renewable sources of energy. One of the major highlights is a waiver of the central inter-state transmission charges for a period of 25 years for green hydrogen production projects commissioned before June 30, 2025. The cost of power constitutes anywhere between 50% and 70% of the total cost of green hydrogen depending on the location of production and the source of renewable energy, whether wind or solar. The open-access charge in turn is a significant portion of the cost of power. According to analysis by the Council on Energy, Environment and Water (CEEW), the cost of green hydrogen production could drop by 17% in a state such as Uttar Pradesh (UP) due to the waiving of the central transmission charges for states importing renewable power. However, if India were to become a global leader in green hydrogen, production costs would need to fall further and the following steps would help meet this objective.

First, states should either reduce or eliminate intra-state transmission charges as a top-up to the central policy. This would not only reduce the hydrogen production costs but also bring down the significant disparity in intra-state transmission charges between states.