Govt to provide 50% financial aid to pilot projects using Green Hydrogen in steel sector

The government has issued guidelines for providing financial support to pilot projects using green hydrogen in the steel sector
Govt to provide 50% financial aid to pilot projects using Green Hydrogen in steel sector
Govt to provide 50% financial aid to pilot projects using Green Hydrogen in steel sectorEnergy Watch

New Delhi: The government has issued guidelines on Friday for providing financial support to pilot projects using green hydrogen in the steel sector. The scheme will be implemented by the Ministry of New and Renewable Energy (MNRE) and the Ministry of Steel together. The guidelines, named ‘Scheme Guidelines for implementation of Pilot projects for use of Green Hydrogen in the Steel Sector under the National Green Hydrogen Mission,’ aim to develop pilot projects to identify operational issues and gaps in terms of current technology readiness, regulations, implementation methodologies, infrastructure and supply chains for the deployment of green hydrogen in the hard-to-abate iron and steel industry.

Under the National Green Hydrogen Mission, along with other initiatives, MNRE will implement pilot projects in the Steel Sector, for replacing fossil fuels and fossil fuel-based feedstock with Green Hydrogen and its derivatives. These pilot projects will be implemented through the Ministry of Steel and the implementing agencies nominated under this scheme. The scheme will be implemented with a total budgetary outlay of Rs 455 crore till FY 2029-30.

Use of green hydrogen in steel industry

Three areas have been identified as thrust areas for the pilot projects in the steel sector. These are, the use of Hydrogen in Direct Reduced Ironmaking process, Blast Furnace, and substitution of fossil fuels with Green Hydrogen in a gradual manner. The scheme will also support pilot projects involving any other innovative use of hydrogen for reducing carbon emissions in iron and steel production and greenfield projects aiming at 100 percent green steel.

“Considering the higher costs of green hydrogen at present, steel plants could begin by blending a small percentage of green hydrogen in their processes, and increasing the blending proportion progressively, with improvement in cost-economics and advancement of technology,” said the MNRE. The guidelines also note that upcoming steel plants should be capable of operating with green hydrogen, thus ensuring that these plants are able to participate in future global low-carbon steel markets.

“The use of Green Hydrogen and its derivatives in the steel sector, through the proposed pilot projects, will lead to the development of necessary infrastructure for use of Green Hydrogen in the Iron & Steel industry, resulting in establishment of a Green Hydrogen ecosystem in the steel sector. The utilisation of green hydrogen in the steel industry is expected to increase over the years, with the expected reduction in its production cost,” said the MNRE.

Steel ministry will develop framework for selection of projects

While the MNRE will disburse funds to selected projects under the scheme, the Ministry of Steel will be responsible for developing a framework for the selection of pilot projects. The scheme would primarily fund capital equipment required for the use of green hydrogen in the iron and steel manufacturing process. Expenses incurred on production of hydrogen, land etc, will not be funded.

Govt to provide 50% financial aid to pilot projects using Green Hydrogen in steel sector
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Steel sector pilot projects will receive funding for up to 50-70% of total cost

According to the guidelines, funding of the approved projects will not exceed 50 percent of the total cost of the project. For consortium of Independent Steel Producers (ISP) and DRI industry or associations, the funding may be increased to 70 percent of the project cost. “Financial support for projects will be evaluated and granted, taking into consideration the specific needs, merits and feasibility of each project,” say the guidelines.

National Green Hydrogen Mission

The National Green Hydrogen Mission was launched on January 4, 2023 with an outlay of Rs 19,744 crores up to FY 2029-30. “It will contribute to India’s goal to become Aatmanirbhar (self-reliant) through clean energy and serve as an inspiration for the global Clean Energy Transition. The Mission will lead to significant decarbonization of the economy, reduced dependence on fossil fuel imports, and enable India to assume technology and market leadership in Green Hydrogen,” said the government.

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