World Bank injects $1.5 billion into India’s coal and green hydrogen market • Carbon credits

The World Bank has approved $1.5 billion to boost low-carbon energy in India. The move aims to boost India’s green hydrogen market, expand renewable energy sources and increase financing for low-carbon projects. The funding, announced June 29, is the second phase of the Operation of the programmatic low carbon energy development policy.

Transforming India’s Renewable Energy Market with $1.5 Billion Investment Plan

India, the world’s fastest-growing mega-economy, is set to continue its rapid expansion. To decouple this growth from emissions, scaling up renewable energy is essential, particularly in hard-to-abate industrial sectors. This strategy aims to increase production and consumption of green hydrogen, as well as accelerate climate finance to support low-carbon investments. Expanding further, the second phase of the $1.5 billion initiative aims to transform India’s RE market by:

• Production of ~450,000 MT of green hydrogen and 1,500 MW of electrolysers per year from FY2025-2026. Will cover the cost of latest technology required for green hydrogen production.
• Increasing renewable energy potential by encouraging battery storage solutions It also promotes renewable energy integration through incentives for battery storage and changes in the Indian Grid Code. This aims to reduce emissions by 50 MTS per year.
• Supporting the development of the domestic carbon credit market.

source: Energy Statistics India 2024

Auguste Tano Kouame, Director of the World Bank in India, noted:

“The World Bank is pleased to continue to support India’s low-emission development strategy, which will help the country achieve its net-zero emissions goal while creating clean energy jobs in the private sector. Indeed, both the first and second operations put a strong emphasis on increasing private investment in green hydrogen and renewable energy.”

First achievements of the low-carbon energy programme

In June last year (2023), the World Bank approved the $1.5 billion First Low-Carbon Energy Programmatic Development Policy Operation. According to the World Bank, the initiative facilitated exemptions from transmission charges for renewable energy in green hydrogen projects in India. It also outlined a clear strategy for launching tenders for 50 GW of renewable energy per year and established a legal framework for a domestic carbon credit market.

Aurélien Kruse, Xiaodong Wang and Surbhi Goyal, leaders of the operations team, jointly said:

“This operation helps scale up investments in green hydrogen and renewable energy infrastructure. This will contribute to India’s Nationally Determined Contributions targets.

The directors also praised India’s efforts to establish a strong domestic green hydrogen market, supported by rapidly growing renewable energy capacity. They noted that the initial tenders under the National Green Hydrogen Mission incentive program have attracted significant private sector interest.

India’s Renewable Energy Landscape from an IEA Perspective

The IEA publication of 2024 discusses the link between the Indian economy and renewable energy demand. India’s GDP grew by 7.8% in 2023, making it the world’s fastest-growing economy and the world’s fifth-largest economy. India’s energy demand is expected to outpace all regions by 2050 due to urbanization and increased demand for electricity, cement, and steel. This dependence on imported fossil fuels could significantly increase carbon dioxide emissions. Hence, there is an urgent need to reduce emissions and achieve net zero emissions by 2070.

India has increased investment in solar and wind power and promoted domestic clean energy production through its Production Linked Incentives program. The country also boasts strong energy efficiency programs and a new hydrogen policy.

Recent media reports say that India entered the sovereign green bond market in January 2023, issuing $1 billion worth of bonds. This has boosted clean energy investments, reaching $68 billion in 2023. Fossil fuel investments have also increased to $33 billion. To achieve its energy and climate goals, India needs to double its clean energy investments by 2030. However, an additional 20% increase would be enough. Reducing capital costs is key to achieving this goal.

As of March 2024Thermal power in India accounts for 56% of installed capacity, renewables for 32%, hydropower for 11% and nuclear for 2%. The World Bank supported this transformation with a huge loan.

• India aims to build 47 GW/236 GWh of energy storage and produce 5 MMT of clean hydrogen by 2030.
• India also plans to achieve 40 GW of electrolyzer capacity by 2030, capture 30 million tonnes of carbon dioxide and produce 2 million tonnes of sustainable aviation fuel.

Overall, the World Bank funding could accelerate India’s commitment to surpass 500 GW of renewable energy capacity by 2030. Continued leadership in advanced energy solutions. With energy giants like Tata, Adani and Reliance, the country is close to achieving its energy transformation goals.