World Bank allocates $1.5 billion for India’s transformation

India, with its rapid economic growth, is receiving significant financial support from the World Bank to accelerate its energy transformation. It has approved $1.5 billion in financing to promote green hydrogen and increase renewable energy production. This support is part of the second round of the Low Carbon Energy Program Development Policy, which aims to increase the country’s energy potential while reducing carbon emissions. India needs to invest up to $385 billion to achieve its target of 500 GW of renewable energy by 2030.

Stimulating the green hydrogen market

The second policy exercise of the low-carbon energy development program focuses on reforms to increase green hydrogen production, including the promotion of electrolysers. These technologies are essential if we are to meet our green hydrogen production and consumption targets. Green hydrogen, produced by electrolysis of water using electricity from renewable sources, is seen as a key solution to decarbonising industrial sectors that are difficult to electrify. The World Bank’s support includes measures to improve the infrastructure needed to produce and distribute green hydrogen. This includes installing new electrolysers and developing storage capacity. By facilitating these actions, India will not only be able to reduce its emissions but also create a robust domestic market for green hydrogen, stimulating innovation and employment in this emerging sector.

Strengthening renewable energy sources

The operation also supports reforms to increase the penetration of renewable energy sources. This includes encouraging battery storage and amending the Indian Grid Code to improve the integration of renewable energy sources. Battery storage is crucial to compensate for the intermittency of renewable energy sources such as solar and wind, ensuring stable and reliable power supply. In addition, the funding supports pilot projects and initiatives to modernise the electricity grid, enabling a greater share of renewable energy in the country’s energy mix. These reforms will also help attract private investment by creating a favourable regulatory environment and offering economic incentives to developers of renewable energy projects.

Production targets and emission reductions

The reforms aim to produce 450,000 tonnes of green hydrogen per year and 1,500 MW of electrolysers by 2025/26. This will increase renewable energy capacity and reduce emissions by 50 million tonnes per year. The increased green hydrogen production will be used in various industrial sectors, including steel, chemicals and transport, contributing to the decarbonisation of these industries. The reforms also include measures to encourage the adoption of clean technologies and improve energy efficiency. By supporting projects that combine green hydrogen and renewable energy sources, the World Bank is helping India achieve its climate goals while strengthening its energy security.

Domestic Carbon Credit Market

The program also supports the development of a domestic carbon credit market, creating a framework for a robust, incentive-based carbon market. The carbon credit market will enable companies to offset emissions by purchasing credits generated by projects that reduce emissions. This will encourage investment in sustainable technologies and projects. Establishing an efficient carbon market is critical to achieving emissions reduction goals. This creates a price on carbon, encouraging companies to adopt more sustainable practices and invest in clean technologies. The World Bank is working closely with the Indian authorities to put in place the necessary regulations and ensure that this market functions efficiently. This financing from the World Bank, through a $1.46 billion loan from the International Bank for Reconstruction and Development (IBRD) and a $31.5 million loan from the International Development Association (IDA), represents a major step forward for India in its energy transformation strategy. These funds will enable us to implement the necessary reforms and support innovative projects that will contribute to India’s sustainable growth.