Note4Students
From UPSC perspective, the following things are important :
Mains level: Significance and issues related to hydrogen;
Why in the news?
India aims to produce 5 million metric tonnes of green hydrogen annually by 2030 to lead in the sector and reduce emissions, but the high costs of financing may hinder this goal.
Hydrogen fuel comes in three types:
What are the key financial barriers to scaling green hydrogen production?
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How can innovative financing mechanisms be developed?
- Blended Finance Models: Combining public and private capital can help lower risks and make investments in green hydrogen more attractive. Government-backed financial instruments or concessional loans can reduce borrowing costs, lowering WACC.
- Green Bonds and Climate Financing: The issuance of green bonds to raise capital for renewable energy projects can provide long-term funding at lower costs. These bonds can appeal to investors with an interest in sustainable investments.
- Private-Public Partnerships (PPP): Collaborations between government and private sectors can help mitigate risks and ensure the financing of green hydrogen projects. To attract private investors, governments can provide financial support through incentives, subsidies, or tax breaks.
- Carbon Credits and Offtake Agreements: Green hydrogen projects could leverage carbon credits or long-term offtake agreements to secure steady revenue streams, which would increase investor confidence and help finance production scale-up.
What role do policy frameworks play in facilitating investment in green hydrogen?
- Incentives and Subsidies: Government policies offering subsidies, tax incentives, or feed-in tariffs can help offset the high initial costs of green hydrogen production and encourage private investment.
- Long-Term Policy Clarity: Clear, stable, and long-term policy frameworks provide certainty to investors, reducing perceived risks and lowering the cost of capital. Such policies could include long-term targets for green hydrogen production, financing support, and infrastructure development.
- Regulatory Support for Innovation: Governments can encourage innovation by providing regulatory frameworks that support new technologies, such as electrolyzers and advanced hydrogen storage solutions, ensuring the rapid scaling of green hydrogen.
- Market Creation and Demand-Driven Initiatives: Policies that create demand for green hydrogen, such as mandatory usage targets for industries like steel, transportation, or chemicals, can drive off-take agreements and ensure market stability.
Mains PYQ:
Q Describe the major outcomes of the 26th session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). What are the commitments made by India in this conference? (2021)
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