World Bank approves $1.5 bln for India's green energy transition, focus on Hydrogen
The reforms supported by this operation are expected to yield significant results such as production of at least 450,000 metric tons of green hydrogen annually from FY25/26 onwards and, installation of 1,500 MW of electrolyzers per year from FY25/26.
The World Bank, a global financial institution dedicated to reducing poverty and promoting sustainable development, has approved $1.5 billion in financing for a second operation aimed at accelerating the development of low-carbon energy in India, the world's third-largest emitter of greenhouse gases.
This operation is part of a broader strategy to combat climate change and promote sustainable development in rapidly growing economies. It comes at a crucial time when countries worldwide are striving to meet their commitments under the Paris Agreement and transition to cleaner energy sources.
The financing will focus on three key areas:
- Promoting the development of a vibrant market for green hydrogen, a clean fuel produced using renewable energy.
- Continuing to scale up renewable energy sources such as solar and wind power.
- Stimulating finance for low-carbon energy investments to attract private sector participation.
This Second Low-Carbon Energy Programmatic Development Policy Operation is the second in a series of two similarly sized operations. It builds upon the foundations laid by the first operation and aims to support reforms that will boost the production of green hydrogen and electrolyzers, which are critical technologies needed for green hydrogen production.
The operation also supports reforms to increase renewable energy penetration in India's power grid. This includes incentivizing battery energy storage solutions, which are crucial for managing the intermittent nature of renewable energy sources, and amending the Indian Electricity Grid Code to improve the integration of renewable energy into the grid.
For context, in June 2023, the World Bank approved the $1.5 billion First Low-Carbon Energy Programmatic Development Policy Operation. This initial operation supported several key initiatives:
- Waiving transmission charges for renewable energy in green hydrogen projects, making them more economically viable.
- Issuing a clear path to launch 50 GW of renewable energy tenders annually, providing a stable pipeline for renewable energy projects.
- Creating a legal framework for a national carbon credit market, which can incentivize emissions reductions across various sectors.
Auguste Tano Kouame, World Bank Country Director for India, emphasized the importance of this support, stating, "The World Bank is pleased to continue supporting India's low-carbon development strategy, which will help achieve the country's net-zero target while creating clean energy jobs in the private sector." He also highlighted that both operations have a strong focus on boosting private investment in green hydrogen and renewable energy, recognizing the crucial role of the private sector in driving this transition.
The reforms supported by this operation are expected to yield significant results:
- Production of at least 450,000 metric tons of green hydrogen annually from FY25/26 onwards.
- Installation of 1,500 MW of electrolyzers per year from FY25/26.
- A substantial increase in renewable energy capacity.
- Support for emissions reductions of 50 million tons per year.
Additionally, the operation will support steps to further develop a national carbon credit market, which can provide economic incentives for emissions reductions across various sectors of the Indian economy.
The team leaders for the operation, Aurélien Kruse, Xiaodong Wang, and Surbhi Goyal, highlighted India's bold action in developing a domestic market for green hydrogen, underpinned by rapidly expanding renewable energy capacity. They noted that the first tenders under the National Green Hydrogen Mission's incentive scheme have demonstrated significant private sector interest, indicating the potential for rapid growth in this sector.
This operation aligns with both the Government of India's energy security goals and the World Bank's Hydrogen for Development (H4D) Partnership, a global initiative to support the development of low-carbon hydrogen in emerging economies.
The financing package for this operation includes a $1.46 billion loan from the International Bank for Reconstruction and Development (IBRD), the World Bank's lending arm for middle-income countries, and a $31.5 million credit from the International Development Association (IDA), which provides concessional financing for the world's poorest countries.
This substantial investment by the World Bank underscores the global importance of India's transition to a low-carbon economy and highlights the potential for green hydrogen and renewable energy to play a crucial role in mitigating climate change while supporting economic growth.
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