Page 49 - BANKING FINANCE APRIL 2024

ARTICLE

and produce green steel, the demand for which is strong in to fulfill their priority sector lending targets, besides boosting
domestic and international markets. the credit flow to green hydrogen projects.

'Green Finance' is a concept that is increasingly being talked To conclude, it can be said that the transition to green hydrogen
about these days when it comes to fulfilment of credit cannot happen overnight. The technology for green hydrogen
requirements of various projects. The Reserve Bank of India production is in the initial stages right now and it will need
considers that finance as 'Green Finance' which is meant sustained efforts for a considerable amount of time before
for projects that are environmentally sustainable. In other production of green hydrogen can be done in an economically
words, if a project gives due weightage/consideration to viable manner, without any monetary support from the Govt.
climate change concerns, then credit extended to such a We can take heart from the fact that solar and wind power
project is classified as 'Green Finance'. were also prohibitively expensive to produce during their initial
stages of development. But with the passage of time, their cost
As per a RBI report titled Survey on Climate Risk & of production has come down substantially.
Sustainable Finance, published in July 2022, majority of the
banks in the country will substantially reduce their credit For example, as per a report by International Renewable
exposure to high carbon emitting businesses in the coming Energy Agency (IRENA), the weighted average Levellised
years. Banks are raising new capital called 'Green Capital' Cost of Electricity (LCOE) in case of onshore wind power
meant solely for financing of environmentally sustainable projects in our country has fallen from $0.2374 per KWh in
projects in the country. 1990 to $0.0299 per KWh in 2021, implying a 87.40%
reduction in cost. Since, cost of electricity generated from
Our country has set ambitious targets to ramp up green renewable sources is one of the major cost components in
hydrogen production in the country, under the National green hydrogen production, it will have a positive impact
Green Hydrogen Mission. Since, setting up green hydrogen on the overall green hydrogen production cost also.
projects requires huge capex, banks and NBFCs have a
As per a report by GEP, a global leader in supply chain
critical role to play in achieving the country's green
transformation consultancy, the cost of electrolyzers has
hydrogen production targets. Apart from expenditure
incurred in setting up of the new projects, financing is also already come down by around 60% since 2010. Hence, it
can be said that right steps are being taken by various
required for extensive research work, since the production
stakeholders to make green hydrogen a viable alternative
cost of green hydrogen is currently very high and it needs
to be reduced substantially to enable mass acceptance of source of energy.
usage of green hydrogen. According to International Atomic Energy Agency, green
hydrogen currently accounts for only 1 percent of the global
As per a report in The Economic Times dated Dec 18, 2023;
hydrogen supply. But in view of factors like urgent need to
State Bank of India along with some other banks are working
tackle adverse effects of climate change, extensive push by
with the government to draw up a uniform financing framework governments across the world to green hydrogen, global
for green hydrogen projects which will include aspects like
investors opting for sustainable businesses in their portfolios
credit appraisal, risk assessment etc. This will streamline the
etc.; it can safely be said that green hydrogen will fulfill a
process of sanctioning of green hydrogen projects. For this substantial part of our energy needs in the near future. The
purpose, a committee comprising of representatives from
only thing required will be to maintain the momentum built
banking sector, industry etc. has been set up to give
now to develop an optimum green hydrogen ecosystem.
recommendations to the Govt. The initiative is being led by
the Ministry of New & Renewable Energy, Govt. of India. (Note: Views expressed in the article are of the author and
not of the bank)
The Govt. of India has also recommended to the RBI to
include Green Hydrogen financing under the priority sector References:
lending. If done, it will open up another avenue for the banks Various sources.

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