The World Bank’s Board of Executive Directors has approved $1.5 billion in financing to help India accelerate the development of low-carbon energy. This second operation aims to promote the development of a vibrant market for green hydrogen, scale up renewable energy, and stimulate finance for low-carbon energy investments.
India’s Rapid Economic Growth and Low-Carbon Transition
As the fastest-growing large economy globally, India’s continued rapid economic expansion necessitates the decoupling of economic growth from emissions growth. Achieving this will require a significant increase in renewable energy, particularly in hard-to-abate industrial sectors. Expanding green hydrogen production and consumption and developing climate finance to mobilize investments for low-carbon initiatives are critical steps in this process.
Second Low-Carbon Energy Programmatic Development Policy Operation
The Second Low-Carbon Energy Programmatic Development Policy Operation, the second in a series of two similar operations, will support reforms to boost green hydrogen and electrolyzer production—essential technologies for green hydrogen production. Additionally, the operation aims to enhance renewable energy penetration by incentivizing battery energy storage solutions and amending the Indian Electricity Grid Code to improve renewable energy integration into the grid.
In June 2023, the World Bank approved the $1.5 billion First Low-Carbon Energy Programmatic Development Policy Operation. This initial operation supported the waiver of transmission charges for renewable energy in green hydrogen projects, outlined a clear path to launch 50 GW of renewable energy tenders annually, and established a legal framework for a national carbon credit market.
Support for India’s Low-Carbon Strategy
“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,” said Auguste Tano Kouame, World Bank Country Director for India. “Both the first and second operations have a strong focus on boosting private investment in green hydrogen and renewable energy.”
Projected Outcomes
The reforms supported by this operation are expected to produce at least 450,000 metric tons of green hydrogen and 1,500 MW of electrolyzers annually from FY25/26 onwards. Additionally, the operation will significantly increase renewable energy capacity and support emissions reductions by 50 million tons per year. It will also help develop a national carbon credit market.
“India has taken bold action to develop a domestic market for green hydrogen, supported by rapidly expanding renewable energy capacity. The first tenders under the National Green Hydrogen Mission’s incentive scheme have shown significant private sector interest,” said Aurélien Kruse, Xiaodong Wang, and Surbhi Goyal, Team Leaders for the operation. “The operation is helping scale up investments in green hydrogen and renewable energy infrastructure, contributing to India’s journey towards achieving its Nationally Determined Contributions targets.”
Financing Details
The financing for this operation includes a $1.46 billion loan from the International Bank for Reconstruction and Development (IBRD) and a $31.5 million credit from the International Development Association (IDA). This initiative aligns with the Government of India’s energy security goals and the World Bank’s Hydrogen for Development (H4D) Partnership.
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