India’s foray into the green hydrogen market shows promising potential with significant investments and an ambitious goal to create a capacity for producing green hydrogen of at least 5 MT annually by 2030.
However, to truly establish itself as a global hub for green hydrogen production, India must act swiftly and strategically by simultaneously working on both demand and supply side drivers. While the National Green Hydrogen Mission, with an outlay of ₹19,744 crore, and foreign collaborations are encouraging, India’s current capacity lags behind global leaders.
The National Green Hydrogen Mission (NGHM) was approved by the Union Cabinet of India on January 4, 2023, with an outlay of ₹19,744 crore from the financial year 2023-24 to 2029-30. The primary objective of this mission is to establish India as a global hub for the production, utilization, and export of Green Hydrogen and its derivatives.
According to the Mission, by 2030, India envisions to create a capacity for producing green hydrogen of at least 5 MT annually, along with an additional 125 GW of renewable energy capacity. This will result in the generation of six lakh jobs, but to support the plan, investments totalling over Rs 8 lakh crore will be required. It is expected to result in a cumulative decrease of over Rs 1 lakh crore in fossil fuel imports as well as a reduction of nearly 50 MT in yearly greenhouse gas emissions.
Around Rs 17,490 crore, of this budget will go toward incentives for the creation of green hydrogen and the manufacture of electrolysers. The government refers to this as Strategic Interventions for Green Hydrogen Transition Programme (SIGHT). A further Rs 1,466 crore would be allocated for pilot projects, while Rs 400 crore and Rs 388 crore will be used for research and development (R&D) and other mission components respectively.
The government is also planning to waive import duty on electrolysers for a short period to give an initial push to investment in green hydrogen production. Incentives for the production of green hydrogen and the manufacturing of electrolysers will mostly be through production-linked incentive (PLI) schemes.
In this blog, we critically examine India’s policy focus, prospects and challenges en route to achieving the National Green Hydrogen Mission 2030.
India produces nearly 7 million tons of gray hydrogen currently and targets to produce 5 million tons of green hydrogen by 2030. The global green hydrogen market was valued at US$ 676 million in 2022 and is projected to reach US$ 7.31 billion by 2027, growing at a CAGR of 61.0% from 2022 to 2027.
Source: NITI Aayog report
The market’s growth is attributed to the lowering cost of producing renewable energy, advancements in electrolysis technologies, and high demand from Fuel Cell Electric Vehicles (FCEVs) and the power industry.
Mr. Saad Ashraf, India Business Head, Ceres said about the potential of Green Hydrogen in India, “India is uniquely placed in the race of green hydrogen production and supply for domestic as well as global markets. With around 180 GW of renewable energy installed already and 50% of total electricity generation to be renewable energy 2030, India can produce green hydrogen competitively with renewable energy costs coming down over time.”
Currently, hydrogen produced using renewable resources costs between $3 to $6.55 per kg, whereas fossil-based hydrogen costs around $1.80 per kg, according to the European Commission’s hydrogen strategy from July 2020. In India, the production cost of green hydrogen is approximately Rs 500 per kg. However, the government aims to reduce this cost by 40-50% through its policy initiatives.
He further said, “India already consumes over 6 million tons of hydrogen (gray) which is primarily used for petroleum refining and fertilizer production. Industry reports suggest the expected demand for H2 by 2030 would be around 11MTs/ year, of which 5MTs are expected to be green as per the National Green H2 mission. With government incentives for electrolyser manufacturing and green hydrogen production coming in (SIGHT), the Indian industry is taking steps in realizing the target of 5MT of green hydrogen production by 2030.”
Concluding his statement, he added, “The Indian government is also expected to mandate the use of green hydrogen (starting with 10%) in industries such as steel and petroleum refining which will further strengthen the demand and boost the green H2 value chain.”
Notably, nine companies have plans for seven factory projects, three joint ventures, and three solo investments, contributing to the 8GW capacity. For instance, Greenko, in partnership with Belgium’s John Cockerill and Nevada-based Ohmium, is building a 2GW factory. Reliance is partnering with Denmark’s Stiesdal, while L&T is collaborating with Norway’s Hydrogen Pro to build electrolyser factories. Gautam Adani has committed financing to a one GW factory, as part of the company’s goal to produce 3 million tonnes of hydrogen by 2030, requiring 16GW of electrolyser capacity.
Recent developments indicate that India could become a key hub for hydrogen electrolyser production, with an 8GW capacity by 2025. Western companies are also showing interest in India’s green hydrogen market through joint ventures and foreign governments are showing interest through collaborations.
Another positive trend is that Indian government and industry are proactively entering into collaborative projects with other countries. India offers carbon credits for green hydrogen production in exchange for investments from other countries. It has hosted talks with the European Union (EU) regarding a potential deal to provide the latter with 10 million metric tonnes of green hydrogen. In return, the EU would invest in a clean energy project in India.
Essar Group launched Essar Energy Transition (EET), a sustainability-focused business, to invest US$ 3.6 billion in India and the north of England. EET will develop low-carbon energy projects to drive growth and resurgence. In addition to this, Abu Dhabi’s Ocior Energy has signed a memorandum of understanding with the state government of Gujarat, India, to develop a green hydrogen and ammonia plant worth Rs 400 billion (US$ 4.8 billion). The plant is expected to produce 1 mn tonnes of clean fuels annually.
Moreover, India and Panama are in talks for collaboration on green hydrogen and renewable technologies, including green shipping. Panama aims to become a global hydrogen and green shipping hub with India’s assistance, given that 70% and 95%, respectively, of India’s trade is carried out via sea transportation and this might potentially shift the game.
Similarly, investment interests by foreign entities in India’s green transition bring encouraging signs for the growth of the sector. The European Investment Bank (EIB) has pledged € 1 billion to support the development of a large-scale industry hub in India, demonstrating its confidence in the country’s green energy initiatives. The Asian Development Bank (ADB) has expressed its intent to provide US$ 20-25 billion over five years to support India’s green growth aspirations. The World Bank has approved US$ 1.5 billion in financing to aid India’s low-carbon transition journey.
Avaada Group successfully closed a funding round of Rs 10,700 crore (US$1.3 billion), a significant milestone for India’s renewable energy sector. Brookfield Renewables commits up to Rs 8,225 crore (US$ 1 billion) in Avaada Ventures Private Limited, while Global Power Synergy Public Company plans to invest an additional Rs 1,917 crore (US$ 233 million) in Avaada Energy Private Ltd. GPSC’s total investment in Avaada now stands at around Rs 6,037 crore (US$ 779 million). Climate technology startup Newtrace has successfully secured US$ 5.65 million in seed funding, with leading investments from Sequoia Capital India and Aavishkaar Capital.
Amidst India’s visionary Green Hydrogen Mission and the promise of future growth, a few daunting challenges continue to loom on the horizon.
Currently, India consumes 6 million tonnes of gray hydrogen, which is produced using natural gas with low-carbon technologies. However, to produce the same amount of green hydrogen, estimates suggest that India would require anywhere between 132-192 million tonnes of water. This amount accounts for about 10% of Delhi’s annual water requirement, just to provide a context. If the country were to scale up production to 10 million metric tonnes of green hydrogen annually, the water demand would increase further.
According to an International Energy Agency (IEA) report, 9 litres of water are needed for every kilogram of green hydrogen produced. The report highlights that freshwater access becomes a concern in water-stressed areas when producing green hydrogen.
When we asked Mr. Saad Ashraf about the difficulty of the mission to achieve the desired goal, he said, “In order to meet the 2030 target, India will need at least 60 GW of installed electrolysis capacity. There is a lot of ground to be covered for the Indian industry to meet this scale of electrolysis capacity. Although the SIGHT scheme with nearly US$ 2.2 billion sanctioned for GH2 ecosystem development is a good step in the right direction, more support will be required for the Green H2 industry to really take off and meet the 60 GW target. This is certainly doable if India creates a strong local electrolyser manufacturing base.”
But when we asked Anil Srikar Pavuluri, Business Development Head, GreenH Electrolysis, he said (citing it as his personal opinion), ” It is easy in the sense our RE targets are quite optimistic and we are trying for the lowest levelized cost of electricity (LCOE) by employing RE-RTC plants including hybrid of Wind, Solar PV, BESS as well as Pumped Hydro storage projects, waiver in ISTS charges, banking etc. If LCOE which is 60% to 70% of the Levelized Cost of Hydrogen (LCOH) is brought down, then, with domestic Electrolyser manufacturing, we can bring down the Electrolyser costs also. Hence, LCOH of hydrogen which is right now hovering at US$ 5-8/kg, can be brought down to US$ 3-4/kg of Green Hydrogen.”
|Potential mandates for existing applications|
|Sector||Target Type||Mandate||Cut-off Date for the Sector to go 100% Green|
|Refinery||Corporate level targets||50% by 2030||2035|
|Fertilizers||Import substitutions||100% by 2030||2040|
|Aspirational targets for new applications|
|Steel||Old plants||Fleet level carbon intensity by 2035 should be less than 2 tonnes of CO2 per tonne of steel|
|New capacity||At least 20 million tonnes of green hydrogen- based green steel to be made in India primarily for exports|
|City Gas Distribution (CDG)||Pilot and subsequent scale-up||10% blending by 2025 and 20% by 2030|
|Green Ammonia||Exports||25 million tonnes of exports to countries such as Japan, Korea, and the European Union|
|Heavy-Duty Vehicles (HDVs)||Pilots on specific routes||1,000 trucks, 50 boats, and 10 aircrafts to be piloted by 2030. Three hydrogen corridors to be developed across the country based on state grand challenge.|
|Power||Allow participation in RTC tenders||Where economics makes sense, allow hydrogen to compete with other storage technologies in Round the Clock tenders by SECI.|
Source: NITI Aayog report
He added, “However, we need consistent policy attention. Most importantly we need to define what is Green / Clean Hydrogen which global economies have already announced. Since, developing Electrolyser manufacturing indigenously will take time, right now many of the developers plan to import the Electrolysers. So, Government of India can think of reducing import duties and GST applicable on components of Electrolysers. Simultaneously, thoughts have to be given on import from countries which don’t provide availability guarantees of Green Hydrogen, like importing from cross border countries that India shares a land border with.”
Estimates reveal that using solar energy for electrolysis would require a total water input of around 32 kg per kg of green hydrogen while using wind energy would demand 22 kg of water per kg of green hydrogen. In contrast, producing hydrogen from natural gas (gray hydrogen) requires 22 kg of water per kg of hydrogen.
Another challenge for India is that hydrogen is known to leak easily, and liquid hydrogen reacts explosively with air, necessitating additional infrastructure for safe handling. The concerned scientific claims suggest that if there are 10% leaks during production, transportation, storage, or use, the climate benefits of green hydrogen over fossil fuels could be nullified.
Further research, technology, and data are needed to address these concerns and ensure the sustainability of hydrogen projects. Moreover, introducing a hydrogen blend in existing gas grids would require extensive study, testing, and modifications to pipeline integrity monitoring and maintenance practices.
India’s success in achieving its green hydrogen goals depends on acting swiftly. Its advantage lies in low-cost renewable energy production, which it aims to leverage for profitable green hydrogen exports before breaking the gray hydrogen price barrier in the domestic market. Mr. Saad adds, “For the supply side, creating a robust supply chain for local electrolyser manufacturing will be critical for India to realize the targets of the green hydrogen mission. India must focus on highly efficient and robust electrolysis technologies such as Solid Oxide and take the lead in creating a supply chain for the local manufacturing of the hardware. 2030 is only the beginning of a much longer journey which will be challenging without creating local production capacity.”
And on the demand side, he adds, “The government should help create the demand by mandating high emission-intensive industries such as steel, cement and petrochemical industries to use green hydrogen. Government subsidies and incentives will be critical in creating initial offtake until the economies of scale are reached.”
To realize the vision, India must employ multiple triggers simultaneously.
The first trigger is the Green Hydrogen Mission’s INR 17,940 crore in financial incentives for electrolyser and green hydrogen generation. Immediate contributions will be encouraged by precise descriptions of the incentive payout method, scope, and timeline. Progress can be accelerated by coupling incentives with capacity expansion and production schedules.
The second trigger comprises developing a supportive policy environment, such as requiring industries to acquire green hydrogen and blending green hydrogen gas. Investments in the green hydrogen market could be accelerated by these methods.
Setting standards and coordinating India’s green hydrogen program with potential export markets’ norms are the three main objectives of this trigger. This includes conforming to the EU Commission’s green hydrogen standard, which requires the production of green hydrogen to employ renewable power from installations that are no more than 36 months old.
The fourth trigger has to do with the export method and its technological and commercial effects. India needs to think about things like hydrogen liquefaction, which uses a lot of energy, and look at alternative derivatives like ammonia.
As India’s green hydrogen production capacity is currently behind global leaders, it must urgently accelerate its green hydrogen mission and aim for 50k-100k tons of operational capacity by 2025. This can be achieved by using incentives and supportive policies to encourage investment and innovation in the green hydrogen industry. By adhering to international standards, India can enhance its credibility and competitiveness in the global market.