Unlocking Green Hydrogen: Demand in India

Green hydrogen is expected to play a crucial role in India's goal of achieving net-zero emissions by 2070. It will be particularly vital for hard-to-abate and other industrial sectors that are challenging to decarbonize through direct electrification with renewable energy.

‍

Beyond decarbonization, green hydrogen offers India a path to enhanced energy security by reducing its reliance on imports. With abundant access to renewable energy, India possesses a natural advantage in establishing a globally competitive green hydrogen ecosystem.

‍

Recognizing this potential, the Indian government has set a near-term goal of 5 million metric tons (MMT) of green hydrogen production capacity by 2030, supported by various policy measures outlined in the National Green Hydrogen Mission of 2023. This favorable policy environment has successfully stimulated significant supply-side interest, with announced production plans from large-scale players expected to exceed the government's 5 MMT target by 2.5 times.

‍

Despite encouraging momentum on the supply side, demand-side enthusiasm for green hydrogen has been subdued, leading to slower execution of planned investments. As of 2024, commissioned green hydrogen capacity, primarily from pilot programs, remains below 0.01 MMT.

‍

The main reasons for this slowed progress are high production costs, nascent enabling infrastructure, and high financing costs. Current green hydrogen production costs, at $4–$5 per kg, are not yet competitive with grey hydrogen, which typically costs $2.3–$2.5 per kg (though some industries may pay more). While green hydrogen production costs are expected to decrease naturally with economies of scale and technological advancements, there are immediate demand segments that can be targeted. Additionally, viable, differentiated sector-level strategies could help accelerate green hydrogen adoption in the interim.

This report outlines five immediate demand-side strategies to accelerate the adoption of green hydrogen:

• Blend green hydrogen: Introduce small amounts of green hydrogen into existing grey hydrogen or piped natural gas supplies across high-volume sectors like refineries, fertilizer production, and piped natural gas, while considering technological feasibility and customer price sensitivity.
• Encourage substitution in niche segments: Promote the switch from grey to green hydrogen in segments such as glass, ceramics, and chemicals, where the cost impact is neutral.
• Increase domestic consumption: Boost internal demand through public procurement, particularly for green steel.

• Explore export potential with partner countries: Investigate opportunities to export green hydrogen and green ammonia to countries already advanced in green hydrogen adoption.
• Identify export opportunities for green hydrogen-embedded products: Seek out global market opportunities for products that incorporate green hydrogen and benefit from existing tailwinds.

This report also examines catalytic measures to overcome challenges and constraints in implementing the above strategies. Key enablers such as infrastructure development, risk-mitigating offtake agreements, financial mechanisms (e.g., viability gap funding and sovereign guarantees), and adherence to global standards can accelerate the scalability and market viability of green hydrogen.

These interventions are crucial for India to transform its green hydrogen vision into a commercially viable reality.