India’s Green Hydrogen Economy: What’s in it for Investors?

Posted by Written by Naina Bhardwaj Reading Time: 7 minutes

We address why India is prioritizing investment growth in the green hydrogen economy, which is aligned with its net zero carbon emission commitments, ambitions for its electric mobility industry, and development of its renewables sector. In February this year, India unveiled its National Green Hydrogen Policy, 2022. Given the scale of the prospective market, India should be proactive in manufacturing electrolyzers to produce green hydrogen.

Green Hydrogen

India’s commitment to net zero carbon emissions is more resilient than ever and green hydrogen-based fuel is being touted as a way to achieve this. Along with its global counterparts, India aspires to transition to a low-carbon hydrogen-based economy to address concerns around its energy security, climate change, reducing emissions, accelerating decarbonization efforts, improving the degrading air quality, and reducing the high fossil fuel import bills. This was indicated during by Prime Minister Narendra Modi in his speech at the UNFCCC’s COP26.

Green hydrogen, a source of clean energy and industrial feedstock, has trended across much of recent international climate agenda. This is because the cumulative efforts of all Nationally Determined Contributions (NDC) have failed to meet reductions in global GHG emissions required to limit global warming below 2°C as outlined in the Paris Agreement on climate change. India, also a signatory to the Paris Agreement, has committed to reducing the emission intensity of economic activity by 33–35 percent by 2030, below the 2005 levels. Several initiatives have been undertaken at various levels, including promoting electric vehicle (EV) use and building necessary support infrastructure, engineering shifts to renewable energy, as well as active engagement in climate diplomacy.

Moreover, the Indian leadership views green hydrogen as the ultimate solution to India’s decarbonizing goals. The National Hydrogen Mission was launched in August 2021 as a blueprint for India’s transition to a hydrogen-based economy. The Mission seeks to aid the government’s efforts to meet climate targets and make India a production hub for green hydrogen and green ammonia –  considered to be ‘the fuels of the future’. The Mission targets the production of five million tons of green hydrogen by 2030 and envisions the ancillary development of renewable energy capacity.

Furthering this clean energy agenda, the federal government launched the National Green Hydrogen Policy, 2022 on February 17. The policy intends to reduce India’s dependence on fossil fuels and reduce crude oil imports.

What is green hydrogen?

Depending on the process of its formation, hydrogen can be classified as:

  • Green: Produced by electrolysis of water using renewable energy (like solar and wind energy) and has a lower carbon footprint.
  • Blue: Produced from natural gas, where the emissions are captured using carbon capture and storage.
  • Gray: Produced from natural gas where the associated emissions are released to the air.
  • Brown: Produced using coal where the emissions are released to the air.

Among the different forms of hydrogen, green hydrogen is seen as the most viable and favorable option that eliminates the use of fossil fuels in the production process and enables the decarbonization of sectors like heavy industries, heavy transport, and energy.

Moreover, by enhancing the demand for renewable energy generation, it is also expected to facilitate the intensification of renewable energy markets in India.

Green hydrogen in India: Sector overview

Market demand and technology innovation

According to a study by the Council on Energy, Environment, and Water (CEEW), green hydrogen demand in India could go up to 1 million tons across multiple sectors, including ammonia, steel, methanol, transport, and energy storage. Estimates by Allied Market Research peg the valuation of India’s hydrogen market at US$81 million by 2025, projecting a growth of 6.3 percent from US$50 million in 2017 till 2025.  Yet, despite the research, the contribution of hydrogen as a major player in the energy system is yet to be actualized.

Now, however, technological innovations in electrolyzers are making the prospects of large-scale production of low carbon hydrogen more realistic. Further, as the global green hydrogen ecosystem develops, the cost of hydrogen production is expected to lessen and become comparable with fossil fuels. An analysis by The Energy and Resources Institute (TERI) estimates that by 2030, cost of hydrogen production from renewables will fall by more than 50 percent and will start to compete with hydrogen produced from fossil fuels.

Factors that are enabling the successful penetration of hydrogen in the energy system include:

  • Growing demand in numerous end-use sectors like industry.
  • Supply-side innovation in production technologies, notably electrolyzers and renewables.
  • Enabling technological innovations like the development of high renewables power systems, which can help solve problems like excess renewables generation, need for long-term electricity storage, etc.
  • Policy impetus on compelling deep decarbonization of energy systems, which will require chemical energy carriers like hydrogen, and in netting the industrial benefits of hydrogen.

Given the scale of the prospective market, India should be proactive in manufacturing electrolyzers to produce green hydrogen. According to research by KPMG, in the coming years, an exponential drop in the cost of electrolyzers is expected. These are currently produced at about US$800 per kW, with some Chinese electrolyzers costing as low as US$400 per kW. The cost difference between green hydrogen and grey hydrogen is expected to be covered over the next 10 years.


The biggest challenge in the production of green hydrogen is its high levelized cost of production, which at present is around two times that of grey hydrogen. According to TERI, the present cost of green hydrogen production in India is around US$5-6 per kg. While electrolyzers are estimated to cost around 36 percent of levelized production, energy consumption costs approximately 48 percent of the levelized production. Large capital requirements at the outset are a challenge in the green hydrogen supply chain.

According a joint statement released by ReNew and Larsen & Toubro, green hydrogen demand in India for applications such as oil, refineries, steel, fertilizer units, and city gas grids will grow up to two million metric tons per annum by 2030, demanding investments upward of US$60 billion. Another market report suggests that India needs investments to the tune of US$44 billion by 2030 in order to produce green hydrogen at scale.


Long distance transportation of hydrogen via trucks and tankers will prove to be an expensive affair, requiring huge initial investments in laying new pipelines or making existing natural gas or fossil fuel pipelines compatible with transporting hydrogen.

Various Modes for Transporting Hydrogen

Modes of Transport


Tariff Range

Trucks and tankers

Short distance hydrogen transport in gaseous, liquid and chemical form

For every 50 km:

  • US$0.07 (as ammonia)
  • US$0.48 (as gaseous hydrogen)


Long distance hydrogen transport in gaseous form

For every 500 km:

  • US$0.29 – US$0.88


Ships and marine transport

Hydrogen exports in liquid or derivative chemical form

For every 3000 km:

  • US$1.60 – US$2.80 (as liquid organic hydrogen carriers)
  • US$1.90 – US$2.20 (as ammonia)
  • US$2.34 (as liquid hydrogen)



End uses of hydrogen

Potential End Uses of Green Hydrogen in India



Light-duty passenger and freight transport

Short-distance, regular-route heavy-duty transport

Very long-distance heavy-duty

freight transport


Ammonia production

Steel production

Refineries hydrogen demand

Methanol production

Power sector

Converting fuel cells into chemical fuel for renewable energy storage for deployment in small scale decentralized power applications

Heat generation

As a combustion fuel for large scale stationary turbine engines and generators to produce heat for industrial applications

Electricity storage

Short-term (weekly/monthly/seasonal) storage in the long run

Who are the leading market players in India’s hydrogen market?

In the four months after the launch of the National Hydrogen Mission, three energy giants – Reliance, Adani, and most recently ReNew (in partnership with Larsen and Toubro), have announced entry plans for the  green hydrogen market. India’s green hydrogen plan aims to cut it down the present production cost of around US$5-6 to half at around US$2 per kg by 2029-30.

Reliance, which is a major player in the hydrocarbon, or fossil fuel segment has committed to making green hydrogen available at US$1 per kg by 2030.

The Adani group, too, has announced at investment of approximately US$20 billion in green hydrogen. Presently, the Adani group’s overall organic and inorganic investments across the entire green energy value chain range between US$50 billion to US$70 billion.

In December 2021, Larsen & Toubro (L&T) and ReNew signed an agreement to jointly develop, own, execute, and operate green hydrogen projects in India and adjoining nations. They aim to capitalize on the US$2 billion worth green hydrogen business opportunities in in India and its neighboring countries over the next two years.

Meanwhile, in December 2021, India announced its first green hydrogen-based energy storage project in Vishakhapatnam, Andhra Pradesh. The project “Standalone Fuel-Cell based Micro-grid with hydrogen production using electrolyzer” in the NTPC Guest House at Simhadri (near Visakhapatnam) hopes to be a precursor to large-scale hydrogen energy storage projects. It will be useful for studying and deploying multiple microgrids in various off grid and strategic locations of the country. Prior to this, in July 2021, the NTPC Renewable Energy Ltd. approved India’s first green hydrogen fueling station in Leh, Ladakh.

Provisions of the Green Hydrogen Policy, 2022

Under the Green Hydrogen Policy, 2022, the Indian government is offering to set up manufacturing zones for production, connectivity to the Inter-State Transmission System (ISTS) on priority basis, and free transmission for 25 years – if the production facility is commissioned before June 2025.

This implies that a green hydrogen producer will be able to set up a solar power plant in one state to supply renewable energy to a green hydrogen plant in another state and would not be required to pay any inter-state transmission charges.

Furthermore, the production target has been raised five times from one million tons (MT) to five MT by 2030. In October, 2021 it was announced that India is initially targeting about 1 MT annual green hydrogen production by 2030. The policy provides that the manufacturers of green hydrogen will be allowed to purchase renewable power from the power exchange or set up renewable energy capacity themselves or through any other developer, anywhere.

Additionally, the policy provides facility for the producers to bank any surplus renewable energy generated with discoms (power distribution companies) for up to 30 days and use it as required. The discoms may also procure renewable energy to supply to green hydrogen producers but will be required to do so at a concessional rate – which will only include the cost of procurement, wheeling charges, and a small margin as determined by the state commission. Such procurement would also count towards a state’s Renewable Purchase Obligation (RPO) under which it is required to procure a certain proportion of its requirements from renewable energy sources.

To ensure ease of doing business, a single portal for carrying out all the activities, including statutory clearances in a time bound manner, will be set up by the Ministry of New and Renewable Energy (MNRE).

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