Whalesbook
India's Green Hydrogen Ambitions Face Implementation Hurdles
The Institute for Energy Economics and Financial Analysis (IEEFA) has raised concerns regarding the realization of India's substantial pledged green hydrogen capacity, which is nearing 12 million tonnes per annum. Despite strong investor interest reflected in the announcement of 158 projects, the sector's development is in its nascent stages, with significant gaps between announced plans and actual operational capacity.
The Scale of Ambition vs. Reality
As of August 2025, approximately 94 percent, or around 11.2 million tonnes per annum (mtpa), of India's total green hydrogen capacity has been announced, but crucial details remain unfinalized. Only about 0.1 percent (9,770 tonnes per annum) is currently under construction, and a mere 2.8 percent (0.3 mtpa) was operational. This stark contrast underscores the early stage of development for India's green hydrogen industry.
Diverse Applications and Key Challenges
Proposed green hydrogen projects span various end-use applications, highlighting its versatility in decarbonizing sectors like oil refining, fertilizer manufacturing, city gas distribution, chemicals, and mobility. However, Charith Konda, an author of the IEEFA note, points out that despite the ambitious capacity targets, the materialization of these projects is uncertain due to adoption and uptake challenges. High production costs and demand uncertainty are significant headwinds impacting the industry globally.
The Critical Need for Buyers
Kaira Rakheja, an Energy Analyst at IEEFA and co-author, identified securing reliable, bulk buyers as a primary concern for green hydrogen project investors worldwide. Globally, by January 2025, only 6 percent of planned green hydrogen capacity had a committed buyer. This lack of an anchor offtaker often delays financing and final investment decisions. Many of India's planned projects could struggle to achieve financial closure if they fail to secure buyers, who are deterred by high costs and inadequate infrastructure.
Policy and Demand Dynamics
The National Green Hydrogen Mission (NGHM) sets a target of producing 5 mtpa by 2030 but does not mandate purchase obligations for existing or potential users. While supply-side incentives are in place, demand is expected to be driven by individual user initiatives and overarching climate goals, presenting a considerable challenge. IEEFA noted that while India has not seen significant project cancellations, unlike in the US, Europe, or Australia, the large number of projects in very early stages emphasizes the need to ease execution challenges.
Impact
The challenges in materializing green hydrogen capacity could slow down India's decarbonization efforts and its transition to cleaner energy sources. This could affect companies involved in renewable energy, industrial gas production, fertilizer manufacturing, and chemical sectors, potentially impacting investor confidence and market valuations. However, it also signals potential opportunities for innovation in cost reduction and buyer engagement. Impact Rating: 7/10
Difficult Terms Explained
- Green Hydrogen: Hydrogen produced using renewable energy sources, such as solar or wind power, with no direct carbon emissions.
- Grey Hydrogen: Hydrogen produced from natural gas or other fossil fuels, which releases carbon dioxide during the production process.
- mtpa: Million tonnes per annum, a unit used to measure large quantities of production annually.
- NGHM: National Green Hydrogen Mission, a government initiative aimed at promoting green hydrogen production in India.
- Offtaker: A buyer or entity that agrees to purchase a product or service, in this case, green hydrogen.
- Financial Closure: The stage where all necessary funding for a project has been secured, allowing construction to commence.
- Hard-to-abate sectors: Industries that are inherently difficult to decarbonize due to their processes or reliance on specific fuels.
- Decarbonising: The process of reducing carbon dioxide emissions and other greenhouse gases from economic activities.