India, a country making significant strides in the renewable energy sector, is expected to see a reduction of up to 40% in the cost of green hydrogen due to the government’s support and incentives, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA).
The levelized cost of green hydrogen in India is projected to drop to around Rs 260-310 per kg (USD 3-3.75 per kg). This reduction is primarily driven by the government’s provisions of affordable renewable electricity for hydrogen manufacturers, exemptions on Inter-State Transmission Charges for open access, as well as lowered transmission and distribution costs. Additionally, the GST on hydrogen has been reduced to just 5%.
The report also highlights that electrolyzer manufacturers are expected to see a 7-10% decrease in overall system costs during the first five years, beginning in 2024. The average annual incentive is estimated to be around Rs 2,960/kW (USD 36/kW).
While the green hydrogen initiative is an essential step for India, the report emphasizes that further adjustments are necessary to encourage long-term investment and ensure the sustainability of projects. It notes that while the green hydrogen mission has been well received by the industry, it needs fine-tuning to make it competitive globally, attract startups, and develop a secure supply chain and demand that will support the sector’s longevity.
“If successful, this initiative could help build India’s green hydrogen industry and offer benefits across various sectors, including agriculture, transport, and manufacturing,” the report states.
India launched its National Green Hydrogen Mission in January 2023 with an allocated budget of Rs 19,744 crores. The goal is to achieve a green hydrogen production capacity of 5 million tonnes by 2030. The mission consists of two main financial incentive mechanisms to support both domestic electrolyser manufacturing and green hydrogen production.
This ambitious green hydrogen mission is a key step towards India’s broader goals in the hydrogen economy, which also aims to cut reliance on fossil fuels. Renewable energy, including green hydrogen, is seen as vital in reducing India’s dependence on conventional power sources. Globally, the focus on green energy for climate change mitigation has gained considerable traction.
At COP26 in 2021, India made a bold commitment to the five-part “Panchamrit” pledge. This includes achieving 500 GW of non-fossil fuel-based electricity capacity, generating half of the country’s energy from renewables, cutting emissions by 1 billion tonnes by 2030, reducing the emissions intensity of GDP by 45%, and reaching net-zero emissions by 2070.
