India is the world’s second-largest steel producer. But it is at a crossroads as it seeks to expand capacity to meet the demands of manufacturing, infrastructure, and urbanisation. All of these are powered by coal-based processes, which have subsequently made the steel industry carbon-intensive. At the same time, we have been able to witness a dramatic change in the climate policy and the global markets. The carbon intensity is heavily influencing the trade and procurement decisions, and this has led to the decarbonization and maturing of steel production.

Green Hydrogen has been attributed with the successful production of low-carbon steel at scale. It is made by electrolysis of water with renewable energy. The success of green hydrogen is also dependent on various factors such as coordination between the public and the private sector, ambition of the policy makers, and the ongoing industrial strategies.

Why Is Green Hydrogen Important For The Steel Industry?

When it comes to steel production, there are two main low-carbon routes. A short-term pathway makes use of electric arc furnaces (EAFs) fed by scrap and/or direct reduced iron (DRI). On the other hand, the long-term pathway makes use of a deep-decarbonization route for primary steel with hydrogen-based DRI (H2-DRI). In this route, hydrogen is replaced by carbon as the reducing agent.

Therefore, if this hydrogen is produced with the help of renewable materials, it will reduce the intensity of the emissions. This technology is being increasingly tried out in India with increasing success rates. Green Hydrogen has also aligned with India’s strategic economic goals. Not only has it reduced the dependence on natural gas and imported coking coal, but also created a surge in the demand for India’s renewable energy capacity. It has also helped in the establishment of supply chains and exportable expertise. All of these factors have given India a competitive advantage over other countries.

What Are Some of India’s Strengths In This Industry?

The economy in India can be strengthened with some of its existing advantages in the steel industry. These advantages are as follows:

Potential in the renewable resource sector: The cost of expanding the solar and wind capacity is relatively low in India. To reduce the price of green hydrogen, it can pair the electrolysers with the cheap renewables. It is one of the most direct and efficient routes to achieve green hydrogen.

Increasing demand for domestic steel: The urban growth and the domestic infrastructure have led to a huge demand for domestic steel. This has been made possible by the investment in decarbonising capacity. This investment is not dependent on the export markets, which have increased its likelihood in the Indian market.

Industrial programmes and policies supporting its growth: To encourage the supply and domestic manufacturing of hydrogen equipment, there have been various subsidies and programmes, such as the National Green Hydrogen Mission. Apart from this, there have been hub development plans and PLY-type support. All of these factors together have supported the growth of green hydrogen incentives in India.

How Is India Supporting This Shift Towards Green Hydrogen?

India is not lagging when it comes to the adoption of better renewable sources of energy production. The pilot projects have already been funded by the Ministry of Steel to produce DRI using 100% Hydrogen. The existing blast furnaces have also been injected with hydrogen. These are important technical experiments which have de-risked the scaling up. On the other hand, even the large-scale industries have started the pilot projects for hydrogen-DRI demonstrations and pilot electrolysis.

For example, in the Vijayanagar works, JSW has established a sizable green hydrogen project. This has helped in the coming together of steel making, power readiness and the electrolyser capacity. In this way, India can quickly move from theory to industrial practice, in the areas associated with these pilot projects.

The Role of Policymakers In The Production of Green Hydrogen In India

Several policy moves are essential for the large-scale production of green hydrogen. Some of them include the following:

Carbon pricing and trade readiness: To prevent the steel makers in India from getting sudden shocks, there needs to be a transparent domestic carbon pricing roadmap in place. There also needs to be strict measures for the exporters to comply with carbon border rules. This will also push the local suppliers towards decarbonization investments.

Research & Development: The companies need to invest in training their workforce, pilot testing projects, research materials and cluster industrial policy. This will help in the formation of supply chains and the lowering of the technical risk.

The mechanics of demand and pull: To reduce the offtake risk for green-steel plants and create a predictable demand, the policymakers can create mandates, offtake targets, flagship projects and low-carbon procurement processes. This can enable the public procurement of low-carbon steel for rails, metros and ports.

Better finance and targeted subsidies: To bridge the cost gap and enable the rapid scaling of steel industries, the policy makers need to ensure concessional loans, capital grants and production support, which enables the maturity of the pilot projects. When it comes to the establishment of green hydrogen hubs, there needs to be better public investment. This will also help in the co-location of steel units, renewable energy and electrolysers.

Better manufacturing policies: To accelerate the domestic manufacturing of electrolysers, the policymakers should ensure the right PIL, standards and testing facilities. This can reduce the capex and internalise the supply chains. This will create new opportunities for export and reduce the import exposure. People will start relying more on the indigenous capabilities rather than the imports. 

How To Mitigate Competitive Risks?

There is uneven access to the cheap renewables and the presence of entrenched coal-based incumbents. This can slow down the adoption of green hydrogen. Therefore, there needs to be adequate policies that grant the required access to the renewable power. A federal state programme could potentially help in mitigating these risks. Support could come in the form of incentives related to land permissions, fiscal incentives and transmission priorities. This also helps raise the importance of clear regulatory guidance.

Also, the government and production units should not rely heavily on exports. Only if Indian industries can certify the intensity of their emissions and consistently produce a good quality of carbon steel, will it be accepted in the global markets.

The Future of Green Hydrogen Industries In India

Green hydrogen has the capacity to fully restructure the steel-making industry in India. It is more than just a way of reducing carbon emissions. It can also successfully reconfigure the inputs and the steel markets. The government policies alone would not be sufficient in bringing about this transition; it would also require domestic manufacturing of electrolysers, better public investment and predictable demand signals. To avail the long-term advantages of the integration of green hydrogen, there needs to be a willingness on the part of the industries to absorb some of the related costs.

Green hydrogen can become a durable competitive advantage for the Indian market if it can integrate all of the above-mentioned incentives and changes into its steel ecosystem. India’s renewable potential and steel demand will be successfully converted into an industrial advantage, and it will turn out to be more than just an expensive experiment for the steel industry.

Mr. Vedant Goel is a Director at Enlight Metals Pvt Ltd. He is the Director of Enlight Metals, a leading steel aggregator company specializing in Mild Steel (MS) products including MS Pipes, MS Structures, and MS Plates. With a sharp business acumen and over 17 years of experience across the steel, FMCG, and digital marketing sectors, Vedant has built Enlight Metals into a brand that provides clients with a price advantage and assured quality, leveraging technology for seamless fulfillment and operational transparency.