Energy Transition

5 ways to power up India’s green hydrogen ecosystem

Green hydrogen could help India simultaneously meet its growing energy demand and reduce emissions.

Green hydrogen could help India simultaneously meet its growing energy demand and reduce emissions. Image: Getty Images/iStockphoto.

Sachin Kotak
Partner, Bain & Company Inc.
Jörgen Sandström
Head, Transforming Industrial Ecosystems, World Economic Forum
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Energy Transition

This article is part of: World Economic Forum Annual Meeting
  • Green hydrogen is critical to help meet India’s energy security needs while tackling emissions in hard-to-abate sectors.
  • The Indian government launched the National Green Hydrogen Mission in 2022, but so far there is limited on-the-ground traction for green hydrogen.
  • A new report by the Word Economic Forum and Bain & Company, has identified five areas across the demand and supply ecosystems to accelerate green hydrogen adoption in India.

India is the world's third-largest economy in terms of energy needs – and its energy demand is projected to surge 35% by 2030. For India to achieve net-zero emissions by 2070 as planned, it needs to pursue non-traditional methods for energy generation.

To address this, India is turning to green hydrogen. In addition to other initiatives, such as biofuels, green hydrogen could help India simultaneously meet its growing energy demand and reduce emissions.

The green hydrogen imperative

Green hydrogen is produced through the electrolysis of water using renewable energy. No polluting gases are released into the atmosphere during production or combustion, which makes it both clean and sustainable. Green hydrogen can be transformed into electricity or fuels such as ammonia. It already has versatile applications in the commercial, industrial and mobility sectors.

India launched the National Green Hydrogen Mission in 2022 to propel green hydrogen production and consumption. The mission sees green hydrogen as a vital way to secure India’s energy needs and mitigate polluting emissions. Between 2022 and 2030, the mission is expected to spend nearly $2.3 billion toward green hydrogen incentives and other enabling measures.

Overview of National Green Hydrogen Mission.
Overview of National Green Hydrogen Mission. Image: Bain & Company.

However, many of India’s key players are taking a cautious “wait-and-see” approach, anticipating that substantial production won’t start until after 2027. But there’s no time to waste. To meet critical energy and climate goals, India needs to expedite green hydrogen adoption.

According to a report by the Word Economic Forum and Bain & Company, India can address five areas across the demand and supply ecosystems to expedite green hydrogen and accelerate adoption.

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1. Reduce green hydrogen production costs to less than $2/kg

Today, green hydrogen costs about $4–5/kg to produce in India, which is approximately double the production cost for grey hydrogen. For the green hydrogen ecosystem to develop in India, production costs need to come down to $2/kg.

The higher cost of green hydrogen is primarily driven by round-the-clock (RTC) renewable electricity and electrolysers.

Production costs are likely to reduce naturally over time, as capacity increases and renewable energy costs decline. However, India could benefit from two targeted interventions right now:

  • India needs to lower energy storage costs so it can provide RTC energy. Indirect cost subsidies could reduce the cost of energy storing technologies, such as batteries. Interventions could also take the form of goods and service taxes or customs duty exemptions. As part of its 2023 Union Budget, India exempted customs duties on imported lithium-ion batteries for electric vehicles, which reduced their cost by as much as 20%. Similarly, India could exempt imported battery storage components for RTC renewable energy to support green hydrogen production.
  • To lower the cost of electrolysers, India could also increase direct subsidies for early adopters. The Indian government launched a production-linked incentive (PLI) to subsidize $54/kW during the first year of electrolyser production. Tranche 1 went live between July and October 2023. However, this subsidy only reduces the cost of green hydrogen production by $0.1/kg. Additional interventions are needed, including more subsidy support through the PLI scheme, to significantly reduce the cost of electrolysers and, thus, green hydrogen.

2. Minimize costs related to the conversion, storage, and transport of green hydrogen and its derivatives

Infrastructure demands also have a significant impact on the landed cost of green hydrogen. For example, facilities are needed for conversion and reconversion, storage, and transport.

Several interventions could minimize such costs. For example:

  • Creating clusters for production and offtake could significantly reduce the cost of infrastructure for transportation and storage. Industrial clusters are geographic concentrations of co-located companies that provide opportunities for tech scale-up, sharing of risk/resources and help in optimization of energy demand. As the industry is responsible for 30% of all global CO2 emissions, industrial clusters can accelerate the adoption of green hydrogen. The Transitioning Industrial Clusters Towards Net Zero initiative is a global effort to formalize and encourage industry participation in clusters. In India, to encourage offtake in clusters, the government could allow companies to bid for PLI or other incentive schemes as part of a cluster. India could also share success stories about clusters on national platforms to encourage collaboration.
  • In the European Union, the European Hydrogen Backbone programme developed a pipeline network in the EU. India could also benefit from long-term investments in infrastructure construction, such as pipelines for green hydrogen transport.

3. Create demand for green hydrogen to boost development

There are four types of users that are likely to drive the adoption of green hydrogen:

  • Existing grey hydrogen users (e.g., refining, ammonia).
  • Industrial processors (e.g., steel, cement, chemicals).
  • Transportation providers (e.g., heavy and light-duty vehicles, maritime, aviation).
  • Power and heating companies (e.g., power, grid balancing).

Demand-side interventions should be tailored for each type of user. For example, for existing grey hydrogen users, green energy uptake could be influenced by consumption-based interventions. Stakeholders could start by encouraging the use of blended hydrogen, which combines both green and grey hydrogen (with minimal impact on final product costs). For example, mandates could require refiners and ammonia manufacturers to blend small quantities (5%–20%) of green hydrogen into their fuel. That level would not materially change the cost of the end product, but it could encourage more widespread adoption.

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4. Capitalize on India's export potential

India has the potential to become a hub for green hydrogen derivative exports given its relatively low-cost renewable energy, skilled workforce, and abundance of land for renewable energy expansion.

Stakeholders can capitalize on India’s export potential by improving export infrastructure at ports.

Green hydrogen derivatives need to be converted at the production site or at ports before they can be exported. Export also requires storage and shipping facilities at port terminals.

The Indian government recently started allowing green hydrogen and green ammonia manufacturers to establish storage bunkers near ports. In the future, India could further optimize port infrastructure to enable green hydrogen production and conversion on site.

5. Divert investments away from carbon-intensive alternatives and into greener pathways, while ensuring energy access for all

In addition to incentivizing green hydrogen adoption, India must also disincentivize carbon-intensive energy sources.

India can divert subsidies away from high-emission sources and redirect funds toward the green energy transition. A comprehensive carbon-tax regime could help India meet rising energy demand, without compromising energy affordability for the population.

A once-in-a-lifetime opportunity

The green hydrogen ecosystem is still developing. As with any new or evolving technology, measures with shorter time-to-impact and that are easier to implement could have the most profound effects. The actions we take now will steer India’s green hydrogen ecosystem toward maturity.

If appropriate measures are taken, India can pivot from being an energy importer to an exporter for green hydrogen derivatives.

If India can unlock green hydrogen’s full potential, it can create a win-win-win solution for energy security, economic growth, and environmental sustainability.

For more details about these goals and enabling measures, read the full report from the World Economic Forum and Bain & Company.

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