India’s first-ever reverse auction that was intended to help in the price discovery for commercial green hydrogen showed that the gas could be priced at ₹400 per kg, or $4.7.
L&T Energy Green Tech won the bid to supply Indian Oil Corporation 10,000 tonnes a year from its green hydrogen plant at its Panipat refinery, via a build-own-operate (BOO) model for 25 years. The good news is that two others, who did not win the bid, were also able to quote prices in the same range – NTPC Green Energy Ltd quoted ₹398 while Renew E-Fuels came in third at ₹407/kg.
The not-so-great news is that we are still a long shot away from the $1 per kg of GH2 that seems to be the global benchmark. A government-mandated purchase obligations on buyers – so that they buy a certain percentage of their requirements from green hydrogen vendors – could help lower prices.
How to spur demand?
When the renewable energy industry was at a nascent stage, a similar mandate, called Renewable Purchase Obligation, enabled producers to gradually acquire economies of scale and that helped hammer costs down over time.
Earlier this month, the India Hydrogen Alliance (IH2A) urged the Indian government to implement Hydrogen Purchase Obligations (HPOs) for refineries and ammonia plants, proposing a 10 per cent HPO for existing facilities and a 100 per cent HPO for new plants by 2030.
In a statement, the alliance pointed out that the proposal aimed to “stimulate domestic green hydrogen demand and safeguard an estimated $80 billion in hydrogen-related investments crucial for achieving the National Green Hydrogen Mission (NGHM) targets.”
Currently, India’s green hydrogen production is less than 1 per cent of the 2030 target of 1.5 million metric tonnes, meant for domestic consumption.
Ammonia plants and refineries account for about 95 per cent of the approximately 6 million tonnes of hydrogen consumed in India, according to Dr Ajinkya Shrish Kamat, Senior Manager – Hydrogen & Innovation at India Energy Storage Alliance (IESA).
Without such obligations, the alliance warns that the 2030 targets and related investments were at risk and could lead to stranded assets for green hydrogen plants.
The IH2A argues that without HPOs and adequate demand creation, the NGHM targets and associated investments are at significant risk, potentially leading to stranded assets for planned hydrogen plants and supply projects.
Common roadmap
The proposed HPOs target 47 existing and new refinery and ammonia plants across India. This includes a 10 per cent HPO for 39 existing projects (17 refineries and 22 ammonia plants) to meet 45 per cent of the NGHM target by 2030 (672,000 MT). Additionally, a 100 per cent HPO is proposed for 8 new build/expansion projects (5 refinery and 3 fertilizer plants) to fulfill the remaining 55 per cent of the NGHM target (849,000 MT).
Amrit Singh Deo, IH2A Secretariat lead, emphasised that a common hydrogen use and demand roadmap for refineries and fertilizers is essential to aggregate demand and procure green hydrogen volumes of at least 10 per cent until 2030. IH2A estimates an additional budget of $2 billion for a contract-for-difference (CfD) framework that could support the transition of all existing refinery and fertilizer plants to 10 per cent HPO offtake, and all new plants to 100 per cent HPO by 2030, simultaneously reducing carbon emissions in these hard-to-abate sectors.
Whether the government would implement HPOs for cost-sensitive industries such as refining and fertilizers, which are linked to inflation and food security, remains to be seen, he says. However, though purchase obligations would be beneficial, several foundational elements must be in place first.
Deo highlights the need for a “very reliable and robust green hydrogen certification mechanism that is scalable” and capable of certifying large volumes. He says that if the government were to allow, say, 5 per cent HPO, then of the approximately 6 million tonnes of hydrogen that is consumed, the country ought to have the capability to certify at least 300,000 tonnes annually. Before certification, green hydrogen plants ought to have started producing at scale, reliably, and in compliance with technical standards, with well-defined and stable business models.
Most ammonia makers and oil refineries operate captive hydrogen plants. The remaining is procured from the market by specialty chemical companies or glass companies, which often pay higher delivered prices due to storage and transportation costs, sometimes reaching ₹400 per kg, and going up to even ₹800 per kg for high-purity requirements, he said.
Does that mean that the $1 per kg would be difficult to achieve even in the distant future? Kamat says that the often-cited target of $1 per Kg for green hydrogen was set by the US Department of Energy before the Covid-19 pandemic and at a time when natural gas prices were low. He noted that today in India, the production cost of grey hydrogen ranges between ₹150 and ₹300 per Kg – significantly higher than the $1 benchmark.
But green hydrogen costs will eventually decrease, he says, pointing out that government incentives will help spur initial demand which will then become self-sustaining. Initial incentives are vital for establishing large-scale green hydrogen and green ammonia plants.
Push from States
A dozen State governments have announced incentives for green hydrogen and its derivatives — tax reimbursements, low-cost or free electricity and capital subsidy.
Odisha is offering a reimbursement of ₹3/kWh on tariff of electricity purchased from its discoms. Gujarat reimburses State GST on capital goods for plants of GH2 and its derivatives. The land lease policy makes government fallow land available for green hydrogen production on lease charges starting at ₹15,000 per hectare per year.
Gujarat, Andhra Pradesh and Assam have announced incentives for electrolyser manufacturing, including partial or full reimbursement of State GST on electrolysers; Rajasthan and Telangana have promised capital subsidy.
Kamat cites IEA data to suggest that merely increasing the utilisation of existing electrolyser manufacturing capacity from 10 per cent to 85 per cent could significantly reduce electrolyser costs by 40-60 per cent, subsequently lowering green hydrogen costs. This scale-up is essential for achieving economies of scale, eventually reducing the need for extensive incentives.
While large-scale plants are needed for the refining and fertilizer sectors, smaller plants could service others such as specialty chemical companies. These smaller-scale projects can provide valuable experience, providing the initial impetus for the scaling process for green hydrogen, he points out, adding that companies are already exploring various business models.
For example, Greenko has partnered with John Cockerill, an electrolyser manufacturer. “What I see happening is either refineries that use hydrogen are partnering with project developers or sometimes renewable project developers partner with electrolyser providers to get into the development of green hydrogen production so that they share the risk,” says Kamat.
Published on May 25, 2025
