India’s National Green Hydrogen Mission (NGHM) aims to catalyse more than ₹8 lakh crore of investment while developing an annual production capacity of 5 million metric tonnes of green hydrogen (GH) by 2030. This ambition is not merely to decarbonise hard-to-abate sectors but to position India as a global hub for GH manufacturing.
However, mobilising capital at this scale will require more than generous incentives or larger climate funds. It will require a financial system capable of financing commercially promising technologies that are yet to evolve into mature infrastructure assets. As the RBI advances its climate risk framework and financial institutions start integrating climate considerations into lending decisions, the focus now needs to shift more toward building the institutional architecture that enables climate investments than toward managing only climate-related financial risks.
This presents an important paradox in India’s energy transition. While banks readily finance utility-scale RE projects, GH, battery energy storage and industrial decarbonisation projects continue to struggle for finance. The conventional explanation is that banks are overly risk-averse. However, this interpretation fails to capture the root problem.
Banks are unwilling to finance risks they cannot adequately assess or price. Today, a 500 MW solar park can secure long-tenor debt, while a comparable GH project often struggles to attract financing. The difference lies less in the technology than in the predictability of future cash flows.
RE has gradually become a bankable asset class because institutions progressively reduced commercial uncertainty. Competitive auctions, standardised PPAs, advanced payment security mechanisms, declining technology costs and experienced developers created stable revenue streams that banks could underwrite with confidence. Operational assets could subsequently be refinanced through green bonds, Infrastructure Investment Trusts, and institutional investors, thereby recycling capital into new projects.
Alternatively, GH presents a fundamentally different proposition.
Despite NGHM and other policy support, lenders still lack clarity on demand, pricing and contracts: Who will buy green hydrogen, at what price, under what terms and for how long?
Similar uncertainties remain in battery energy storage, where revenues depend on evolving ancillary service markets and capacity payments and in industrial decarbonisation projects, where returns often arise from avoided costs rather than dedicated revenue streams. While these sectors are commercially promising, they have not yet developed the predictable revenue models that conventional project finance requires.
International experience points in a different direction. Germany’s Carbon Contracts for Difference and H2Global programme reduced market risk by providing long-term revenue certainty for GH and industrial decarbonisation. The UK’s Green Investment Bank demonstrated how specialised public institutions can crowd private capital into commercially nascent sectors.
MDBs are increasingly deploying guarantees, blended finance and portfolio-level interventions rather than financing projects individually. The common thread across these models is not larger subsidies, but institutions deliberately designed to convert uncertainty into investable opportunities.
Therefore, India’s next challenge is not simply financing GH. It is building the institutional architecture that makes emerging climate technologies bankable.
Emerging sectors become investment-grade only when risks are systematically reduced as projects mature and capital moves through successive stages of financing.
Pipeline creation: MNRE, SECI and state governments should focus on project preparation, standardised long-term hydrogen purchase agreements, demand aggregation and common infrastructure to create investment-ready projects.
Early-stage risk absorption: NIIF, sovereign-backed climate funds and MDBs should deploy platform-level vehicles to absorb technology, construction and market risks across portfolios, helping anchor private capital.
Commercial debt mobilisation: As risks decline, IREDA, REC and commercial banks should provide long-tenor debt, supported by BF structures, partial credit guarantees and risk-sharing facilities. Public finance should address risks private lenders cannot efficiently bear.
Financial intermediation: Specialised intermediaries should aggregate projects, standardise documentation, warehouse assets and refinance operational portfolios. Diversified portfolios can become investment-grade assets attractive to pension funds, insurers and global climate investors.
The final stage is capital recycling. Regulators, capital markets and institutional investors must facilitate green bonds, securitisation, InvITs and other market-based instruments that enable mature assets to be transferred from bank balance sheets to long-term investors.
India’s leadership in the next generation of clean technologies will ultimately depend not only on technological innovation or larger financial commitments, but on whether its financial institutions systematically convert technological promise into investable infrastructure.
(The Author is Senior Research Consultant, Chintan Research Foundation. Views are personal)
