India's Green Hydrogen Ambition
India aims to produce 5 million metric tonnes (MMT) of green hydrogen annually by 2030 to decarbonize industrial sectors.
However, current production costs of green hydrogen are much higher than traditional methods, posing a challenge to achieving this goal.
Economic Barriers to Green Hydrogen
Green hydrogen costs ($5.30-$6.70 per kg) are significantly higher than grey/blue hydrogen ($1.9-$2.4 per kg), hindering domestic demand and investment.
Key cost drivers include the levelised cost of electricity (LCOE) and electrolyzers, which are influenced by high capital costs in emerging markets like India.
Increased borrowing costs (weighted average cost of capital (WACC)) can raise the LCOE by up to 73%, making projects less financially viable.
Global Investment Challenges
Globally, a large portion of announced clean hydrogen projects ($370 billion worth) have not secured final investment decisions, indicating barriers beyond technological challenges.
India needs innovative financing mechanisms and policy frameworks to attract investment and scale the green hydrogen sector.
De-risking Investments in Green Hydrogen
India needs comprehensive policies, including long-term hydrogen purchase agreements, loan guarantees, and regulatory sandboxes to foster innovation and reduce investor uncertainty.
Indian banks must create tailored financial products like modular financing and “anchor-plus” models to address the unique challenges of hydrogen projects.
India should focus on practical collaborations, like carbon intensity certification and trade corridors, to facilitate exports and build trust in its hydrogen supply chain.
Key Industrial Hubs for Early Projects
Industrial hubs in states like Odisha, Maharashtra, and Gujarat can serve as testbeds for green hydrogen projects, helping to refine business models and financial structuring.
India’s success in green hydrogen will depend on utilizing renewable resources efficiently and securing low-cost capital.
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