By Raunaq Chandrashekar and Meera Gopal

In April 2024, the Asia Society Policy Institute (ASPI) launched the Green Hydrogen for Decarbonizing Asia’s Industrial Giants report in New Delhi. The report was commissioned by ASPI’s High-level Policy Commission on Getting Asia to Net Zero and featured analysis from Global Efficiency Intelligence. A separate blog summarized the report’s key findings on green H2’s potential to meet the dual aims of economic growth and industrial decarbonization in Asia’s four largest economies: China, India, Japan, and South Korea.

This blog analyzes India’s case, using expert and stakeholder insights shared during the report’s launch event, Assessing Green Hydrogen Market Opportunities in Asia and India. The event featured opening remarks from Commission member Vivek Pathak (Global Head and Director of Climate Business, IFC) and keynote remarks by Abhay Bakre (Director General, Bureau of Energy Efficiency, India), followed by an expert panel discussion and a closed-door multistakeholder roundtable.

Pathak highlighted the progress made in improving energy efficiency across supply chains and the diminishing emissions intensity of current and future technologies. Bakre added that green H2 represents a significant opportunity in the Indian context, considering the ambitious targets for emissions reduction and energy independence. He pointed to India’s success at scaling solar as a blueprint for how green H2 could be scaled.

Expert Reactions to the ASPI Report

The panel featured experts on India’s green economy evolution: Deepak Yadav (Council on Energy, Environment and Water), Charith Konda (Institute for Energy Economics and Financial Analysis), and Sujit Jena (India’s G20 Sherpa Office). The roundtable that followed, which was held under the Chatham House Rule, engaged notable industry, technical, civil society, and government stakeholders. The report’s assessment drew insightful responses from panelists and stakeholders alike, broadly centered on the opportunities and challenges for India’s green H2 economy. 

Key Takeaways

• The fast-paced rollout of India’s National Green Hydrogen Mission, with nine guidelines issued in a little over a year, covering pilot programs, manufacturing incentives, and more, is promising. The emergence of state-level policies is also a positive sign.
• The main challenge domestically will be bringing down the cost of green H2 as a viable, low-emissions alternative in hard-to-abate sectors, such as steelmaking, where green H2 is the most expensive alternative. Creating demand-side directives and financing instruments will be the first steps in addressing this challenge. 
• Internationally, India and other large developing economies need to leverage their leadership positions (such as the G20 presidency, held by Indonesia, India, and Brazil in 2022, 2023, and 2024, respectively) to lay the groundwork for a robust global supply chain. This includes steering discussions on global guidelines for green H2’s definition; safety; and measuring, reporting, and verification (MRV) systems.

The report and panel discussion laid the groundwork for an engaging discussion organized around four themes:

• Indigenizing electrolyzer manufacturing and green H2 production via production-linked incentive schemes 
• Creating a holistic ecosystem, which includes safety regulations, testing labs, MRV systems, etc. 
• Promoting international cooperation for global standards and supply chains and positioning India as a green H2 hub
• Incentivizing blended finance options to support ambitious green H2 projects and de-risking the sector

Opportunities: Domestic Manufacturing Capacity, Industrial Applications, and Global Markets

India’s burgeoning economy and population, particularly its expanding middle class, will drive demand for food and housing, which, in turn, will propel demand for steel, cement, and fertilizers — notoriously high-emitting sectors. Scaling green H2 in the production of DRI steel and ammonia (for fertilizers) can ensure that India simultaneously meets its consumer demands and its net zero ambitions. The Strategic Interventions for Green Hydrogen Transition (SIGHT) policy’s USD 2.1 billion production-linked incentives, oversubscribed auctions, and plans for green H2 hubs are encouraging developments that can be the building blocks for a thriving market and supportive policy ecosystem.

Key Takeaways

• To catalyze the domestic market, the Indian government must continue to focus on green H2 for DRI steel and ammonia as its priority applications. However, it needs to balance the growth of demand and production capacity to avoid creating import dependencies.
• Methanol, while a relatively lower priority (since it is a relatively lower H2 consuming sector), must be considered in the long term as the demand for biofuels is likely to increase.
• Internationally, promoting cooperation under Article 6.2 of the Paris Agreement is a vital and necessary diplomatic strategy. This global coordination will be important in creating channels for international climate finance that can support projects in India.

Challenges: Domestic Supply Chains, Global Definitions and Standards, and De-Risking

Unlocking green H2’s transformative promise comes with its own set of challenges, and the discussions indicated a degree of cautious optimism for its market potential. Around the world, the green H2 sector faces considerable risks and uncertainties.

For instance, no electrolyzer manufacturer in the world can currently offer a lifetime guarantee, which makes purchasing this expensive but crucial technology incredibly risky. The Indian government is considering a relaxation of certain bans on Chinese imports to create more options in this space, but addressing risk holistically will require a suite of measures: distributing costs across supply chains; funding research and development of more reliable electrolyzers; and employing strategies such as concessional finance, in the form of first-loss guarantees and institutional lenders, to diffuse risks.

Moreover, in developing green H2 hubs, the government must take steps to address supply chain issues both upstream (the high input costs involved) and downstream (incentivizing demand to ensure a marketplace). Such measures are critical to make green H2 derivatives competitively priced and viable alternatives in applications like DRI steel, which now require up to three times the capital expenditures compared to coal-based routes (while also posing greater investment risk).

Key Takeaways

• Making green H2 a competitively priced alternative should be the Indian government’s primary goal. This should be approached through both supply- and demand-side measures. 
  • Supply-side measures must focus on de-risking investments and lowering the cost of inputs in electrolyzer manufacturing. 
  • On the demand-side, the government needs to determine measures, such as incentives, to encourage green H2 purchase and use.
• Funding research and development will be equally important in creating electrolyzers, which are less reliant on critical minerals, and therefore more affordable, and have longer term operational guarantees, improving their reliability and lowering risk. 
• To ensure a thriving export market for electrolyzers and green H2, India needs to leverage its global leadership positions and push for harmonized definitions and standards. For instance, a variety of definitions and standards for “clean” and “green” H2 are being put into place in several countries. These discrepancies are likely to create supply chain bottlenecks and inaccurate emissions accounting in the long term.