Green Hydrogen: India’s Big Ambitions, Costly Realities

Green hydrogen is hydrogen produced by splitting water with renewable energy. Its importance comes from avoiding the large carbon dioxide emissions associated with grey hydrogen, which is made from natural gas. This makes green hydrogen a possible cleaner fuel and industrial feedstock.

The key difference is the production process. An electrolyzer uses electricity to separate water into hydrogen and oxygen. When that electricity comes from renewable sources, the hydrogen is classified as green. Grey hydrogen instead relies on natural gas and releases significant carbon dioxide during production.

Green hydrogen could replace grey hydrogen in fertilizers and refineries. It could also replace coal in steelmaking and fossil fuels in chemicals, petrochemicals and heavy transport. However, its wider use depends on production costs, end-use efficiency and supporting infrastructure. India is promoting it through the National Green Hydrogen Mission.

India’s National Green Hydrogen Mission aims to make the country a global hub for green hydrogen production, use and exports. Its central production target is at least 5 million tonnes annually by 2030. The ambition reflects green hydrogen’s potential to reduce emissions, fossil-fuel imports and exposure to global price volatility.

Progress has begun through government incentives. By December 2025, India had awarded incentives for 0.862 million tonnes per annum of green hydrogen production capacity. It had also awarded incentives for 3,000 megawatts per annum of electrolyzer manufacturing capacity. These awards support both hydrogen output and the equipment needed to produce it.

The awarded production capacity equals only about 17 percent of the 2030 target. That gap shows the scale of expansion still required. Costs, uncertain demand, delayed projects and slow infrastructure development could affect how quickly India moves from announced capacity to operating production.

Green hydrogen is especially useful in sectors that cannot easily switch directly to electricity. It can replace grey hydrogen in fertilizers and refineries, coal in steelmaking, and fossil fuels in parts of chemicals, petrochemicals and heavy transport. Shipping is one example of transport where battery-based electrification can be difficult.

Fertilizers and refineries already use hydrogen, so green production can replace a carbon-intensive source. Steelmaking can use hydrogen instead of coal. Chemicals, petrochemicals and shipping could use hydrogen or hydrogen-based fuels where heavy energy demands make direct electrification harder. These changes could lower emissions across major industrial activities.

The benefits extend beyond emissions. Green hydrogen could reduce imported fossil fuels and industrial feedstocks, limit exposure to global price volatility and strengthen energy security. Adoption will still depend on costs, end-use efficiency, reliable supply and infrastructure for production, storage, handling and transport.

Green hydrogen costs more because its production requires renewable electricity and electrolyzers, while grey hydrogen uses natural gas. Renewable energy is the largest stated cost component, accounting for 50–70 percent of green hydrogen production costs. Round-the-clock supply makes the challenge particularly important.

An electrolyzer consumes electricity to split water into hydrogen and oxygen. Lower-cost renewable power reduces the cost of every kilogram produced. Electrolyzers also need to become cheaper and more widely manufactured in India. The government is supporting manufacturing through incentives, which decline from 4,440 rupees to 1,480 rupees per kilowatt over five years.

The International Energy Agency says uncertain demand and project delays, partly caused by slow infrastructure development, mean green hydrogen is unlikely to become cheaper than grey alternatives soon. Production subsidies cover only 10–15 percent of the green-grey cost gap, so longer-term cost reductions remain essential.

India’s support package targets several barriers at once. The SIGHT program has 174,900 million Indian rupees allocated under the National Green Hydrogen Mission. Production subsidies support green hydrogen and green ammonia, while transmission-charge waivers reduce the cost of moving electricity to eligible projects. Three ports are designated as green hydrogen hubs.

The hubs—Deendayal, V.O. Chidambaranar and Paradip—are intended to coordinate production, storage, handling and shipping. Subsidies decline over three years, from 50 to 30 rupees per kilogram for green hydrogen and from 8.8 to 5.3 rupees for green ammonia. Electrolyzer incentives also decline over five years.

These policies are temporary and cover only 10–15 percent of the green-grey cost gap. Demand remains uncertain, and infrastructure development is slow. Renewable generation centers may also be far from hub ports. Long-term progress requires industrial demand, cheaper renewable power, domestic electrolyzers, export markets and carbon pricing for grey hydrogen.

Moving hydrogen over long distances can increase costs and complicate storage, handling and shipping. India faces this issue because renewable-energy centers and designated green hydrogen hubs are not always close together. The article notes that Kandla is relatively near renewable-rich areas in Gujarat and Rajasthan, while Paradip is considerably farther away.

One response is to convert hydrogen into derivatives such as green ammonia or green methanol before transport. These products can fit planned industrial and shipping supply chains, avoiding the need to move hydrogen in its original form over every long route. The article identifies green ammonia and green methanol as export products, though it does not quantify their transport advantage directly.

In July 2026, ACME Group signed long-term agreements from Paradip for 0.41 MTPA of green ammonia with IHI and 1.0 MTPA of green methanol with Mitsubishi Gas Chemical. Such contracts connect production with overseas demand and may support export infrastructure around distant coastal hubs.

An electrolyzer is the equipment that produces hydrogen by using electricity to split water into hydrogen and oxygen. For green hydrogen, that electricity must come from renewable energy. Electrolyzers therefore connect water availability, power supply and hydrogen output. Their cost and performance directly affect whether projects can compete.

Water-stressed locations need credible sourcing and treatment plans, including desalination where necessary. Renewable electricity must also be affordable and available reliably, especially when production requires round-the-clock supply. India is supporting domestic electrolyzer manufacturing with performance-linked incentives, but renewable energy remains 50–70 percent of production costs.

Supply chains create another constraint. Dependence on global suppliers for electrolyzers and renewable-energy equipment exposes projects to concentrated manufacturing and critical-mineral dependencies. Large-scale production will therefore depend on land and water access, cheaper renewable generation, capable domestic manufacturing and more resilient equipment supply chains.