By Subhrajit Datta Ray, Partner – Energy Transition and Decarbonisation, PwC India
India has set two key milestones on energy security and transition: achieving energy independence by 2047 as part of the Viksit Bharat agenda, and reaching net zero emissions by 2070. To achieve these ambitions, India needs to continue its rapid expansion of renewable electricity supported by adequate flexibility in its electricity grid. There is also a need to identify credible pathways to decarbonise hard-to-abate sectors such as steel, fertilisers, refining, chemicals, ammonia and long-distance transport, where direct electrification may be difficult or insufficient.
The National Green Hydrogen Mission (NGHM), launched in January 2023, is one of the key government programmes that aims to achieve this decarbonisation objective by positioning India as a global leader in the production, use and export of green hydrogen and its derivatives. The mission envisages a production capacity of 5 million metric tonnes per annum by 2030, backed by accelerated market formation through demand aggregation, procurement through competitive bidding and a certification framework for export positioning. However, global experience shows that green hydrogen markets are still struggling to move from announcements to final investment decisions, largely because of uncertain offtake, high production costs, lack of price parity with incumbent fuels and the absence of sufficiently bankable demand.
As per the International Energy Agency’s Global Hydrogen Review 2024, although the low-emission hydrogen capacity reaching final investment decision has nearly doubled, over 90 per cent of the announced production capacity remains at the early stages with limited firm offtake. A similar story can be observed in India. The Institute for Energy Economics and Financial Analysis reports that as of August 2025, out of 158 projects currently at different stages of development, 94 per cent of the planned projects are yet to move beyond the announcement stage, while only approximately 3 per cent are operational. Currently, in India, green hydrogen remains more expensive than grey hydrogen, which restricts its faster adoption in hard-to-abate sectors, which themselves are under competitive cost pressure in their own markets. As per RMI’s report “From Promise to Purchase: Unlocking India’s Green Hydrogen Demand” while the announced production capacity has already exceeded the 2030 target by over 2.5 times, actual implementation remains limited. The immediate challenge is thus how to catalyse demand by creating a market where buyers have enough confidence to sign contracts, producers have sufficient revenue certainty to invest and financiers have enough cushion to provide long-term capital.
These challenges can be addressed through different levers. A practical first lever is demand aggregation. Demand can be pooled across industrial clusters, like steel plants, refineries and smaller offtakers. Demand aggregation is a proven and effective tool to justify investment and is identified in the NGHM. A good example is Germany’s H2Global mechanism, which makes use of an intermediary model to buy green hydrogen derivatives through long-term contracts and resells them to buyers using short-term contracts. Public funding bridges the price gap. A similar approach can be explored for India across domestic industrial clusters. Green ammonia can be one of the most practical routes to creating a market. Green ammonia has an established use case in fertilisers and can serve as a carrier for hydrogen and is highly relevant for shipping and export markets. As broader hydrogen applications mature, exploring green ammonia can help create an early demand anchor.
The second lever is bankable offtake design. Long-term offtake agreements can push green hydrogen projects towards closure as long as the contracts are balanced. That is to say, the perceived risk to lenders is controlled while contract terms are commercially manageable for buyers. Mechanisms such as phased volumes, flexible take-or-pay obligations, floor-and-cap mechanisms, credit support, termination protections and provisions for certification can ensure that producers are able to envisage a predictable cash flow while buyer flexibility is maintained.
The third, and perhaps one of the most important levers, is blended finance and credit enhancement. Blended concessional capital with debt has the potential to lower the weighted average cost of capital, thereby reducing the levellised cost. To make projects bankable, instruments such as first-loss and partial credit guarantees, concessional loans, viability gap funding (VGF) support and result-based financing can assist. These instruments can be used effectively over the project tenure. In early years, instruments like concessional capital and guarantees can help overcome technology risks, demand risks, etc. As manufacturing scales, renewable energy procurement improves, significant infrastructure develops and project execution becomes more efficient and standardised, support can be taken back, allowing development finance to crowd in private capital rather than replace it altogether.
The fourth lever is carbon pricing and monetisation of avoided emissions. India has an emerging Carbon Credit Trading Scheme, which has the potential to act as an important tool to push industrial decarbonisation. As per a Bureau of Energy Efficiency directive, the Indian carbon market framework can support entities undertaking decarbonisation projects and gradually strengthen demand-side incentives. As sectors face emission-intensity trajectories, green hydrogen can significantly act as an enabling tool for compliance, competitiveness and market access.
The fifth and final lever is standardisation and certification. Green hydrogen can become a traded commodity only if buyers and financial agencies trust its emission profile, thereby enhancing its bankability. India has already notified a green hydrogen standard, defining green hydrogen as having well-to-gate emissions of not more than 2 kg CO2 equivalent per kg of hydrogen, covering electrolysis-based and biomass-based pathways. The Ministry of New and Renewable Energy has also released the Green Hydrogen Certification Scheme of India, which is intended to monitor, verify and certify the greenhouse gas emission intensity of hydrogen produced from renewable energy sources. This is a step in the right direction, as the certification backbone is particularly of interest for exporters, since alignment with international standards and certification requirements will reduce market risk, improve buyer confidence and support long-term offtake agreements with international buyers.
In conclusion, India’s green hydrogen market can evolve through multiple demand-and supply-side interventions as discussed above. It will require demand aggregation, contracts that give comfort to both buyers and lenders, suitable financing support, credible certification and infrastructure that is ready for domestic as well as export markets. If all these pieces of the jigsaw puzzle come together, India can build a green hydrogen market that is commercially viable, trusted by buyers and attractive for investors, and scale up green hydrogen production.
With inputs from Dr Gautam Raina, Senior Associate, PwC India
