New Delhi: The Energy and Resources Institute (TERI) has unveiled a comprehensive policy brief titled "Green Hydrogen – Path to Decarbonization," presenting a detailed roadmap to bolster India's green hydrogen mission and align with its carbon neutrality goals. Emphasizing innovation, competitive procurement, and government-backed initiatives, TERI’s report explores the multiple hurdles and opportunities in building a sustainable green hydrogen ecosystem in India.

In a significant observation, TERI points out that while green hydrogen can play a pivotal role in India’s decarbonization efforts, it remains costly compared to conventional fossil fuels. “Green hydrogen is significantly more expensive than the fossil fuel it aims to replace, but implementing pilot projects early on can help stimulate demand in downstream sectors,” the report notes. This high cost has stymied market demand, yet TERI argues that competitive procurement and targeted pilot projects could address both cost and demand gaps, enabling India to become a leader in green hydrogen production.

Targeting competitive production and innovation

TERI’s policy brief emphasizes the importance of creating a competitive green hydrogen market in India, driven by innovation and cost reduction through competitive procurement. Pointing to India’s experience in the solar sector, where structured bidding processes helped establish one of the world’s lowest solar prices, TERI envisions a similar path for green hydrogen. The proposed approach involves developing a Special Purpose Vehicle (SPV), modelled on the Solar Energy Corporation of India (SECI), to oversee competitive procurement of green hydrogen and support emerging pilot projects.

The report underscores the significance of starting with small-scale projects, emphasizing, “A market mechanism can ensure cost efficiency by bringing in private sector innovation and reducing risks for early investors.” According to TERI, such a system could gradually bring down prices, making green hydrogen a feasible alternative to fossil fuels across multiple sectors.

Decarbonizing key industries with green hydrogen pilots

The report recommends the creation of SPVs dedicated to specific sectors like iron and steel, fertilizers, shipping, and heavy-duty transportation, where green hydrogen could replace traditional carbon-intensive processes. For instance, in the iron and steel industry—an energy-intensive sector with high emissions—TERI suggests establishing a pilot greenfield plant to produce carbon-free steel. According to the report, this project, supported by government-backed SPVs, could not only place India at the forefront of green steel technology but also attract investment by de-risking the project through guaranteed purchase agreements.

For the fertilizer industry, TERI advises a pilot project to produce green ammonia, a key component in green fertilizer production, using green hydrogen instead of natural gas. The report proposes an assured supply of green hydrogen at a competitive rate, which would de-risk investments and set the stage for more extensive green fertilizer initiatives. “Such initiatives can help lay the groundwork for carbon-free fertilizer, even though initial costs may be higher than conventional products,” the brief notes.

Heavy-duty trucks, which require long-range fuel solutions not viable with current battery technology, are another sector where TERI sees potential for green hydrogen. The policy brief proposes starting with pilot projects along select high-traffic routes, where subsidized green hydrogen filling stations would serve fleets of hydrogen-fueled trucks. “This dual approach of promoting trucks and hydrogen infrastructure together would be key to ensuring pilot projects reach critical mass,” the report states.

Green shipping and power Generation: Pioneering carbon-free transportation

In the realm of shipping, TERI recommends using green ammonia—a derivation of green hydrogen—as a sustainable alternative fuel, particularly in coastal shipping and tourism. With states like Kerala at the forefront of eco-tourism, the report envisions a future where all tourism vessels are carbon-free, powered by green ammonia. “This can be a brand-building exercise for states like Kerala, setting a target for carbon-free operations in tourism without significant financial burden, as the cost could be passed on to tourists,” TERI observes.

For power generation, green hydrogen and green ammonia could potentially be used to offset seasonal demand peaks in electricity. While technologies like pumped storage and battery energy storage offer short-term solutions, TERI advocates for the use of green fuels to address long-term decarbonization needs in the power sector.

Financing and policy support: Building a foundation for export-ready green manufacturing

To support these large-scale projects, TERI proposes the establishment of a Development Finance Institution (DFI) aimed at providing long-term, low-interest credit specifically for green hydrogen-based production facilities. TERI’s report suggests that this DFI could play a crucial role in meeting the EU’s stringent CBAM (Carbon Border Adjustment Mechanism) standards, which require imported products to meet specific carbon standards. “India could become a major player in the export of green, carbon-free products if the government supports the industry with affordable credit and policy incentives,” the brief suggests.

With this financing mechanism, India could tap into new markets for green products, achieving export growth while moving toward its carbon reduction goals. TERI argues that exporting green products to meet international standards could have a positive impact on India’s trade balance and make the country a global leader in green manufacturing.

Challenges and the way forward: Moving beyond subsidies

While TERI acknowledges that subsidies may be necessary to kickstart the green hydrogen market, it stresses the importance of moving toward self-sustaining models. The brief highlights that relying on direct subsidies from the government may not be feasible in the long term. Instead, TERI recommends minimizing budget allocations for subsidies and exploring other mechanisms, such as reduced GST rates on green hydrogen and related infrastructure.

The report also advocates for the gradual scaling up of these projects once initial cost discovery is complete. “The long-term vision should be to transition the entire production system to carbon-free capacities, but this can only happen once costs are competitive,” TERI remarks. The timeline for scaling up will depend on the government’s ability to balance the higher costs of green products with market and consumer readiness.

One of the unique suggestions in the brief involves linking subsidies with GST reductions rather than direct payments. By lowering GST rates on green hydrogen trucks and hydrogen fuel, TERI suggests that the government can encourage adoption without heavy budgetary implications.

Path to carbon neutrality: Leveraging green hydrogen for India’s future

As India pursues its ambitious target to reach net-zero carbon emissions by 2070, TERI’s policy brief offers a pragmatic approach for green hydrogen adoption. It outlines actionable steps to decarbonize high-emission industries, provides a competitive procurement model to make green hydrogen affordable, and suggests a strategic financing mechanism to support pilot projects and industrial scaling.

The report also hints at India’s potential to become a leader in green hydrogen technology, citing the country's track record in solar energy production. “India’s potential to develop cost-efficient green hydrogen production, driven by solar power and a competitive market structure, could be transformative,” the report asserts.

TERI’s policy brief underscores the need for a structured approach to create a green hydrogen market in India, backed by strategic partnerships, innovative financing, and sector-specific pilot projects. If executed well, the vision presented in the brief could lay the foundation for India’s transition to a low-carbon economy, contributing both to domestic decarbonization goals and to India’s aspirations of becoming a global leader in sustainable manufacturing.