From hope to hype: Why green hydrogen isn't delivering

Green hydrogen stands today as the most celebrated promise in India’s clean energy narrative— heralded in political speeches, global reports, and glossy investment pitches as the “fuel of the future.” Government targets (like India’s 5 million metric tonne per annum target by 2030) are framed as technological inevitabilities, and there is universal optimism that costs will soon rival or undercut fossil hydrogen—particularly in sun-rich, wind-rich markets like India. The headlines and conference panels are consistent: green hydrogen at $2/kg by the 2030’s decade, and a coming renewable powered revolution. But beneath the haze of slogans, the economic and environmental hard facts tell a very different story. As of late 2025, the true cost of green hydrogen production in India remains in the $3.7– 6/kg range. Globally, less than 1 million tonnes per year of operational green hydrogen actually exists (out of more than 1,700 projects announced). Much of the optimism in Indian energy circles centres on the oft-quoted goal: green hydrogen at $2/kg by 2030’s. This figure is routinely cited by policymakers, major private developers, and international agencies as not just feasible but inevitable. But a close analysis of current, real-world production costs tells a different story: As of 2025, actual production costs for green hydrogen in India are generally in the $3.7–$6/kg range, depending on project configuration, location, integration level, and market conditions. Even the lowest recent competitive tenders have hovered around $3.7–$3.8/kg, with many projects costing more, especially when fully accounting for all infrastructure and financing. Renewable Power (~65–70 per cent of Total Cost) All major international and Indian analyses agree that the largest input cost (not less than 65 per cent) is the delivered cost of round-the-clock renewable energy, not just the artificially low ₹2/kWh "headline" solar auctions often cited in the press. The true round-the-clock (RTC) cost—including asset oversizing, battery or pumped hydro storage, and grid integration—is ₹4.0–5.1/kWh, with SECI's latest 2025 "true RTC" tender showing tariffs of ₹5.06/kWh. This RTC price directly sets a floor for green hydrogen cost, as electrolysers cannot operate economically on intermittent supply alone.While much of the current green hydrogen debate focuses on renewable power tariffs, the second pillar of cost—the electrolyser hardware—faces equally stubborn limitations. Here, the dream of rapid cost decline runs into the immovable wall of chemistry, materials science, and manufacturing economics. Core Materials Drive High Costs Electrolysis technologies primarily use either alkaline or Proton Exchange Membrane (PEM) systems. These require precious metals such as iridium and platinum (PEM), titanium, and specialty polymers, or nickel-based electrodes (alkaline), all of which set a natural cost floor. Balance-of-plant components—rectifiers, transformers, water treatment, cooling systems, and safety gear—add significantly to total costs. Even with expected learning curve effects, the global average capital cost of electrolysers in 2025 ranges from $500–800 per kW for PEM and $400–700 per kW for advanced alkaline systems. Further reductions (due to scale or localization) will be incremental, not transformational. Limited scope for future cost reductionResearch from the IEA, IRENA, and CEEW all converge: further cost lowering by 2030 is limited to about 20–30 per cent from current levels, primarily through supply chain and process optimisation. Material constraints and technology maturity mean sharp cost falls are unlikely.

Electrolyser efficiency

A Modest Margin Modern electrolysers operate at 65–70 per cent efficiency. Incremental improvements of just 5–10 per cent are expected over the decade due to fundamental electrochemical limits—offering at best a 5–7 per cent reduction in overall hydrogen production costs. The notion that scaling alone will halve electrolyser costs is not supported by science. These are material-heavy, precision-engineered devices constrained by physics, not just manufacturing volume or automation. Scaling production may deliver 10–15 per cent savings at best, but a dramatic fall in price is unrealistic; hardware is a story with hard limits.Looking at the drivers above—where the delivered cost of renewable power accounts for nearly 70 per cent of the final price, and where electrolyser costs and efficiencies are capped by fundamental physics and global supply chains—there is no credible scenario in which green hydrogen costs will fall dramatically before 2030. All independent analyses and real-world market results indicate that, at best, total costs may decline by only 10–15 per cent by the end of this decade. Expectations of a major breakthrough making green hydrogen universally low-cost or widely cost-competitive in this timeframe are not grounded in current evidence.India has positioned green hydrogen as a flagship solution for its energy transition, targeting 5 million tonnes annual production by 2030 and universal adoption across sectors such as steel, fertilisers, refining, and transport. Yet beneath the policy surface, significant, multifaceted barriers remain to scaling up production from pilot to commercial levels. High Production Costs Despite ambitious mission targets, the cost of green hydrogen produced in India continues to vastly exceed that of conventional (grey) hydrogen. This is driven by elevated renewable power costs, expensive electrolyser hardware, and a lack of domestic supply chain resilience. Large-scale project development is further hindered by the need for concessional financing and guaranteed tariffs to make economics viable. Limited Infrastructure and Storage:India currently has no fully developed hydrogen transport, storage, or refuelling infrastructure at commercial scale. Bulk movement of hydrogen—and derivatives such as ammonia—requires new pipelines, cryogenic tankers, and distribution networks, all still at the early stage of planning. These networks will need substantial investments and new engineering standards.

Water scarcity and land constraints

A frequently overlooked challenge is water: every kilogram of green hydrogen produced requires ~9–20 litres of ultra-pure water, which—at national scale—means hundreds of millions of tonnes annually. Most viable renewable zones (Rajasthan, Gujarat) are already water-stressed. Land for utility-scale renewables and accompanying infrastructure is another major constraint, adding complexity to project siting and regulatory approvals. Supply Chain Risks and Technology Dependence

India remains highly dependent on imported nickel, iridium, platinum, and advanced membranes for water electrolysis. These material supply chains are vulnerable to global disruptions, and India faces skill gaps in operating, maintaining, and scaling next-generation systems. Fragmented Demand and Public Safety Concerns Uptake is slowed by fragmented and unpredictable demand, absence of robust off take contracts, and lack of universally accepted hydrogen safety protocols. Standardisation and regulatory harmonisation are needed to build public, financial, and technical confidence.

Green hydrogen is not a drop in fuel

It is important to note that the costs discussed here pertain purely to the hydrogen molecule at the production site. Hydrogen is not a “drop-in” fuel. Its use demands deep infrastructure and process re-engineering. Only when hydrogen green directly substitutes existing hydrogen — as in refineries or fertilizer plants — can current pipelines, compressors, and reactors be partially utilized. In every new application, however — such as transport, power generation, heating or steelmaking — the transition is far more disruptive. In steel, for instance, replacing coal in the Direct Reduced Iron (DRI) route requires redesigning furnaces, storage systems, and safety interlocks to handle hydrogen’s unique flammability and diffusion characteristics. Similarly, using hydrogen for heavy-duty mobility or industrial heating calls for new supply chains, retrofitted equipment, and purpose-built safety infrastructure. Each of these adaptations adds substantial capital cost, energy loss during conversion, and operational complexity. In short, hydrogen is not an easy substitute for existing fuels; it is an entirely new ecosystem that must be engineered from the ground upA commonly suggested workaround for hydrogen’s logistical difficulties is to convert it into green ammonia for easier transport, then crack it back into hydrogen at the point of use. While attractive on paper, this pathway introduces a cascade of technical and economic penalties often glossed over in public discussion.

Conversion to ammonia

Additional Cost and Loss Converting green hydrogen into ammonia adds $0.70–1.20 per kg of H₂ equivalent to the base price—a figure validated by current Indian and global studies. Transport and Storage:

Cryogenic Challenges Ammonia’s advantage over hydrogen as an energy carrier lies in its ease of liquefaction and established shipping standards. But cryogenic tankers, new port infrastructure, and special handling drive up costs by $50–200/tonne and create safety, insurance, and operational barriers. As on date, almost all green ammonia shipment activity is in the demonstration phase. Regular global commercial exports at large scale have not begun.

Ammonia cracking

Major Loss and Expense Reforming ammonia back to hydrogen—essential for fuel cell or certain industrial uses— incurs energy losses of 20–35 per cent, and adds $1.20–2.00 per kg H₂ equivalent in capital and running costs. Purity challenges can further constrain efficiency and escalate costs.

Bottom-Line Cost and Efficiency

For every $4/kg green hydrogen produced, conversion, shipping, and cracking stack up to a total delivered cost of $6.20–7.90/kg hydrogen. Overall system efficiency drops to around 65–80 per cent, even before the hydrogen is used as fuel or feedstock. The “ammonia detour” more than doubles both the logistical complexity and delivered price of green hydrogen for distant use. In the climate policy and clean energy debate, what matters most is cost per ton CO₂ abated—not just project capital or fuel price. Green hydrogen, despite its popularity, finds itself at the top (most expensive) rung of this ladder when compared to almost all proven alternatives. CO₂ Abatement Costs: What the Data Shows Peer-reviewed studies and sector benchmarks estimate that, at today’s delivered prices, the cost to avoid one ton of CO₂ using green hydrogen in India is $70–175/ton—even with aggressive assumptions on renewable prices and plant scale. In hard-to-abate sectors (steel, fertilizers, refining), green hydrogen might just break through to cost-competitiveness under optimal scenarios, but it is still double to triple the cost per ton CO₂ abated versus direct RE/electrification or efficiency-focused interventions. Comparison to Alternatives Grid modernization, direct electrification, and industry efficiency projects commonly yield abatement at $15–30/ton CO₂ in the Indian context. These can deliver broad, near-term decarbonisation impact. Subsidizing green hydrogen in place of these solutions means spending several times more money for every ton of carbon emission reduced. Green hydrogen remains essential in select “last mile” industrial decarbonisation—where electrification just cannot reach, or for niche chemical processes. For mass transport, grid use, and heating, its abatement lottery odds are simply too poor to justify priority policy support over more cost-effective options. Green hydrogen is not the “CO₂ abatement hero” in the Indian energy transition—at least not at current and plausible future price levels. Its best use is targeted, strategic deployment in the hardest-to-abate verticals, not as a universal climate solution.In the world of climate policy, the decisive test is how much CO₂ reduction can be achieved for each dollar spent. As of today, green hydrogen sits high on the CO₂ abatement cost ladder— making sense mostly for the wealthier Global North, where capital and infrastructure are abundant and scale-up risks can be absorbed. For the Global South, where resources are scarce and the need for rapid, maximum returns is paramount, priority should be given to proven abatement options—like electricity grid modernization, renewables, and efficiency investments—that deliver the largest CO₂ reduction at the lowest cost. Broad deployment of green hydrogen should wait until costs fall dramatically and technology reaches true maturity. The right global strategy, therefore, is for the Global North to lead with pilot projects, large-scale investments, and technology breakthroughs—driving down costs and risks. The Global South should concentrate limited funds on high-impact, low-cost CO₂ abatement, adopting green hydrogen only after economies of scale and innovation have made it truly competitive. This ensures the greatest climate returns for every rupee or dollar invested, and the fastest possible progress on global emission reduction.