Part 2 – Economics of Green Hydrogen

Industry News

In September 2021, Mukesh Ambani, Chairman of Reliance Industries Ltd (RIL), said that India can set an aggressive target of 1-1-1 for Green Hydrogen. This means that India can target a cost of $1 for 1 kilogram of Green Hydrogen in 1 decade (by year 2030). He added that even the cost of green hydrogen is currently high, new technologies in storage and transportation of green hydrogen will lead to a significant drop in costs. While we do not have access to how the target of $1 per kg of Green Hydrogen can be achieved, we take a peek at the cost components of a Green Hydrogen system, and some estimates by NITI Aayog and KPMG on the cost trajectory of Green Hydrogen in India.

Cost drivers of Green Hydrogen

The costs of Green Hydrogen can be classified under three categories – Capital Expenditure (CAPEX), Operating Expenditure (OPEX) that includes energy cost, and transportation.

This refers to the cost of electrolysers used in generating Hydrogen from water. The two most popular electrolyser technologies are alkaline and polymer electrolyte membrane (PEM) technologies. The alkaline technologies have been around for several decades now and are quite mature, whereas PEM technologies are relatively new, but has some advantages over alkaline technologies because PEM electrolysis can quickly adjust to the fluctuations in power generation which is a feature of renewable energy sources. However, PEM electrolysers are typically costlier since they use rare earth metals like iridium or platinum. Irrespective of the technology, an electrolyser has two components – a stack and a set of balance of plant (BoP) components, which includes demineralised water required for electrolysis. The overall cost of Green Hydrogen generation will thus depend on factors like the electrolyser type and the scale of the installation.


  • Energy costs - Since the electricity used for Green Hydrogen generation comes from renewable energy sources, the energy cost is typically the cost of solar or wind power, which is among the lowest in India. Depending on the citing of the Green Hydrogen Manufacturing facility, the cost of transmission and distribution(T&D) costs and wheeling charges for electricity should be added to the energy cost.
  • Other OPEX items includes all the costs required for running a hydrogen generation unit.

3. Transportation cost
A Green Hydrogen value chain typically consists of three major geographic nodes –

  • a green electricity generation location (a solar or wind farm),
  • a green hydrogen generation location and
  • the green electricity consumption location.

The first and third nodes – green electricity generation location and the consumption location are generally constrained due to renewable energy resource availability in case of the former, and a pre-existing demand centre in case of the latter. The key decision for a green hydrogen manufacturer is to decide on locating the green hydrogen plant either close to the green electricity generation site or close to the demand centre.

If the Green Hydrogen is located far from the demand centre, a storage and transportation infrastructure must be built, which can involve pipelines, trucks (road transportation) and tanker ships (water transportation in case of exports). However, storage and transportation are relatively difficult because Hydrogen is a highly flammable gas and must be compressed for storage due to its low density. It can also cause embrittlement of metals. As a result, locating the Green Hydrogen facility close to the demand centre is preferred in order to reduce the logistics issues. In this case, the green electricity can be wheeled from far off solar or wind power plants.

India’s Hydrogen policy supports locating the green hydrogen generation facility close to the demand centres by exempting inter-state transmission charges for green electricity and providing banking facility for unused power for Green Hydrogen generators (read the policy here).

Forecasts of Price Trajectory of Green Hydrogen

A joint NITI Aayog and RMI study estimates the current cost of green hydrogen from electrolysis to be between around $7/kg and $4.10/kg depending on various technology choices and the associated soft costs. With an expected price decline for both electrolysers and renewables, our analysis indicates that in the best-case scenario, the cost of green hydrogen can fall to approximately $1.60/kg by 2030 and $0.70/kg by 2050.

A report by KPMG India estimates the current cost of green hydrogen production at about INR 320-330 per kg. 25-35% of this cost can be attributed to the cost of electricity transmission. According to the projections of KPMG India, the cost of green hydrogen could halve from the today’s cost and fall to as low as INR 160-170/kg by 2030. At this cost, Green Hydrogen will be competitive with grey hydrogen and other competing fuels. The KPMG report can be accessed here.


Green Hydrogen today is still quite expensive, which makes it uncompetitive with grey or brown hydrogen (NITI Aayog). However, the falling costs of solar and wind power coupled with the reduction in the costs of electrolysers, Green Hydrogen will achieve parity with grey hydrogen and other competing fuels over the next decade.

To learn & understand more about Green Hydrogen from top experts visit The smarter E India Conference, 7-9 Dec. at Gandhinagar Gujarat India.

Click the link to registration.

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