India can attract $125 billion in green hydrogen projects

India has the potential to attract $ 125 billion as cumulative investments across the green hydrogen value chain by 2030, investment bank Avendus Capital says.

In a recent report ‘Green Hydrogen – the next frontier in energy transition’, Avendus underlines the decarbonisation potential of green hydrogen and the role it could play in India’s transition to a greener economy. “This growth will be driven by rising sustainability focus, demonstrated commercial viability, ever-expanding use cases and a strong regulatory push”, the report says. It charts the course from production methodologies to wide-ranging applications, underlining significant opportunities and dispelling myths surrounding the economic viability of green hydrogen.

“India is home to one of the cheapest renewable electricity costs globally, has abundant availability of fresh water and is emerging as a global manufacturing hub -- three essential elements required for the production of green hydrogen at a competitive cost. We see an emergence of the first set of serious standalone and integrated participants forging partnerships to aggregate capabilities and infrastructure to tap into green hydrogen derivatives. While the commercial and industrial (C&I) business model for domestic consumption of green hydrogen will drive the first set of investments in the sector, the steel industry will form the largest share of off-take contracts in the near-term with the imposition of the Carbon Border Adjustment Mechanism in the EU,” Prateek Jhawar, Managing Director & Head, Infrastructure & Real Assets Investment Banking, Avendus Capital said.

The Central government has already announced production linked incentive (PLI) schemes to bolster green hydrogen production and local electrolyser manufacturing. The emergence of green hydrogen has also increased the target market for renewable independent power producers (IPPs) and can lead to improvement in project economics. Early-stage investment risks are likely to be short-lived as the sector is already at an inflection point, the report points out.

“In terms of project bankability, green hydrogen is already viable for a subset of target off takers and its derivatives are also gaining visibility in global markets. Hence, long-term contracts are already available. In the absence of long-term contracts, we expect the grey molecule price benchmarks to act as de-facto for debt sizing and a corporate financing model to emerge and co-exist with the project financing model” Akhil Dokania, Director, Infrastructure & Real Assets Investment Banking, Avendus Capital said.