As of February 2026, only 8,000 tons per annum of capacity have been commissioned, less than 0.2% of the 2030 green hydrogen target. The gap stems not from lack of supply intent, but from absent demand, as without committed buyers, developers cannot reach financial closure, and without scale, costs will not fall.
India’s green hydrogen ambitions are among the most aggressive in the world. Under the National Green Hydrogen Mission (NGHM), launched in January 2023 with a budgeted outlay of ₹19,744 crore, the country has set a target of producing 5 million metric tons of green hydrogen annually by 2030, positioning itself as a global hub for production, manufacturing, and exports.
However, three years in, the gap between ambition and execution is significant. As of February 2026, only 8,000 tons per annum of capacity have been commissioned (according to the Ministry of New and Renewable Energy (MNRE)), less than 0.2% of the 2030 target. The gap stems not from lack of supply intent, but from absent demand, as without committed buyers, developers cannot reach financial closure, and without scale, costs will not fall.
This demand vacuum has intensified discussions around a Green Hydrogen Consumption Obligation (GHCO), a mechanism conceptually similar to Renewable Purchase Obligations (RPO) that helped scale solar and wind in India. The core idea: create guaranteed demand by mandating certain industries to consume a minimum share of green hydrogen.
The larger question is whether India is attempting to apply the solar demand creation playbook to a sector that is structurally far more complex than renewable power.
Why is green hydrogen adoption taking time?
India’s green hydrogen challenge is often framed as a production problem, but it is equally a demand, infrastructure, and ecosystem coordination problem. Green hydrogen costs between four and six dollars per kilogram, which is three to four times the price of grey hydrogen, while electrolysers remain expensive, imported, and dependent on consistent renewable power that variable solar and wind supply cannot reliably provide. The infrastructure to transport and store hydrogen at scale barely exists. And without regulatory compulsion, industries that already use grey hydrogen have no commercial incentive to switch.
The result is a classic wait-and-watch deadlock: producers hesitate because buyers are uncertain; buyers hesitate because supply is expensive and unreliable. Without committed offtake, developers cannot secure financing. Without financing, there is no scale. Without scale, costs don’t fall. Every part of the system is waiting for another to move first, and none of it moves.
Why is GHCO gaining attention?
GHCO is increasingly being discussed as a demand-creation mechanism. Conceptually, GHCO would function similarly to the RPO in the power sector. Certain industries such as fertilisers, refineries, steel, shipping, or city gas distribution (CGD) could be mandated to source a fixed percentage of their hydrogen or fuel requirements from green hydrogen over time.
The logic behind such a policy is straightforward. If industries are legally required to consume green hydrogen, demand becomes more predictable. This can improve investor confidence, support project bankability, reduce market uncertainty, and encourage infrastructure investment.
Over time, increasing scale could help reduce costs through learning effects and manufacturing expansion. This argument is particularly relevant in India because the country already has substantial hydrogen consumption in sectors like fertilisers and refineries. The idea is not necessarily to create entirely new demand, but to gradually replace existing grey hydrogen demand with green hydrogen. In theory, GHCO could provide the long-term policy certainty investors are seeking before committing capital to large-scale hydrogen projects
Can GHCO actually solve the hydrogen challenge?
Where GHCO can help:
A binding consumption obligation addresses the sector’s most immediate bottleneck: predictable demand. A legally obligated buyer gives developers a defensible revenue model, improves project bankability, and could trigger the investment flywheel that brings costs down over time. The logic is particularly strong in fertilisers and refineries, where grey hydrogen is already consumed at scale and substitution is technically cleaner than in greenfield sectors.
Where it is unlikely to help:
GHCO cannot solve the fundamental economics of green hydrogen. If production costs remain significantly above grey hydrogen, industries will simply pass them downstream, raising subsidy burdens in fertilisers and affecting agricultural economics.
Beyond costs, domestic electrolyser manufacturing remains nascent. India targets 60 to 100 GW of electrolyser capacity by 2030, yet only 3 GW of manufacturing capacity per annum has been approved so far (MNRE, March 2025), with several production-linked incentive (PLI)-backed manufacturers already delaying production timelines due to technology readiness issues, high capital costs, and dependence on imported critical components. The supply infrastructure needed to support a consumption mandate at scale is still in early stages. There is also a real risk that compliance becomes symbolic: industries pursuing minimal blending targets or relying on certificate mechanisms rather than investing in genuine transition. GHCO is a demand-side instrument, but hydrogen transition is not merely a demand problem.
Beyond production constraints, GHCO cannot independently create the broader ecosystem that hydrogen adoption requires. Even with mandated demand, questions remain around transport infrastructure, storage capacity, and industrial retrofits. Hydrogen transition requires coordinated investment across multiple parts of the value chain, most of which are underdeveloped in India today.
The Solar RPO parallel: Instructive but misleading
RPOs helped scale India’s solar sector by creating guaranteed demand, improving bankability, and contributing to the conditions under which costs fell dramatically. The analogy is appealing, but it conceals a fundamental asymmetry.
Solar electricity plugs into an existing grid. The transmission infrastructure, distribution networks, and consumption ecosystem were already there. Solar’s challenge was cost
competitiveness within a mature delivery system. Green hydrogen has no such foundation. It requires entirely new logistics including pipelines, storage, compression, port infrastructure, industrial retrofits, safety standards, and certification frameworks. Hydrogen is not merely an energy source; it is simultaneously a chemical feedstock, industrial input, transport fuel, and storage medium, each requiring different infrastructure configurations. RPOs solved a coordination problem in a mature value chain, whereas GHCO would need to catalyse an entirely new industrial ecosystem, which is a categorically different policy challenge.
The risk of forcing demand before readiness
Aggressive GHCO implementation carries a real risk of creating a policy-led bubble. Mandates deployed ahead of commercial readiness can trigger speculative project announcements and capital deployment that outpaces genuine market viability; and when underlying economics fail to materialise, the result is stranded assets and damaged investor confidence that takes years to rebuild.
This is the central dilemma. Without mandates, investors hesitate because demand is uncertain. With premature mandates, industries face cost burdens the economics cannot support. Neither inaction nor impatience is obviously correct, and the design of any GHCO framework must reckon honestly with this tension rather than assume that mandate plus subsidy automatically produces viable outcomes.
A global reality check
The global green hydrogen landscape has been significantly reassessed since 2022. In the US, Inflation Reduction Act (IRA) hydrogen tax credits have faced implementation complexity. Across Europe, several large industrial hydrogen projects have been delayed or cancelled amid persistent cost uncertainty. Governments are becoming more selective about where hydrogen genuinely makes economic sense, and how much public subsidy they are willing to sustain indefinitely.
For India, this cuts both ways. It reinforces caution about overcommitting before economics mature, particularly around export assumptions in green ammonia and steel that depend on international demand yet to solidify. But India also holds genuine advantages such as strong renewable potential, an existing industrial hydrogen base, and a strategic window to build early positioning before global supply chains consolidate. The question is not whether to develop green hydrogen capability, but at what pace, with what instruments, and in which sectors first. GHCO can support India’s green hydrogen transition, but its effectiveness will depend on where and how it is implemented. The strongest near-term case is in fertilisers and refineries, where hydrogen is already used at scale and switching from grey to green hydrogen is relatively feasible. A gradual obligation in these sectors could help create predictable demand and improve investor confidence without imposing excessive economic pressure.
The case is weaker in sectors such as steel, shipping, and heavy transport, where adoption requires major process changes and entirely new infrastructure. Unlike solar RPOs, which benefited from an existing grid and transmission ecosystem, green hydrogen still lacks the supporting infrastructure needed for large-scale adoption. Significant investments in electrolysers, storage and transport systems, financing support, and certification mechanisms will be needed alongside any consumption mandate.
GHCO, therefore, is unlikely to work as a standalone intervention. But if implemented gradually and in sectors that are relatively ready, it can help address the demand uncertainty currently slowing investment and project development in India’s green hydrogen sector.
This article first appeared in Hydrogen India Newsletter, July 2026 Vol III, Issue 3
Varun Desai
Manager, Xynteo
Bhaskar Jha
Senior Consultant, Xynteo
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