Green Hydrogen Explained: Promise, Costs and a Reality Check

Hydrogen burns without carbon dioxide, can be made from water and sunlight, and has been promised as a fix for everything from cars to steelworks. With green hydrogen explained from the ground up, this report looks at how it is made, what it costs as of the latest data, what India is aiming for, and where the numbers support the hype and where they do not.

Few clean technologies have had as many false dawns as hydrogen. That does not make it a dead end. It means the useful question is not "is hydrogen the future?" but "for which jobs is it the best available option, and at what price?"

How electrolysis works

Electrolysis uses electricity to split water into hydrogen and oxygen. The device that does it, an electrolyser, works like a fuel cell in reverse: an anode and a cathode separated by an electrolyte, as the US Department of Energy explains. Three main designs are in commercial use or close to it:

• Alkaline electrolysers use a liquid alkaline solution and run at about 60–90°C. This is the traditional design.
• Proton exchange membrane (PEM) units use a solid plastic membrane that lets only hydrogen ions pass, and run at about 70–90°C.
• Solid oxide electrolysers use a ceramic electrolyte at about 650–850°C and can use waste or nuclear heat to cut the electricity they need.

The hydrogen is only as clean as the electricity. An electrolyser on a coal-heavy grid can produce hydrogen with a higher carbon footprint than the natural gas route it is meant to replace.

The colours of hydrogen

Hydrogen is a colourless gas. The "colours" are industry shorthand for how it was made, and there is no single international definition. The labels below follow CSIRO, Australia's national science agency.

Because colours are vague, governments are moving to emissions thresholds. India's Green Hydrogen Standard, notified in August 2023, defines green hydrogen as having well-to-gate emissions of not more than 2 kg of CO₂ equivalent per kg of hydrogen, with the Bureau of Energy Efficiency accrediting verification agencies.

Where the world stands in 2026

The International Energy Agency's Global Hydrogen Review 2026, published on 18 June 2026, is the most comprehensive annual stocktake. Its headline figures:

• Global hydrogen demand passed 100 million tonnes (Mt) in 2025, mostly in refining, ammonia and methanol.
• Low-emissions hydrogen production grew 20% in 2025 to almost 1 Mt and is expected to exceed 1% of global production for the first time in 2026.
• Installed electrolysis capacity doubled in 2025 to more than 4 GW, with China responsible for nearly three-quarters of new installations.
• The pipeline of announced low-emissions projects for 2030 has shrunk to 27 Mt, and about 22 Mt of it could miss 2030 if investment decisions are not taken by early 2027.

The IEA also linked hydrogen to energy security. It said the Middle East accounts for around one-sixth of global hydrogen production and over a quarter of global ammonia trade, and that disruption to shipping through the Strait of Hormuz in 2026 had severely affected supplies of these products. In the IEA's assessment, domestic low-emissions hydrogen can improve resilience over the long term but cannot solve short-term supply shocks.

What green hydrogen costs

Cost is the core problem. Fossil hydrogen is cheap because natural gas and coal are cheap and the plants are long paid off. The table below brings together figures from successive IEA reviews and IRENA, with the year of each stated.

Two things stand out. First, costs have not fallen as quickly as forecast. The 2025 review said the gap had widened recently because gas prices fell while electrolyser prices rose with inflation and slow deployment. Second, the IEA's 2026 "cost acceptability" analysis found that, without policy support, the cost gap is not closed in most regions and applications, and that for steel the hydrogen price would effectively need to be negative to compete with the incumbent route. Only China, with very cheap electrolysers and strong renewables, is expected to approach cost-competitive renewable hydrogen by 2030.

The question is not whether green hydrogen works, but who will pay the premium, and for how long.

India's National Green Hydrogen Mission

The Union Cabinet approved the National Green Hydrogen Mission on 4 January 2023. Its stated 2030 outcomes are below.

The SIGHT programme (Strategic Interventions for Green Hydrogen Transition) has two incentive streams, one for electrolyser manufacturing and one for green hydrogen production, according to MNRE. The ministry's mission page also lists pilot allocations of ₹455 crore for low-carbon steel, ₹496 crore for mobility and ₹115 crore for shipping, and plans for at least two green hydrogen hubs.

There has been real activity. The IEA noted in 2024 that India had become a key player in electrolysis investment thanks to a single final investment decision for 1.3 GW. In July 2025, a Solar Energy Corporation of India (SECI) auction for fertiliser company Paradeep Phosphates produced a green ammonia price of ₹55.75 per kg (about USD 641 per tonne) for 75,000 tonnes a year under a 10-year fixed-price contract, reported as a record low.

The IEA's 2026 review was cautious. It said SECI and refinery tenders had led to offtake contracts, but whether projects proceed depends on government incentives whose details were "still unclear".

Where green hydrogen makes sense

Analysts broadly agree on a ranking, from uses where hydrogen is the obvious answer to uses where something else does the job better.

Strong cases

• Fertiliser and ammonia. Ammonia and methanol account for roughly half of global hydrogen use, according to the IEA. Switching from grey to green hydrogen cuts emissions without changing the product, and for import-dependent countries it can reduce exposure to gas price shocks. India's first auctions targeted exactly this sector.
• Oil refining. Refineries already use large volumes of hydrogen. The IEA expects refining and industry to absorb 2.5 Mt of low-emissions hydrogen by 2030, around 60% of committed global production.
• Steel via direct reduction. Hydrogen can replace coal or gas in reducing iron ore. IRENA estimates the cost premium for renewable-based steel at about 30–40%, but the IEA's 2026 analysis shows steel faces the hardest economics of any major sector without carbon pricing or subsidy.
• Shipping and aviation fuels. Ammonia, methanol and synthetic fuels made from hydrogen are among the few options for long-distance ships and aircraft. The IEA notes the growing hydrogen-capable fleet but warns that international rules may initially favour biofuels or LNG.

Weak cases

• Home heating. A 2022 review in the journal Joule by Jan Rosenow of the Regulatory Assistance Project examined 32 independent studies and, as reported by Tech Xplore, found none supporting widespread hydrogen heating. The report says burning hydrogen at home would be roughly five times less efficient than using an ordinary heat pump.
• Passenger cars. Battery electric cars convert electricity to motion directly, while hydrogen cars lose energy in electrolysis, compression and the fuel cell. The IEA's 2025 review said heavy trucks were the only fast-growing market for fuel cell vehicles, and even there costs of ownership were higher than for battery or diesel trucks.
• Routine power generation. Turning electricity into hydrogen and back again loses energy at every step. It may have a niche in long-duration storage and backup, which the IEA mentions as a resilience benefit, but it is not an efficient way to supply the grid day to day.

For a comparison with another technology that has had to prove itself against its own hype, see our analysis of solid-state batteries and global transit infrastructure.

How realistic is the project pipeline?

The gap between announcements and steel in the ground is the clearest reality check. The IEA's 2030 pipeline figure for low-emissions hydrogen fell from 49 Mtpa in its 2024 review to 37 Mtpa in 2025 and to 27 Mt in 2026. Projects that are operating, under construction or have taken a final investment decision point to just over 4 Mt by 2030.

Buyers are also hesitant. Of the roughly 1.7 Mt of new offtake agreements counted in the 2026 review, only around 20% were backed by firm contractual commitments. Without signed buyers, banks will not lend, and projects stall.

Measured against those numbers, India's 5 Mt target is very ambitious: on its own it is larger than the just over 4 Mt of low-emissions production the IEA counts as committed worldwide for 2030. Supporters argue that India's low-cost solar and wind, a large domestic fertiliser and refining market, and auction-based procurement give it a better chance than most countries. Sceptics point to the global pattern of delays and to the uncertainty the IEA flagged over incentive details.

The bottom line

Green hydrogen is real, growing and needed for a handful of industrial jobs that electricity cannot do directly. It is also expensive, behind schedule worldwide and a poor choice wherever batteries or heat pumps can do the work. The most credible near-term path, in India and elsewhere, runs through fertiliser, refining and a few steel and shipping projects, supported by public auctions and clear standards. Watch the investment decisions due by early 2027: they will show whether 2030 targets were plans or wishes.

Frequently asked questions

Is green hydrogen completely carbon-free?

Not quite. Building solar panels, wind turbines and electrolysers has a footprint, and grid electricity may be used at times. That is why India's standard allows up to 2 kg CO₂ equivalent per kg of hydrogen rather than zero.

Why is most hydrogen still grey?

Because it is cheaper. Natural gas and coal plants are already built, and in most regions the IEA finds fossil hydrogen remains less costly than renewable hydrogen in the near term.

Can hydrogen be used in existing gas pipelines?

Small blends are possible in some networks, but hydrogen behaves differently from natural gas and dedicated pipelines cost more. IRENA estimates hydrogen pipelines can cost 10–50% more than gas equivalents.

Does India export green hydrogen yet?

Exporting green hydrogen and derivatives such as ammonia is a stated aim of the National Green Hydrogen Mission, but the early auctions have focused on domestic fertiliser and refining buyers.

Sources

1. Global Hydrogen Review 2026: Executive summary, International Energy Agency, 2026.
2. Global Hydrogen Review 2026: Cost acceptability, International Energy Agency, 2026.
3. Global Hydrogen Review 2025: Executive summary, International Energy Agency, 2025.
4. Global Hydrogen Review 2024: Executive summary, International Energy Agency, 2024.
5. Hydrogen, International Renewable Energy Agency (IRENA).
6. Hydrogen Production: Electrolysis, US Department of Energy.
7. Green, blue, brown: the colours of hydrogen explained, CSIRO, 2021.
8. Cabinet approves National Green Hydrogen Mission, Press Information Bureau, 2023.
9. National Green Hydrogen Mission, Ministry of New and Renewable Energy.
10. Government notifies Indian Green Hydrogen Standard under National Green Hydrogen Mission, All India Radio News, 2023.
11. SECI auction yields record-low green ammonia price of INR 55.75 per kg, pv magazine India, 2025.
12. Review of multiple studies suggests hydrogen is not a good option for heating homes, Tech Xplore, 2022.