A new report by Rocky Mountain Institute (RMI), released on July 10, 2025, underscores the pivotal role of state-level policies and project optimization in shaping the techno-economic feasibility of green hydrogen production in India. The study, which examines 17 distinct project locations across India, reveals that while the National Green Hydrogen Mission sets ambitious goals, the success of large-scale projects hinges on nuanced state-specific incentives and strategic development choices, significantly impacting market viability and investment. The findings are critical for India's decarbonization efforts and its aspiration to become a global leader in clean energy.

The RMI analysis highlights that state policy waivers, coupled with national mission support, can slash renewable power costs for green hydrogen projects by over 90%. In resource-rich states like Gujarat, Maharashtra, and Rajasthan, on-site solar power costs are currently as low as ₹2.1 per kilowatt-hour (US$0.026/kWh), with projections indicating a drop to ₹1.5/kWh ($0.018/kWh) by 2030. However, off-site projects face transmission charges that can inflate landed power costs by up to 104%. States such as Odisha and Maharashtra are leading with lower or waived surcharges, significantly improving affordability. Odisha, in particular, offers an additional ₹3/kWh ($0.036/kWh) waiver, potentially reducing landed power costs by up to 94% and positioning it as one of the most competitive states for green hydrogen production.

The report differentiates between stand-alone on-site projects and those connected to the Inter-State Transmission System (ISTS) or Central Transmission Utility of India (CTU). Stand-alone projects, benefiting from subnational capital expenditure (capex) subsidies of 25% to 35% in states like Maharashtra, Uttar Pradesh, and Odisha, can reduce production costs by 20%–22%, ranging from $4.4/kg to $4.8/kg. However, these projects face scalability constraints due to land availability and proximity to industrial demand centers. Conversely, ISTS-connected projects offer production prices 20% to 30% lower than State Transmission Utility (STU)-connected projects without subsidies, with costs ranging from $4.1/kg to $5.0/kg. The study emphasizes that a substantial 50% reduction in green hydrogen production costs is still required for off-site projects to compete effectively with grey hydrogen, which currently maintains a cost gap of $1.6/kg to $3.2/kg.

For developers, critical considerations include system utilization and storage solutions. Increasing electrolyzer utilization from 25% to 85% can reduce required capacity by 70%, significantly cutting capital expenditure from nearly $1.8 billion to approximately $537 million for a 100 kilotonnes per annum (ktpa) project. While gains beyond 75% utilization are marginal, optimizing this factor remains crucial. Developers also face a strategic choice between battery energy storage and hydrogen storage. Battery storage enables higher utilization rates (up to 100%), reducing electrolyzer size but requiring significantly oversized renewable energy capacity. Hydrogen storage, while leading to lower utilization (around 33%), demands less renewable capacity. An optimal green hydrogen project, the report suggests, will likely integrate a strategic combination of both battery and hydrogen storage to balance operational flexibility, cost-effectiveness, and manage excess generation, which can also create additional revenue streams.