A manufacturing company in India decides that green hydrogen could become its next major investment. The promoter has identified industrial land, received an electrolyser quotation and is in discussions with a renewable power developer. On paper, the opportunity looks attractive.
The initial plan is straightforward. Install a 10 MW electrolyser, procure renewable power, produce green hydrogen and sell it to a refinery, chemical manufacturer or another industrial consumer.
Then the financial model is prepared.
The renewable power tariff looks low, but transmission charges increase the effective electricity cost. The electrolyser cannot operate at full capacity throughout the year. Hydrogen must be compressed before transportation. Water treatment requires additional infrastructure. The buyer wants guaranteed purity and supply availability but is not ready to sign a long-term contract at the expected hydrogen price.
Suddenly, a project that looked highly profitable becomes far more complicated.
This is exactly why a Green Hydrogen Plant Feasibility Study is important before purchasing machinery, finalising land or preparing a complete DPR.
A feasibility study is not simply a document explaining how green hydrogen is produced. It is a commercial decision-making exercise that answers a much more important question:
Can the proposed green hydrogen project actually generate sustainable returns after considering electricity cost, electrolyser utilisation, water, storage, transportation, approvals, financing and hydrogen offtake?
India is moving rapidly towards green hydrogen. Under the National Green Hydrogen Mission, the country is targeting at least 5 million metric tonnes of green hydrogen production annually by 2030, supported by approximately 125 GW of additional renewable energy capacity.
The Mission has an initial financial outlay of approximately ₹19,744 crore.
These numbers show the scale of opportunity. However, national growth does not automatically make every individual hydrogen project financially viable.
Before investment begins, promoters need to test the project from technical, financial, regulatory and market perspectives.
A green hydrogen feasibility study examines whether a proposed project is technically possible, financially attractive and commercially sustainable at a particular location.
It generally happens before the detailed engineering stage.
The study evaluates the complete project rather than only the electrolyser.
For example, a promoter may receive a quotation for a 10 MW electrolyser and assume that the equipment cost represents most of the project investment.
In reality, the complete project may also require:
The feasibility study combines all these components into one financial and technical model.
The objective is not to prove that the project should be developed.
The objective is to determine whether the project should be developed at all.
Green hydrogen production appears simple at first.
Renewable electricity is supplied to an electrolyser. Water is split into hydrogen and oxygen. Hydrogen is purified, compressed, stored and supplied to the customer.
Commercial reality is different.
Hydrogen production economics depend heavily on how many hours the electrolyser operates every year and what the effective electricity tariff is during those operating hours.
A difference of just ₹1 per kWh in electricity cost can change hydrogen production economics substantially.
If a plant requires approximately 50 kWh of electricity to produce 1 kg of hydrogen, then:
This is only the electricity component.
The calculation still does not include equipment depreciation, financing cost, manpower, maintenance, water treatment, compression, storage, replacement of electrolyser stacks or transportation.
This is why electricity procurement can determine whether a hydrogen project succeeds or struggles.
India has several natural advantages for green hydrogen development.
Large parts of the country have good solar radiation. Several states also have strong wind potential. India already has large industrial sectors consuming hydrogen, including refining, fertilisers and chemicals.
Government programmes are also helping create domestic electrolyser manufacturing capacity and hydrogen production projects.
By 2026, approximately 3,000 MW per year of electrolyser manufacturing capacity had been awarded under government-supported programmes.
Green hydrogen production capacity of approximately 862,000 tonnes per year had also been awarded across multiple projects.
Refineries are emerging as one of the important initial customers.
Around 30,000 tonnes per year of green hydrogen capacity has been associated with refinery projects including Panipat, Bina, Vizag and Numaligarh.
For a new investor, this means the opportunity is real.
But the better question is not whether India needs green hydrogen.
The better question is:
Who will buy hydrogen from your particular plant, at what price, for how many years and under what delivery conditions?
That question should be answered before major capital is committed.
There is no single standard investment figure applicable to every green hydrogen project.
The cost depends on plant capacity, electrolyser technology, electricity arrangement, storage pressure, hydrogen purity, transportation requirement, renewable generation system and site infrastructure.
A captive industrial plant supplying hydrogen directly through a short pipeline may have completely different economics compared with a merchant hydrogen plant transporting compressed hydrogen hundreds of kilometres.
The feasibility study normally divides investment into major cost categories.
The electrolyser is the core hydrogen production system.
Technology selection may include alkaline, PEM and other emerging technologies.
The evaluation should consider:
A lower equipment quotation should not automatically become the preferred option.
If another electrolyser consumes fewer kWh per kg of hydrogen, the higher initial investment may sometimes be recovered through lower electricity consumption.
Electricity is usually one of the most sensitive factors in hydrogen economics.
Suppose a 10 MW electrolyser operates at approximately 70 percent utilisation.
Annual electricity consumption would be around:
10 MW x 8,760 hours x 70 percent
This gives approximately 61.3 million kWh per year.
If the plant consumes approximately 50 kWh for every kilogram of hydrogen, annual production would be roughly:
1.22 million kg of hydrogen
or approximately:
1,220 tonnes of hydrogen per year
Now consider the electricity cost.
At ₹4 per kWh:
61.3 million kWh x ₹4
The annual electricity expense alone would be approximately ₹24.5 crore.
If the effective landed electricity tariff increases to ₹5 per kWh, annual electricity expense would increase to more than ₹30 crore.
That ₹1 difference can completely change project IRR.
This is why feasibility studies should calculate the effective landed renewable electricity cost, not simply use the headline tariff quoted by the solar or wind developer.
The model may need to consider:
Investors sometimes focus heavily on electrolyser size.
A 20 MW project may appear more attractive than a 10 MW project because it produces more hydrogen.
But installed MW alone does not determine profitability.
The important factor is how many productive hours the electrolyser actually operates.
A plant operating only during solar hours may have relatively low utilisation.
Using grid renewable power, hybrid solar-wind systems, storage or banking arrangements may improve operating hours, but each option affects electricity cost.
Suppose two projects use identical 10 MW electrolysers.
Project A operates at 35 percent utilisation.
Project B operates at 75 percent utilisation.
The capital investment in the electrolyser may be similar, but Project B produces more than twice as much hydrogen annually.
Fixed project costs are therefore distributed across significantly more hydrogen production.
This can reduce the levelized hydrogen cost.
For this reason, a feasibility study should calculate multiple utilisation cases instead of assuming constant operation.
Water is another important site-selection factor.
Electrolysis theoretically requires approximately 9 litres of water for every kilogram of hydrogen produced.
Actual plant water requirement will normally be higher because the project may also require water for:
Consider a plant producing approximately 1,000 tonnes of hydrogen annually.
At the theoretical electrochemical requirement alone, approximately:
1,000,000 kg hydrogen x 9 litres
would require around:
9 million litres of purified water per year
or approximately:
9,000 cubic metres annually
Actual raw water demand could be higher depending on water quality and treatment system recovery.
This is why land should never be selected only because renewable energy is inexpensive.
A location with excellent solar potential but weak water availability can create long-term operating problems.
India has defined a Green Hydrogen Standard.
For hydrogen to qualify under the Indian definition, emissions should generally remain within 2 kg of CO2 equivalent per kg of hydrogen, calculated according to the applicable methodology.
This means green hydrogen is not defined only by the colour of electricity used on a particular day.
Projects need proper renewable energy sourcing, metering, monitoring and emissions accounting.
For companies planning to sell hydrogen to multinational buyers or export hydrogen derivatives, traceability may become even more important.
A feasibility study should therefore consider certification requirements from the beginning.
Designing the plant first and worrying about certification later can create unnecessary complications.
A green hydrogen project can generate revenue through several business models.
The most predictable model is usually captive consumption.
A refinery, fertiliser plant or chemical manufacturer may produce green hydrogen within or close to its own industrial facility.
This reduces transportation risk and creates a clear hydrogen consumer.
Another model is long-term hydrogen supply.
The plant developer produces hydrogen and supplies it to an industrial customer under a multi-year agreement.
Green hydrogen may also be converted into:
These products may sometimes offer better transportation economics than compressed hydrogen.
One government-linked green hydrogen procurement in India reported a discovered supply price of approximately ₹279 per kg for a large refinery requirement.
However, this number should not be treated as the selling price available to every project.
Hydrogen pricing depends on:
The correct hydrogen selling price should therefore come from project-specific market analysis.
Consider an industrial promoter evaluating a 10 MW green hydrogen plant.
This is an illustrative case study only. Actual results will depend on project configuration.
Assume:
Electricity expenditure would be approximately:
₹24.5 crore per year
Now assume the hydrogen selling price is ₹279 per kg only for understanding sensitivity.
Annual hydrogen revenue would be approximately:
1.226 million kg x ₹279
or roughly:
₹34.2 crore per year
At first glance, the difference between revenue and electricity cost looks attractive.
However, the project still has to pay for:
If effective electricity cost rises from ₹4 to ₹5 per kWh, electricity expenditure increases by more than ₹6 crore annually.
If electrolyser utilisation falls from 70 percent to 50 percent, hydrogen production falls substantially while much of the fixed capital remains unchanged.
This is why the project cannot be evaluated using selling price minus electricity cost alone.
A proper feasibility model must calculate cash flow across the entire project life.
A feasibility report should calculate more than simple ROI.
LCOH represents the average lifetime cost required to produce each kilogram of hydrogen.
It considers capital investment, operating costs and hydrogen production over the project life.
Project IRR helps determine the overall return generated by the project before considering the specific equity-debt structure.
Equity IRR measures the return available to shareholders after considering debt financing.
NPV shows whether future project cash flows create value after discounting them at the required rate of return.
Debt Service Coverage Ratio helps lenders understand whether project cash flows are sufficient to repay debt obligations.
Payback indicates how long the project may require to recover the original equity investment.
These numbers should be calculated under multiple cases.
A good feasibility model normally includes:
A change of even ₹0.50 to ₹1 per kWh can significantly affect hydrogen production cost.
Long-term power procurement strategy should therefore be evaluated carefully.
Producing hydrogen is only one part of the business.
Selling it consistently is more important.
Projects should ideally secure a credible industrial buyer or captive consumer before commissioning large capacity.
Electrolyser efficiency and degradation directly affect hydrogen output.
Stack replacement should be included in long-term financial projections.
Hydrogen has low volumetric energy density.
Compression and transportation can become expensive when the buyer is located far from the production site.
Locating the plant close to demand can sometimes be more valuable than choosing the cheapest renewable power location.
Water availability should be confirmed before land acquisition.
This becomes particularly important in water-stressed regions.
Hydrogen is flammable and requires careful storage, compression and handling.
Applicable approvals may depend on project configuration and state.
Banks and investors will examine technology guarantees, offtake contracts, electricity arrangements, promoter contribution and project cash flows before funding.
A technically successful project can still become financially difficult if debt servicing assumptions are unrealistic.
A green hydrogen plant does not operate under one single universal approval.
The approval framework depends on the project configuration.
Depending on location and plant design, approvals may include:
Projects involving green ammonia, methanol or other chemicals may require additional approvals.
The feasibility report should therefore include a regulatory matrix showing which permissions are required before construction, installation, commissioning and commercial operation.
A strong feasibility study should provide enough information for promoters to make a Go or No-Go decision.
The report should cover:
The conclusion should clearly state whether the project should proceed to the DPR stage.
A DPR should normally be prepared after the primary feasibility questions have been answered.
Before moving into detailed engineering, the promoter should have reasonable clarity on:
Power, site, water, technology, customer and finance.
If these six elements are not clear, preparing a highly detailed DPR may be premature.
The feasibility study helps refine the project concept.
The DPR then converts the selected concept into an implementation-ready project plan.
This sequence can save promoters from investing significant time and money in a project configuration that later needs to be completely redesigned.
Green hydrogen has the potential to become an important industrial fuel and feedstock in India, particularly for refining, fertilisers, chemicals, steel and export-oriented industries.
But green hydrogen projects are highly sensitive to electricity cost, electrolyser utilisation and customer location.
A project operating at 70 percent utilisation with electricity at ₹3 per kWh can produce very different financial results compared with the same electrolyser operating at 45 percent utilisation and paying ₹5 per kWh.
That difference can represent several crores of rupees every year.
This is why a Green Hydrogen Plant Feasibility Study should come before equipment procurement and large capital commitments.
The study allows the promoter to understand investment requirement, hydrogen production cost, potential selling price, project returns, approvals and risk before proceeding to detailed engineering.
Green Permits supports project developers and investors with green hydrogen feasibility studies, DPR preparation, site evaluation, regulatory approvals, environmental compliance and complete plant setup consulting.
📞 Phone: +91 78350 06182
🌐 Website: www.greenpermits.in
📧 Email: wecare@greenpermits.in
Talk to Green Permits before committing major capital to your green hydrogen plant.
