India is expanding its policy toolkit for green hydrogen by addressing one of the sector’s most persistent challenges: the high upfront cost of electrolyzer deployment.
Under the National Green Hydrogen Mission, the Ministry of New and Renewable Energy has released a Model Service Agreement for Electrolyzer as a Service (EAAS), introducing a standardized contractual framework intended to accelerate industrial hydrogen adoption through a service based business model rather than direct asset ownership.
Published on July 23, 2026, the agreement adopts a Build Own Operate structure that allows technology providers to finance, construct, own, and operate hydrogen production facilities at industrial customer sites. Rather than investing capital in electrolyzer infrastructure, industrial users purchase the hydrogen and oxygen produced while outsourcing plant ownership, operations, and maintenance to the service provider.
The model reflects a broader shift toward service based financing mechanisms that have gained traction in other clean energy sectors, including rooftop solar, battery storage, and industrial energy efficiency. By reducing capital expenditure requirements, policymakers hope to encourage companies that remain hesitant to invest in relatively new hydrogen production technologies despite growing decarbonization pressures.
High capital costs continue to represent one of the principal obstacles to green hydrogen deployment worldwide. Electrolyzers account for a substantial share of project investment, while uncertain electricity prices, evolving regulations, and immature hydrogen markets add further commercial risk. Under an Electrolyzer as a Service arrangement, much of that investment risk shifts from industrial consumers to specialized developers with greater technical expertise and access to project financing.
According to the Ministry, the standardized agreement is designed to simplify negotiations, reduce transaction costs, and improve commercial certainty for both developers and industrial off takers. Standardized contracts can shorten project development timelines by reducing the need to negotiate technical, legal, and commercial provisions from the ground up for every individual project.
The proposed framework establishes a 15 year operating period, beginning after successful completion of a Performance Guarantee Test. Throughout the contract, ownership of the electrolyzer remains with the developer, who is responsible for operating and maintaining the facility while supplying hydrogen under agreed performance conditions.
The commercial structure combines a Fixed Monthly Payment covering equipment leasing and operational expenses with annual price adjustments linked to the Consumer Price Index, allowing costs to be indexed to inflation over the life of the agreement. Such mechanisms provide greater revenue visibility for developers while offering industrial customers more predictable long term operating costs than market based hydrogen purchases alone.
The agreement also places considerable emphasis on operational performance. Developers must meet defined technical benchmarks covering hydrogen production volumes, product purity, and Threshold Energy Consumption, a key measure of electrolyzer efficiency. The framework tracks annual performance degradation, rewards lower electricity consumption through financial incentives, and applies penalties when energy use exceeds agreed thresholds.
Plant reliability receives similar attention. Developers are required to guarantee minimum annual availability levels, with payment deductions applicable when outages attributable to the service provider reduce plant availability below contractual targets. These provisions seek to align financial incentives with operational performance, an important consideration for industrial facilities that depend on continuous hydrogen supply.
Industrial customers also retain important responsibilities under the proposed framework. They must provide the project site, utilities, and supporting infrastructure while obtaining necessary environmental and safety approvals. In addition, hydrogen purchasers are responsible for obtaining green hydrogen certification in accordance with government guidelines. Equipment deployed under the agreement must also comply with India’s domestic content requirements and applicable national land border procurement regulations, reinforcing the government’s broader industrial policy objectives.
The Ministry has emphasized that the agreement serves as a reference model rather than a mandatory contract. Project developers and industrial consumers remain free to modify commercial, technical, and financial provisions to accommodate project specific requirements. This flexibility acknowledges the diversity of hydrogen applications across sectors including refining, fertilizer production, steelmaking, chemicals, and heavy industry.
