India’s green hydrogen auctions have rapidly driven production prices toward globally competitive levels, but a new analysis suggests those economics may depend heavily on access to Chinese electrolyzer technology.
According to a report by SBICAPS, green hydrogen projects awarded under existing government tenders are unlikely to achieve commercial profitability if developers rely on electrolyzers manufactured outside China, highlighting a strategic dilemma between cost competitiveness and supply chain diversification.
The finding comes as India accelerates efforts to achieve 5 million tonnes per annum of green hydrogen equivalent production capacity by 2030, one of the world’s most ambitious hydrogen deployment targets. While policy support and competitive auctions have stimulated investment, equipment costs remain one of the largest determinants of project economics.
SBICAPS argues that Chinese manufacturers currently maintain a decisive advantage across virtually every major cost component of electrolyzer production. The report concludes that developers using equipment sourced outside China would struggle to match the economics underpinning successful bids in India’s current hydrogen tenders.
The assessment reflects broader trends across the global electrolyzer industry. Manufacturing capacity has expanded significantly over the past several years, particularly in China, where aggressive investment has created substantial production capability ahead of market demand. According to the report, global manufacturing capacity remains underutilized even after accounting for demand from established industries such as chlor alkali production, and excess capacity is expected to persist as additional factories enter operation.
Despite this manufacturing expansion, electrolyzer prices remained relatively stable between 2024 and 2025. SBICAPS attributes the limited cost reductions to slower than anticipated project deployment and higher input material costs, preventing the sharp price declines that many market participants had expected as production volumes increased.
For India, the challenge extends beyond equipment pricing. The country is attempting to establish a domestic hydrogen manufacturing ecosystem while simultaneously pursuing cost competitive hydrogen production capable of serving industrial users and export markets. These objectives do not necessarily align in the near term.
The report suggests that, rather than prioritizing immediate large scale domestic electrolyzer manufacturing, India should focus investment on building national research and development capabilities for next generation electrolyzer technologies. During the initial phase of hydrogen deployment, the report argues that facilitating imports of lower cost equipment could improve project viability while allowing domestic manufacturers additional time to develop competitive technologies.
The commercial pressure is evident in recent auction results. Under the government’s Strategic Interventions for Green Hydrogen Transition (SIGHT) Component 2 Mode 2B program, oil and gas companies have awarded approximately 30,000 tonnes per annum of green hydrogen production from an initial tender volume of 200,000 tonnes annually.
Competitive bidding has driven prices sharply lower. The lowest discovered green hydrogen tariff reached ₹279 per kilogram, representing a decline of approximately 17 percent in less than a year. Including the first year production incentive of ₹50 per kilogram, successful suppliers would receive ₹329 per kilogram, leaving limited margin for higher capital expenditures associated with more expensive electrolyzer technologies.
A similar trend has emerged in green ammonia procurement. Developers secured contracts covering 724,000 tonnes per annum across 13 projects awarded to eight companies. The average winning tariff reached ₹53.3 per kilogram, while the lowest successful bid was ₹49.8 per kilogram, approximately 24 percent below the auction reserve price.
These results demonstrate growing confidence among developers regarding future production costs, but they also intensify pressure on project execution. Winning bids establish pricing expectations that developers must ultimately achieve despite uncertainty surrounding renewable electricity costs, electrolyzer performance, financing conditions, and supply chain availability.
India’s hydrogen strategy increasingly reflects a broader industrial policy challenge facing many economies pursuing energy transition technologies. Governments seek to establish domestic manufacturing capabilities to strengthen industrial competitiveness and reduce dependence on foreign suppliers, yet lower cost imported technologies often improve the commercial viability of early projects.
China’s current dominance in electrolyzer manufacturing illustrates this tension. The country’s combination of manufacturing scale, integrated supply chains, and lower production costs has enabled equipment prices that remain difficult for competing manufacturers to match. For Indian policymakers, balancing near term deployment objectives with long term industrial development may prove as important as the hydrogen production targets themselves.
