Avendus Capital: India’s green hydrogen quest a $125-bn opportunity by 2030

A new study conducted by Mumbai based Avendus Capital suggests that the green hydrogen sector in India holds significant investment potential, projecting a cumulative opportunity of up to $125 billion by 2030. This surge is attributed to several factors including a growing emphasis on sustainability, proven commercial feasibility, expanding applications, and robust regulatory support.

Renewable energy production constitutes the largest segment of this opportunity, with an estimated investment potential of nearly $80 billion by 2030. Additionally, Avendus Capital identifies investment prospects of $30 billion for green hydrogen production, $10 billion for green ammonia, and $5 billion for electrolyser production.

Prateek Jhawar, managing director and head of infrastructure and real assets investment banking at Avendus Capital, highlights India’s advantageous position with its globally competitive renewable electricity costs, ample freshwater resources, and emergence as a manufacturing hub, all crucial for cost-effective green hydrogen production.

Regarding offtake contracts, Jhawar notes that while the commercial and industrial sector will drive initial investments, the steel industry is poised to be a major consumer, especially with the implementation of the Carbon Border Adjustment Mechanism (CBAM) in the EU.

Akhil Dokania, director of infrastructure and real assets investment banking at Avendus Capital, emphasizes that the CBAM regulation could prompt Indian steel manufacturers to transition to green hydrogen or face taxes, thus catalyzing investments in the sector.

Avendus Capital also predicts that the rise of green hydrogen will broaden the market for renewable power producers, enhancing project economics. Dokania asserts that despite early-stage investment risks, the sector is already witnessing viability for certain off-takers, with long-term contracts readily available.

However, the report acknowledges challenges hindering the sector’s full potential, such as resource constraints and funding requirements. Dokania notes that meeting the $125 billion investment potential would necessitate close to $40 billion in equity investments by 2030.

Despite these challenges, Avendus Capital observes a growing interest in the sector from various investors, not limited to traditional infrastructure or energy-focused entities. Jhawar predicts a global shift towards energy transition as a key focus for capital deployment over the next two decades, attracting investors across the value chain, from venture capital funds to private equity growth investors, eager to make early investments rather than solely relying on operational assets.