Report outlines Maharashtra’s pathway to becoming a green hydrogen hub

Maharashtra’s economy relies heavily on coal and gas. In 2021–22, it produced 56.5 million tonnes of coal worth INR 10,000 crore (US$1.2 billion), with nearly 90% used for utility power generation. Petroleum consumption reached 204 million tonnes, with petroleum and diesel at 55% and liquefied petroleum gas (LPG) at 14%. Natural gas use was close to 1 million tonnes, mainly compressed natural gas (CNG) and domestic piped natural gas (PNG).

In 2018, the state emitted about 290 million tonnes of CO2 equivalent, with 43% from public utility electricity generation. Industrial activities, captive power, and transport were other major contributors. Hard-to-abate industries like iron and steel, refineries, cement, chemicals, and fertilisers account for nearly 80% of industrial emissions.

By 2022, Maharashtra’s installed power capacity was over 38 GW, with renewables contributing nearly 38%. The Mumbai Climate Action Plan 2022 targets net zero for the city by 2050 through electric mobility and renewable energy promotion.

A recent report by RMI, Maharashtra’s Pathway to Become a Green Hydrogen Hub, evaluates the state’s competitiveness in green hydrogen production and the impact of policy incentives on narrowing the cost gap with grey hydrogen.

Current hydrogen demand and industrial base

Maharashtra’s current hydrogen demand is about 0.52 million tonnes per year, expected to rise to 1.5 million tonnes by 2030. Urea production accounts for over half, refineries for about 25%, with future demand growth likely in iron and steel and heavy-duty transport. These sectors currently rely on grey hydrogen, making them prime candidates for transition.

In fertilisers, the state’s 2021–22 demand included 2.55 million tonnes urea, 0.85 million tonnes of diammonium phosphate, and 2.15 million tonnes NPKS. India imported 7.4 million tonnes urea and 2.1 million tonnes ammonia in 2023 worth INR 2.2 trillion. State policy waivers could lower ammonia production costs to US$606 per tonne (vs imports at US$634) and green urea to US$432 per tonne (slightly above the import average of US$403), creating a potential market exceeding 1 million tonnes.

Refineries use hydrogen for hydrocracking and desulfurisation. Switching to green hydrogen could increase costs by US$3 per barrel, about 3–4% of crude oil prices. Maharashtra’s 22 MTPA refining capacity represents a 0.1 MTPA hydrogen market, which could grow to 0.4 MTPA by 2030 with the planned Ratnagiri refinery.

Steel production is nearly 9 MTPA. Conventional costs are US$350–550 per tonne, while green hydrogen steelmaking is US$650–750 per tonne. State waivers could reduce this to US$600 per tonne, enabling demand above 0.6 MTPA.

Policy framework and incentives

The Green Hydrogen Policy, approved in July 2023 with an INR 8,562 crore (US$1 billion) outlay, targets 500 kilotonnes of annual green hydrogen production by 2030. It offers reduced electricity charges, subsidies for blending in gas networks, and incentives for bus and truck use.

Anchor units (≥50 ktpa) receive a 30% capex subsidy on key equipment and renewable infrastructure, 50% exemption on wheeling and transmission charges for 20 years, and full electricity duty exemption for 15 years. This can cut production costs by nearly 30%.

Non-anchor units receive only operational subsidies: stand-alone solar projects get 50% waiver on wheeling and transmission charges and full electricity duty exemption for 10 years; hybrid solar-wind projects get 60% waiver and 15 years duty exemption. These reduce costs by 8–10%.

The policy waives cross-subsidy and additional surcharges for all projects under open access rules and removes captive vs third-party distinctions.

Cost structure and project models

Grey hydrogen costs US$1.5–1.6/kg in Maharashtra, but can exceed US$3/kg if gas prices rise. Global LNG disruptions have pushed it to US$7.5/kg.

For green hydrogen, over 60% of production cost is electricity, rising to 85–90% by 2030 as electrolyser costs fall. Behind-the-meter projects avoid transmission costs but require large land parcels; a 50 ktpa plant needs about 3 GW solar capacity and 15,000 acres.

Only captive projects currently offer viable pricing, as third-party contracts can double delivered costs. CTU-connected projects avoid most state charges and can achieve LCOH of US$3.4–4.7/kg, reduced to under US$3.5/kg with capex subsidies.

Infrastructure and hub development 

Maharashtra’s 720 km coastline, two major ports (Mumbai and Jawaharlal Nehru), 45+ minor ports, and LNG terminals at Dabhol and Jaigarh offer export potential. Extensive gas pipelines serve 23 lakh PNG connections and 570 CNG stations, enabling blending. Renewable potential exceeds 64 GW solar and 173 GW wind, with room for expansion.

The Hydrogen Valley Innovation Cluster Project (2023–2050) will develop hubs in three phases: small-scale demonstration (2023–27), large-scale deployment (2028–33), and full market uptake (2034–50). Maharashtra is a frontrunner.

Demand creation and sectoral opportunities

Heavy industries already consume 75% of the state’s hydrogen, projected to triple by 2030. Heavy-duty buses and trucks face cost challenges: fuel cell trucks cost nine times diesel trucks, hydrogen fuel is seven times more expensive, and FCEBs remain costlier than BEBs and CNG buses except on very long routes.

City gas distribution could create 0.2 MTPA demand with 5% blending. Pilots by NTPC, GAIL, and ATGL show potential emission reductions of 4% and cost savings of INR 64/month per household. Shipping, bunkering, and exports are also emerging, with agreements for a 0.9 MTPA market worth US$33.24 billion.

Roadmap and action plan

According to the report, the roadmap to 2030 involves building production, storage, and transport systems that connect renewable energy sources to end users, along with securing early adoption in key sectors such as fertilisers, refineries, steel, and transport. It also calls for developing domestic electrolyser manufacturing capacity, expanding export capabilities, and training a skilled workforce in hydrogen technologies. The report highlights the need to mobilise finance through incentives, green bonds, and public–private partnerships, as well as to establish a Green Hydrogen Hub–2030 Secretariat to coordinate these efforts.

Feasibility mapping, pilot projects, public procurement, shared infrastructure, and digital monitoring tools are part of the plan. Strong governance, industry collaboration, and innovation support will be essential for execution.

With its industrial base, renewable potential, infrastructure, supportive policies, and financial capacity, Maharashtra is positioned to lead India’s green hydrogen transition and compete globally.