The steel industry is at the forefront of efforts to transition to sustainable practices, as the sector is responsible for 7% of global CO2 emissions. ​ Green hydrogen, produced through electrolysis powered by renewable energy, offers a transformative solution to decarbonise steel production. ​ India, the world’s largest producer of direct reduced iron (DRI), is uniquely positioned to lead this transition, leveraging its abundant renewable energy resources and enabling policy frameworks.

The National Hydrogen Mission was launched in 2021, with the aim of establishing itself as a global leader in green hydrogen production. ​ The mission targets five million metric tons of green hydrogen annually by 2030, supported by the Rs 17,490 crore Strategic Interventions for Green Hydrogen Transition (SIGHT) scheme. ​ This initiative promotes electrolyser manufacturing, hydrogen production and the development of integrated hydrogen hubs or “hydrogen valleys,” to centralise production, storage and utilisation. ​

Green hydrogen can be integrated across various steelmaking processes, including agglomeration, blast furnace operations, DRI processes and downstream activities like reheating and galvanising. Hydrogen-based DRI-EAF (electric arc furnace) steelmaking is particularly promising, offering up to a 90% reduction in emissions compared to traditional blast furnace-basic oxygen furnace (BF-BOF) methods. A report by Renewable Watch states that ​by FY50, green hydrogen-based DRI-EAF is expected to contribute 39% of India’s projected crude steel production. ​

While the initial setup cost for hydrogen-based DRI-EAF steelmaking is higher than BF-BOF plants, falling green hydrogen prices and rising carbon costs are expected to improve its competitiveness. ​ Green hydrogen prices are projected to drop from $7/kg in 2024 to $1.8/kg by 2040, driven by advancements in electrolyser technology and economies of scale, according to a recent report published by the CII-WWF-EY titled “Role of green hydrogen in Indian steel sector”. ​ The report adds that by 2035-2040, the cost of H2 DRI steel production is anticipated to be 25-35% lower than BF-BOF methods, making it a financially viable and sustainable alternative. ​

India’s steel sector can adopt proven technologies like alkaline electrolysis, which is commercially mature and cost-effective and emerging solutions such as solid oxide electrolysis (SOE) and biomass gasification with carbon capture, utilisation, and storage (CCUS). ​ Alkaline electrolysis, with a technology readiness level (TRL) of 9, is the most viable option for large-scale hydrogen production, while biomass gasification offers the lowest production cost at $3.7/kg, but faces challenges like seasonal feedstock availability. ​

There are several pull factors that will drive the adoption of GH by the steel industry. A key factor will be stringent environmental regulations across the world that seek to curb carbon emissions by the industrial sectors. For example, a report by credit rating agency ICRA states that the European Union’s (EU) Carbon Border Adjustment Mechanism that will come into force on October 1 this year “is expected to impact the 15-40 per cent of steel exports to Europe, between calendar years 2026 to 2034”. 

In addition, advancements towards direct reduction of iron technology will go a long way in the production of clean steel. Governments too are creating an enabling environment for the adoption of GH across industrial sectors through policy support. Increased supply and lower costs will further drive adoption of GH by industrial sectors like steel.

In order to ensure seamless production and distribution of Green Hydrogen, India will need to develop requisite infrastructure by building hydrogen hubs and pipeline networks in industrial clusters to boost efficiency and lower costs. These measures can reduce electricity and capital costs, making hydrogen adoption more affordable, according to a report by India Green Steel Coalition in collaboration with CII and EY Parthenon. Centralized hydrogen hubs, pipeline networks and advanced storage solutions are essential to overcoming infrastructure gaps, reducing transport costs by up to 90% and ensuring a reliable supply, the report adds. In the absence of standardization and fragmented supply chains, adoption of green hydrogen will remain a challenge. However, the steel sector’s decarbonization journey is not without its own challenges.

Key Challenges Faced By The Sector

1. High Initial Costs: The upfront investment for electrolysers and infrastructure is prohibitive. ​ Government incentives like production-linked schemes, tax breaks, and public-private partnerships (PPPs) can reduce costs and attract private investments. ​

2. Infrastructure Gaps: Limited hydrogen production hubs, pipeline networks, and storage facilities hinder large-scale adoption. ​ Developing centralised hydrogen hubs, dedicated pipelines, and advanced storage solutions can improve efficiency and reduce costs. ​

3. Climate Risks: Hydrogen production and transportation can involve greenhouse gas emissions and unregulated leaks. ​ Establishing emission standards and conducting environmental assessments can mitigate these risks. ​

4. Supply Chain Fragmentation: The lack of standardised processes for hydrogen transport and distribution complicates logistics. ​ Industry-wide standards, optimised supply chains, and international collaborations can streamline operations. ​

5. Technical Challenges: Inefficiencies in hydrogen technologies and a shortage of skilled workers pose barriers. ​ Investments in research and development (R&D) and workforce training can improve technology efficiency and build capacity. ​

Stakeholder actions to accelerate adoption ​

To accelerate green hydrogen adoption, key stakeholders ought to consider the following:

Government

• Developing policies with mandates for adoption of Green Hydrogen up to a certain percentage; and regulatory measures to lower renewable energy costs. 
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• Introduce financial incentives, such as tax breaks and concessional loans to steel producing companies from Green Hydrogen, production linked incentives for Green Steel and create a carbon pricing framework to create funds for capex support & attract investments.
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• Build hydrogen hubs and pipeline networks to centralise production and distribution.
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Steel Industry

• Adopt proven technologies like alkaline electrolysis and transition to green hydrogen-based DRI-EAF steelmaking.
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• Pilot emerging solutions like SOE and biomass gasification with CCUS to enhance cost efficiency.
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• Leverage public-private partnerships to co-develop infrastructure and optimise supply chains. 
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• Joint development of Green Hydrogen infrastructure for offtake.
  
  

Green Hydrogen Producers ​

• Explore business models like captive, BOO (build-own-operate), and BOOT (build-own-operate-transfer) to ensure reliable supply.
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• Invest in R&D to improve electrolyser efficiency and reduce costs.
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• Form strategic partnerships within steel hubs to create integrated hydrogen supply chains.
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India’s commitment to green hydrogen presents a transformative opportunity to decarbonise its steel sector, aligning with global climate goals and ensuring long-term competitiveness. ​By addressing economic, technological and logistical challenges through strategic interventions, the steel industry can pave the way for a greener and more sustainable future. ​ With the right policies, investments, and collaborations, India is poised to lead the global transition to low-carbon steel production, setting a precedent for sustainable industrial practices worldwide.

Sources:

• https://renewablewatch.in/2025/04/10/role-of-green-hydrogen-in-indian-steel-sector paper/#:~:text=The%20transition%20towards%20green%20steel,of%20H2%2DDRI%20by%202035.
  
• https://www.business-standard.com/industry/news/cbam-framework-to-impact-india-s-15-40-of-steel-export-to-europe-icra-123062200881_1.html