Green steel production could prove cheaper for India

Green-hydrogen-based steel can become cheaper than new blast-furnace steel in India by 2030, driven by globally competitive green hydrogen costs and inflation-proof renewable energy contracts. This is according to a recently released study by the India Energy and Climate Center (IECC) at the University of California, Berkeley.

The study’s Executive Summary points out that India’s steel sector remains heavily dependent on imported coking coal. India’s next phase of steel expansion would lock it into more than $1 trillion in coking coal imports over the life of these assets, with material implications for energy security, foreign exchange exposure, and export competitiveness. Green steel production could help the country avoid nearly $1 trillion in long-term coking coal import costs and strengthen its position in future export markets. India can produce green hydrogen at approximately $3.00/kg by 2030, roughly half the cost of European benchmarks. With continued reductions in electrolyzer and renewable energy costs, delivered green hydrogen falls to approximately $2.50/kg by 2035, bringing green steel below $500/t. This reflects India’s advantage in low-cost clean power and competitive green hydrogen. When coking-coal price increases and rupee depreciation are included, effective cost rises to approximately $588/t, making green steel roughly four per cent cheaper in 2030.

The Summary adds that India’s green hydrogen costs are among the lowest globally. Delivered green hydrogen in India reaches approximately $3/kg by 2030. In Europe, comparable costs are two to three times higher. Hydrogen is the largest cost driver. India’s production costs are among the lowest globally, comparable to China and Brazil and below Australia, Russia, and South Korea.

According to the study, in conventional blast-furnace steelmaking, coking coal serves as the principal reductant, converting iron ore into iron. India imports over 90% of its coking coal demand. Green steel replaces coking coal with green hydrogen, eliminating the most carbon-intensive stage of steelmaking and the associated import dependence. By 2030, green steel costs 5% more than new blast-furnace steel. Once coking-coal inflation and rupee depreciation are factored in, green steel is cheaper. Three barriers to green steel investment in India. Even as economics converge, three practical constraints delay investment decisions. One, high hydrogen shares are still treated as “technology risk”. Industry and lenders cite the absence of continuous 100% green hydrogen operation as a financing barrier. The technical review finds that the binding constraints are economic and infrastructural, not process feasibility. Multiple projects globally have demonstrated hydrogen shares above 60% in shaft furnaces. Two, ore and pellet readiness is uncertain at scale, raising questions about India’s feedstock readiness. The analysis shows that ore quality is a design and cost parameter, not an absolute barrier. Three, no bankable demand signal for near-zero emission steel. India’s green steel taxonomy does not yet distinguish near-zero steel from conventionally improved steel. And no public procurement mandate or pooled offtake mechanism exists to convert the taxonomy into guaranteed demand. Without both a verifiable near-zero definition and committed offtake behind it, early projects could struggle to secure financing.

The study adds that India’s low-cost clean power and competitive green hydrogen, give it a structural advantage that few other steel-producing nations can match. This advantage is time-sensitive: as global green steel capacity scales, India’s cost edge will narrow. Policy decisions taken between now and 2029 will determine whether the next steel build-out captures this advantage, or locks in decades of imported coal dependence. Export-oriented near-zero steel projects face a coordination problem: land, statutory clearances, grid connection, and port/rail logistics sit across multiple agencies and levels of government, and delays can quickly undermine bankability. Even where levelized costs converge, early green steel projects face lender and buyer hesitation because commissioning and performance outcomes are not explicitly allocated in contracts or bounded by credible risk-sharing instruments. The barrier is not economics. It is bankability. India does not yet distinguish near-zero steel from conventionally improved steel. No pooled offtake mechanism exists for near-zero volumes. Early projects face bankability risks that standard project finance cannot address. The decisions that matter will be taken between now and 2029. They will determine whether the next steel build-out captures India’s cost advantage in green steel or commits another generation of critical infrastructure to imported coal dependence.