A TERI and Transition Asia study puts hydrogen-based green steel in India at $571 to $606 a tonne against $536 for blast furnace steel, and models a shared hydrogen hub in Andhra Pradesh.
The Energy and Resources Institute (TERI) and Transition Asia released the study on 5 October at a stakeholder workshop in Visakhapatnam. It examines the economics of commercial-scale hydrogen-based direct reduced iron (H2-DRI) in Andhra Pradesh. The analysis finds green steel made entirely with hydrogen would cost $571 to $606 per tonne of crude steel, against $536 for the blast furnace and basic oxygen furnace (BF-BOF) route.
The report is titled “Is Green Steel within reach in India? Green DRI Economics, Policy Drivers and Site Feasibility in Andhra Pradesh”. It is a techno-economic analysis covering production pathways, renewable integration, infrastructure, costs and policy needs. Senior officials of the Andhra Pradesh government, state power utilities, steel, energy and technology industry leaders, and academics attended the launch.
Why Andhra Pradesh
The global iron and steel sector accounts for nearly 7% to 8% of energy-related carbon dioxide emissions. The study cites three policy drivers: the European Union’s Carbon Border Adjustment Mechanism (CBAM), India’s Carbon Credit Trading Scheme, and the Greening the Steel Sector roadmap. These sit alongside wider green steel ambitions that face economic and resource hurdles.
The state offers strategic ports, renewable resources and an industrial ecosystem. Its Integrated Clean Energy Policy covers renewables, green hydrogen, green ammonia, storage and transmission. Those assets make Andhra Pradesh a candidate site for the first green steel plant of this scale in India.
What the six findings show
The first finding is that the cost routes for green steel have converged. The ranges above imply a premium of $35 to $70 per tonne for hydrogen-based steel. The authors say reactor choice will depend on iron feed, technological maturity and emissions.
The second finding concerns the domestic carbon market. A greenfield plant earns no credits in its early years. Its gain comes from the certificate cost imposed on the existing BF-BOF fleet, which the study puts at $10 to $45 per tonne by 2035. The size of that gain depends on how fast emission targets tighten. A common emission-intensity threshold would reward the new plant directly.
The third finding is that the EU border helps only exported tonnes. Under CBAM, hydrogen-based steel would sit $179 to $209 per tonne below Indian BF-BOF steel in 2033. India exports only 3% to 5% of its steel, so most output sees no benefit.
The fourth finding treats hydrogen as the plan and natural gas as a fallback. In the same reactor, hydrogen beats gas at prices of $1.70 to $2.11 per kilogram. A gas start costs $531 to $553 per tonne. It emits 0.8 to 1.2 tonnes of carbon dioxide per tonne of crude steel and relies on imported liquefied natural gas.
The fifth finding is that power procurement drives project finance. The contract rests on two concessions: a group-captive surcharge exemption worth $81 to $94 per tonne and utility banking worth $50 to $57 per tonne. Only the base case with both concessions clears a 1.3 times debt service covenant.
The sixth finding is that hub hydrogen is the biggest lever the plant controls. Buying hydrogen at $2 per kilogram removes $1.2 billion of electrolyser capital from the balance sheet. It also raises debt cover from 1.65 times to 1.93 times.
Remarks at the workshop
Girish Sethi, senior director at TERI, described the commercial challenge for green hydrogen as a “chicken and egg” problem. He noted that many Andhra Pradesh projects are tied to export markets. Hydrogen may be available but costly, while buyers are not yet willing to pay.
Alastair Jackson, head of research at Transition Asia, said growing steel demand makes low-carbon production “not just a climate or environmental obligation but a strategic national priority.” He stressed India’s chance to leapfrog conventional routes using renewables, iron ore and green hydrogen.
Surya Prakash T.V., director of operations at the Eastern Power Distribution Corporation of Andhra Pradesh, stressed reliable and competitively priced renewable power. He pointed to exemptions in the Andhra Pradesh Clean Energy Policy 2025 on intrastate transmission charges, cross-subsidy and additional surcharges, plus infrastructure support for designated green hydrogen hubs. Srinivas K., general manager at the state renewable energy agency NREDCAP, highlighted rising hydrogen demand in refineries, steel and transport, and ammonia export opportunities in Japan and European countries.
AM Green, NTPC Green Energy and Danieli presented technology views across the H2-DRI value chain. A roundtable brought in AM/NS India, GAIL, Andhra University and the Indian Institute of Petroleum and Energy.
For green steel developers, the numbers put power contracts and shared hydrogen supply ahead of reactor choice. Those two items decide whether lenders will back a plant.
