India should adopt Japan’s contracts-for-difference (CFD) model to help make green hydrogen projects bankable and accelerate final investment decisions, according to Amrit Singh Deo, Senior Managing Director at FDI Consulting and advisor to the India Hydrogen Alliance (IH2A).
Speaking on a gasworld/H2 View webinar, he explained that the bottleneck in projects reaching FID is not due to lack of demand, but bankability.
“The answer is simple, it’s offtake – guaranteed [long-term] offtake,” he said. “Without offtake guarantees, no project is going to be bankable.”
IH2A has recommended that India’s government adopt Japan’s CFD framework to overcome this financing barrier. CFDs are long-term contracts where a public agency compensates producers when market prices fall below fixed strike price, providing guaranteed revenue.
“We’ve asked the Government of India to actually replicate the Japanese CFD model,” he said. “India and Japan have signed a strategic partnership agreement, and hopefully we’ll see more FID-stage projects because of that.
Deo added that refineries and fertiliser plants would likely act as early offtakers under any CFD system.
He noted that a partnership could be the foundation for bilateral support similar to Japan’s Asia Zero Emission Community programme, which aims to de-risk low-carbon hydrogen and ammonia projects across Asia.
In the recent SECI (Solar Energy Corporation of India) auction for green ammonia, Deo highlighted that half of the winning bids mirrored Japan’s approach by joining producer and offtaker within a single consortium.
“50% of [the winning bids] have gone to players who could build a large plant and supply to three or five fertiliser locations,” he said. “This is similar to the path taken by Japan, where supplier and off-take have already been joined together.”
IH2A sees this model as a solution that could kickstart some of India’s stranded renewable energy projects. So far these account for nearly 25% of installed green capacity – over 50GW of energy.
Key players impacted by the delays include major renewable energy firms such as Adani Green, NTPC, ACME Solar, and Sembcorp – all of which have invested millions of dollars into projects that remain stalled.
This is relevant for the country’s National Green Hydrogen Mission, which targets five million tonnes per year of production by 2030.
Many announced gigawatt-scale projects in India remain on paper because they lack long-term offtake agreements and price stabilisation mechanisms.
Deo suggests a policy instrument to bridge the price gap. He described a clear $2/kg cost gap between green and grey hydrogen that needs public support to close.
“If public finance is not going to come and subsidise $2 per kg – which is roughly the delta between grey and green – then we’ll have to find different ways to finance that,” he said.
To watch the full webinar, ‘Hydrogen in APAC: Overcoming challenges and opportunities’, click here.
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IH2A’s recommendation that India’s government adopt Japan’s CFD framework could reshape how green hydrogen projects are developed in the country.
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