Executive Summary
Gujarat’s Green Hydrogen Policy 2025 is a serious long-horizon signal. It aims to position the state as a production and export platform while also nudging domestic demand through specific use-cases. However, green hydrogen projects do not fail because the technology is unavailable. They fail because promoters underestimate the full value chain, misread the real critical path, or assume that incentives will compensate for weak fundamentals. The strategic question for business owners is not whether green hydrogen will grow. It is where it can be built profitably, what must be secured before capital is committed, and how risks are allocated across power, water, evacuation, offtake, and certification.
Market Context: Why this Policy Matters now
Green hydrogen has moved from being a “pilot topic” to a structuring problem for industry. The conversation has shifted from whether electrolyzers work to whether projects can be financed, built, and operated in a way that produces a predictable delivered cost for a credible buyer. That is a major change, and it is precisely why state policies now matter.
Gujarat’s policy matters because it is not framed as a narrow subsidy document. It is an attempt to create an ecosystem: project facilitation, land and water coordination, connectivity pathways, and the beginnings of demand creation through blending, MSME adoption, and mobility-related enabling measures. For promoters, this is important because many of the real barriers in hydrogen are not technical. They are coordination barriers. A project typically fails at the seams: where the renewable power plan meets the electrolyser utilisation plan, where water linkage meets discharge compliance, where evacuation meets storage and safety, and where production meets bankable offtake.
For Gujarat-based industrial firms, the policy is also strategically relevant even if they do not intend to produce hydrogen. It has the potential to change relative energy economics over time, shape cluster-level infrastructure investments, influence how supply chains respond to buyer requests on carbon intensity, and affect long-term decisions on industrial heat and feedstock substitution. In short, it is a policy that can change competitive positioning, not only create a new product category.
What Gujarat is Really Enabling
A common mistake in reading such policies is to focus only on incentives, as if the only question is “how much support is available.” In practice, the bigger signal is what the state is willing to actively solve and what it expects the market to solve.
The Policy’s Enabling Intent can be Understood in Three Layers.
The first layer is facilitation. Hydrogen projects need coordination across multiple departments and agencies, and delays are costly because they push out commissioning while interest and overhead continue to accumulate. A nodal agency approach and a defined governance structure are valuable because they can reduce friction, provided the promoter can submit complete, consistent documentation and respond quickly to clarifications.
The second layer is infrastructure logic. The policy’s emphasis on hubs is directionally important. Hydrogen economics tend to improve when infrastructure is shared: water treatment, desalination where needed, power pooling, evacuation infrastructure, storage and safety infrastructure, and logistics. Standalone plants can work, but they need stronger offtake certainty because they bear all infrastructure costs alone.
The third layer is demand signalling. Demand measures matter because they shape the initial adoption curve. Without demand creation or compliance pull, hydrogen adoption often remains stuck at announcements. If the state nudges blending pathways, industrial use, MSME adoption, and mobility-related use-cases, it is effectively trying to accelerate early volumes and normalise use in adjacent value chains.
The practical implication for business owners is simple. Treat the policy as a market design signal, not a discount coupon.
Business Model: Green Hydrogen is a Value Chain Play, Not an Equipment Purchase
Promoters often begin with the electrolyser because it feels like the “main asset.” That approach is one of the most reliable predictors of failure.
A commercially viable green hydrogen platform must be designed as a linked system. Renewable power access is not a line item. It is the operating engine of the project. Water availability is not a utility detail. It is a critical path constraint with quality and discharge implications. Storage and safety are not optional add-ons. They define operability and regulatory confidence. Logistics is not a later-stage topic. It determines whether the molecule can reach customers at a cost they can accept. Finally, offtake is not a marketing outcome. It is the bankability foundation.
This is why many serious promoters ultimately frame hydrogen projects in one of four archetypes, each with a different risk profile.
One archetype is the producer model, where the promoter sells hydrogen or its derivatives as a product. This model requires strong market access and contracts because price volatility and early-stage demand uncertainty can kill the economics.
The second archetype is captive industrial decarbonisation, where the promoter is also the consumer. This can be more bankable if the firm has a clear internal use-case, a willingness to pay for decarbonisation, and clarity on how the project affects total cost of production.
The third archetype is derivative-led export or domestic supply, where hydrogen is converted into a derivative such as ammonia to simplify transport, storage, and customer adoption. This is often more practical at scale because hydrogen as a molecule is demanding to move and store.
The fourth archetype is hub development, where the promoter builds shared infrastructure and enables multiple producers and consumers. This can create durable advantage but requires institutional execution capability and stakeholder management maturity.
The policy’s hub framing is a nudge toward cluster economics. Promoters who understand that nudge early are likely to structure more resilient projects.
Unit Economics: The Real Drivers that Decide Whether a Project is Bankable
Green hydrogen discussions often collapse into a single number: cost per kg. That number matters, but it is the outcome, not the driver. Bankability depends on a small set of drivers that must be engineered deliberately.
- Renewable Power Cost and Reliability: Power is typically the dominant operating cost in electrolysis, and volatility in power cost or interruptions in supply create two problems. They raise cost and they reduce utilization. Both effects compound.
- Utilization: Electrolyzers are capital-intensive assets. Underutilized electrolyzers are the fastest route to unattractive economics. This is why projects must be designed around a credible power portfolio and operating philosophy. If the power is intermittent, the project must address the utilisation gap through storage, balancing strategies, hybrid sourcing, or an offtake model that can accept variability. If it does not, the project becomes an accounting exercise rather than an industrial asset.
- Water and Evacuation Readiness: Water linkage, treatment, discharge compliance, and evacuation infrastructure often determine the real schedule, not the electrolyzer delivery date. Promoters who treat water and evacuation as “engineering to be done later” frequently discover that those items are on the critical path.
- Offtake Structure: Early markets typically need contracts that share risk sensibly. This means clarity on indexation, floor and ceiling logic where relevant, volume commitments, take-or-pay provisions where feasible, pass-throughs for policy changes, and well-defined quality and delivery specifications. If the contract structure is weak, lenders will either price risk aggressively or decline to fund.
- Premium Cost Reality: In most early adoption contexts, customers will not switch purely because the molecule exists. Adoption happens when policy support bridges the gap, when export buyers pay for low-carbon attributes, when compliance standards create a pull, or when the customer’s own economics favour switching due to a specific operational context. Promoters must be brutally honest about why a customer will pay and for how long.
The policy can improve project economics at the margin. It cannot compensate for weak offtake, weak utilisation, or weak infrastructure readiness.
Execution Traps Investors and Promoters Commonly Underestimate
Most hydrogen projects that struggle do so because promoters underestimate execution traps rather than because they misread the headline opportunity.
- Multi-Agency Coordination Risk: Even with a facilitation framework, hydrogen projects still require coordination across land, water, power connectivity, safety, local statutory approvals, and environmental compliance. Timelines are not guaranteed by intent. They are earned through execution readiness.
- Regulatory Exposure in Power Arrangements: Many projects assume that open access, banking, wheeling, and related grid charges will remain favorable enough for the model to hold. In reality, changes in charges and norms can materially alter unit economics. Projects must therefore be structured with contractual and financial buffers rather than relying on static assumptions.
- Technology Lock-in Risk: Electrolyzers and balance-of-plant systems are improving quickly. Promoters who choose equipment without upgrade pathways or without robust warranties and performance guarantees can end up with underperformance or obsolescence risk that is difficult to remedy later.
- Water risk: Desalination is not only capex. It introduces permissions, discharge compliance, operational complexity, and additional energy consumption. The project must explicitly model these implications and manage them as core workstreams.
- Market Timing and Adoption Uncertainty: Many promoters confuse policy intent with offtake certainty. Announcements are not contracts. A project becomes real only when a buyer’s procurement team signs a structure they can live with.
Operating Playbook: What a Serious Promoter Should do in the First 90 Days
The first 90 days should be used to remove bankability uncertainty, not to create presentation material.
Start by defining the project archetype precisely. Be explicit about whether the project is hydrogen production, derivative production, captive consumption, or hub development. This choice determines the risk profile, incentive fit, contracting strategy, and technical configuration.
Next, build a lender-grade offtake narrative. This does not require final contracts in 90 days, but it does require identifying anchor customers, agreeing on preliminary volume bands, and establishing a pricing logic that can be defended. If the project depends on blending or mobility-related adoption pathways, eligibility conditions and compliance requirements must be tested early.
Then lock the power strategy before selecting equipment. Decide whether the project is renewables-led, grid-led, or hybrid, and define how utilisation will be protected. If power strategy is not locked, electrolyser selection is premature.
Run water and evacuation feasibility as gating items. Treat water linkage, treatment design, discharge compliance, and evacuation readiness as critical path workstreams, not later-stage engineering.
Finally, structure the policy interface as a disciplined workstream. Facilitation frameworks help only when documentation is complete and consistent and when clarifications can be addressed quickly. Promoters should treat this as a formal programme with ownership, timelines, and evidence control.
Scaling and Performance Improvement: Where Winners will pull Ahead
As the sector scales, the competitive advantage will shift away from who entered first and toward who built the lowest-risk operating system.
Winners will push utilisation higher through better power portfolio design and operating discipline. They will standardise designs, build repeatable modules, and control costs through vendor governance. They will treat safety as an operating capability with mature procedures, training, and incident readiness. They will use cluster optimisation where possible, leveraging shared utilities, shared evacuation, shared storage, and shared compliance systems.
In hydrogen, operating discipline is not a “best practice.” It is the product.
Transaction Angle: Greenfield versus Acquisition, and What Diligence must Flag
Greenfield will remain the dominant route in the near term, but transaction activity tends to emerge around renewable platforms with land and connectivity, industrial clusters seeking captive decarbonisation pathways, and early projects that struggle because of weak offtake.
Whether greenfield or acquisition, diligence must focus on bankability, not only technical feasibility. The core diligence questions are straightforward. Is offtake bankable and does the pricing formula survive realistic scenarios? Are power arrangements stable and defensible, with buffers for regulatory shifts? Is land and water truly ready, including the real timeline to readiness? Is capex captured realistically, including balance-of-plant, storage, compression, safety systems, and grid works? Are incentive conditions understood and complied with, including caps, windows, and early-mover limits where applicable?
If diligence does not answer these, the project remains an announcement, not an investable asset.
How Hmsa Can Help
If you are evaluating entry into this space, or scaling an existing operation, Hmsa Consultancy brings hands-on support across strategy planning, performance improvement, and transaction support. We develop evidence-based business plans, size markets with defensible assumptions, design operating models and KPIs, optimize cost and working capital, and run end-to-end diligence and deal support. To explore how these levers apply to your context, reach out for a focused discussion with our senior team.
Gujarat’s policy is a strong strategic move, but it will also expose weak promoters faster than many expect. Over the next 18 to 36 months, the market is likely to split into two tracks: a small set of bankable cluster-led projects with credible offtake and infrastructure readiness, and a long tail of announcements that struggle to reach financial close. Business owners should treat green hydrogen as a risk allocation and contracting problem first, and a technology procurement problem second.
Reference: Gujarat Green Hydrogen Policy 2025
