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Adani, TotalEnergies join forces to develop green hydrogen network in India

15 June 2022 Amena Saiyid

Multinational infrastructure giant Adani Group agreed 14 June to pool its capital with the technology offered by French supermajor TotalEnergies to develop a green hydrogen hub in India, an investment analysts say represents the largest of its kind in the country to date.

Despite the scale of this investment, analysts say India will need a lot more green hydrogen capacity to meet its goal of producing 5 million metric tons (mt) by 2030.

Under the partnership, TotalEnergies will acquire a 25% stake in Adani New Industries Limited (ANIL), a subsidiary that Adani Group specifically created to develop a green hydrogen hub.

Spurred by production incentives in India's recently released national green hydrogen policy, the joint venture aims to invest $50 billion in the next eight years to develop the hub, which upon completion is expected to produce 1 million mt/year of green hydrogen from about 30 GW of renewable power capacity by 2030.

Although details of the transaction between the two companies have not been disclosed, "this is the largest deal in India and probably one of the largest in the world and [the project] is sufficient to produce 2 million mt of green hydrogen even at the current price of $4-5 per kilogram," Kashish Shah, energy finance analyst with the Institute for Energy Economics and Financial Analysis, told Net-Zero Business Daily by S&P Global Commodity Insights 14 June.

Fully integrated player

To launch this investment, ANIL initially plans to boost India's domestic fertilizer market by investing $5 billion to produce 1.3 million mt each year of urea by an unspecified date from green hydrogen made in a 2-GW electrolyzer, which will be fed by renewable power from a 4-GW solar and wind farm.

ANIL is aiming to be the largest fully integrated green hydrogen player in the world, with a presence across the entire value chain. It plans to engage in the manufacturing of equipment to produce renewables and green hydrogen, as well as production of green hydrogen and its derivatives, such as nitrogenous fertilizers (urea and ammonia) and methanol, both for the domestic market and export.

Adani Group is one of the largest renewable energy developers in India with 5.4 GW of installed solar capacity and 14.6 GW under implementation, while TotalEnergies with its experience and access to the European market "makes it the perfect marriage," Shah added.

Gautam Adani, who chairs the Adani Group, makes no bones about the firm's ambitions to make India the world's cheapest producer of green hydrogen as well as the largest green hydrogen player in the world.

"Our confidence in our ability to produce the world's least expensive electron is what will drive our ability to produce the world's least expensive green hydrogen," he said in a 14 June statement accompanying the announcement.

TotalEnergies, which already has an established presence in India through investments in renewable natural gas and LNG, said it will provide the expertise in developing renewable technologies while Adani Group will provide the enterprise with its know-how of Indian markets, rules, and operations.

Terming the acquisition of the stake in ANIL a "major milestone" in meeting the company's decarbonization goals, TotalEnergies CEO Patrick Pouyanné said the company wants "to not only decarbonize the hydrogen used in our European refineries by 2030, but also pioneer the mass production of green hydrogen to meet demand, as the market will take off by the end of this decade."

According to the green hydrogen project tracker for India that S&P Global maintains, TotalEnergies' investment in ANIL would mark its first foray into the green hydrogen space in the country.

The 14 June transaction between TotalEnergies and Adani Group buttresses an existing relationship between the two companies. The companies teamed up on a renewable natural gas project in 2018. In January 2021, TotalEnergies acquired a 20% stake in Adani Green Energy Limited (AGEL), a 50% stake in AGEL's 2.35-GW portfolio of solar assets, and a seat on the board of the company.

Green hydrogen incentives attract investors, developers

The decision from the two multinationals to team up in India is driven by the country's green hydrogen policy, which includes a slew of incentives designed to attract both domestic and foreign investors to help meet its 5 million mt-goal.

For instance, the policy proposes to set up a single portal where developers can access regulatory permissions and clearances for production, delivery, and storage as well as electricity purchases. This policy also allows producers to tap open access applications to procure electricity by green hydrogen (and green ammonia) on a priority basis that can be cleared within 15 days. It also prioritizes access to the interstate transmission network while waiving interstate transmission charges for 25 years.

Moreover, the policy allows green hydrogen producers to be allocated land in renewable energy parks, such as the one ANIL wants to build.

The green hydrogen policy identifies green hydrogen and green ammonia as "fuels that will replace fossil fuels in the future" and help wean the country off urea imports by producing it domestically.

High production costs

To reach that goal, the high cost of producing green hydrogen must be overcome.

The current cost of producing green hydrogen is about $4-$5/kg of hydrogen and it needs to be brought down to the usual $2/kg cost of gray hydrogen produced from the steam methane reformation (SMR) of natural gas, according to IEEFA's Shah.

However, Shah said the production costs could come down as renewables become even cheaper further down the line, and electrolyzers also become cheaper through economies of scale.

S&P Global data show the current cost of producing gray hydrogen in India via SMR is $5.10/kg with CCS given the current strength of gas prices, while green hydrogen production costs in India vary range between $4.40/kg and $4.70/kg.

In an 8 April note, S&P Global Associate Director Ashish Singhla agreed that India not only needs a lower production cost to meet its green hydrogen goal, but it also needs at least 130-180 GW of renewable capacity dedicated to the low-carbon fuel. This is in addition to India's national renewables target of 450 GW by 2030.

At most, Singhla said, India will build 250-280 GW of renewable capacity by 2030. The remainder will require further incentives and large-scale decarbonization mandates for hard-to-abate industries like fertilizers, cement, and steel.

Catching up to do

India has a lot of ground to make up to meet its green hydrogen goal. To date, there are at most two operational projects in India. These include a 110-kW pilot project installed in Madhya Pradesh by Vivaan Solar, and a nearly 10-MW electrolyzer installed by ACME Solar that is producing 5 mt a day. GAIL is planning to install a 10-MW electrolyzer that would produce 5 mt a day, but Singhla said it is likely to be commissioned in late 2023.

Indian companies are well aware of these challenges and some have banded together to form the Independent Green Hydrogen Association to advocate for policies that favor increased adoption of this low-carbon fuel.

The partnership between TotalEnergies and Adani Group is by no means India's first foray into green hydrogen ventures with foreign firms, Manisha Mishra, senior analyst with S&P Global's power and renewables consulting team, said in a 14 June note.

In 2022 alone, a total of 11 deals have been unveiled, including:

  • A 26 April agreement between Aker Horizons via Aker Clean Hydrogen and Statkraft to explore green hydrogen and ammonia production in India and Brazil;
  • A 19 April agreement between SFC Energy and FC TecNrgy to launch EFOY Hydrogen platform in India;
  • A 4 April venture between Indian Oil Corp., Larsen & Toubro, and ReNew Power;
  • A 15 March memorandum of understanding between Technip Energies and Greenko Group to collaborate on green hydrogen in India.

However, none of these ventures so far match ANIL's planned $50 billion investment, which will make it "by far the biggest investment in the Indian hydrogen market," Mishra told Net-Zero Business Daily.

However, Samir Nangia, energy consulting managing director for S&P Global, sounded a cautionary note about all the announced green hydrogen ventures including the latest one.

"This follows a trend of declaring headline investment numbers in hydrogen, which may or may not make it to fruition," Nangia told Net-Zero Business Daily.

Posted 15 June 2022 by Amena Saiyid, Senior Climate and Energy Research Analyst

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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