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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.
