Adani, Total in $50  billion green hydrogen pact

France’s TotalEnergies SE and Adani Group have agreed to invest $50 billion over the next 10 years in India to produce green hydrogen and develop an ecosystem around it as they seek to cut their reliance on fossil fuels and transition to zero net carbon emissions.

As part of the plan, TotalEnergies will buy 25% in a new clean energy company, Adani New Industries Ltd, a unit of Adani Enterprises Ltd, to jointly build the world’s biggest green hydrogen ecosystem, the company said in an exchange filing on Tuesday.

In the initial phase, Adani New Industries will develop a green hydrogen production capacity of 1 million tonnes per annum by 2030.

Traditional energy majors, including Reliance Industries Ltd, Adani Group, TotalEnergies, and Shell, are investing billions of dollars in green hydrogen projects, seeking to redefine their role in a world where people are no longer or less reliant on fossil fuels.

The companies expect green hydrogen to play a crucial part in the energy transition journey and meeting their net-zero carbon emissions commitments.

While hydrogen burns without emitting greenhouse gases, its production by splitting water in an electrolyzer isn’t all that clean and is mostly made using power from fossil fuel sources. However, green hydrogen solves the problem by using renewable electricity.

“The strategic value of the Adani-TotalEnergies relationship is immense at both the business level and the ambition level,” said Gautam Adani, chairman of Adani Group.

“TotalEnergies’ entry into Adani New Industries is a major milestone in implementing our renewable and low-carbon hydrogen strategy, where we want 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,” said Patrick Pouyanné, chairman and CEO of TotalEnergies.

TotalEnergies also owns a 37.4% stake in Adani Total Gas Ltd, a city piped gas distributor.

“In our journey to become the largest green hydrogen player in the world, the partnership with TotalEnergies adds several dimensions that include R&D, market reach and an understanding of the end-consumer. This fundamentally allows us to shape the market demand. This is why I find the continued extension of our partnership to hold such great value. Our confidence in our ability to produce the world’s least expensive electron will drive our ability to produce the world’s least expensive green hydrogen,” Adani said.

For TotalEnergies, the agreement with Adani could act as a major step in increasing its share of new decarbonized molecules, including biofuels, biogas, hydrogen, and e-fuels, to 25% of its energy production and sales by 2050, according to the energy giant’s chief.

As part of the partnership, Adani will contribute its knowledge of the Indian market, execution capabilities, operations excellence and capital management philosophy, and TotalEnergies will bring its understanding of the global market, credit enhancement and financial strength to lower the financing costs and expertise in underlying technologies.

“The complementary strengths of the partners will help Adani New Industries deliver the largest green hydrogen ecosystem in the world, which, in turn, will deliver the lowest cost of green hydrogen to the consumer and help accelerate the global energy transition,” Adani said.

The company will have a presence across the entire value chain, from the manufacturing of renewables and green hydrogen equipment (solar panels, wind turbines, electrolyzers, etc.,) to large-scale generation of green hydrogen, to downstream facilities producing green hydrogen derivatives.

The deal marks the largest-ever commitment by any foreign entity to an Indian energy firm.

The green hydrogen opportunity has attracted many companies in India, including billionaire Mukesh Ambani’s Reliance Industries.

Gaurav Moda, partner and energy sector leader, EY India, said, “In the entire process industry, diesel-run transport industry and ammonia industry, green hydrogen finds a massive potential. There are two key areas where green hydrogen can make a mass replacement for fossil fuels. The entire process industry extensively uses gas, heat or oil today. A lot of metal companies are now looking for ways to become carbon-neutral, not just for the environment but also to gain carbon credits to make some money in the future.”

“Secondly, 50% of the transport fuel in India is diesel, which mainly is used by trucks that can’t use electric battery since they are too heavy and need too much power. Trucks can move into new energy only when hydrogen-led fuel-cell technology is available, which may take 3-4 years more. Half of India’s oil demand can get converted once hydrogen fuel cells come in, and that’s where lies the huge potential for green hydrogen in India. The third major potential is that hydrogen can be converted into ammonia, the demand for which will keep increasing globally,” he added.