ACME Group Takes Lead To Start Work On Green Hydrogen Plant
ACME Group is investing $650 million in setting up the first phase of the plant in Oman.
Even as the big players are strategising for large-scale adoption of green hydrogen in India, ACME Group has already started work on its 1.1 million tonne per annum green hydrogen and ammonia plant in Oman.
The company wants to replicate the same model in India and is in talks with the governments of Egypt and Australia to secure locations for similar plants.
The company is investing $650 million (Rs 5,200 crore) in setting up the first phase of the 300-tonne-a-day plant in Oman, and has tied up with the Norway-based firm Scatec, which has taken 50% equity in the project, Rajat Seksaria, chief executive officer of ACME Group, told BQ Prime.
The total investments planned in Oman for the two-phased development is around $5-6 billion (Rs 40,000-48,000 crore).
Edited excerpts from the interview:
ACME Group is known as one of the successful low-cost operators in the solar power segment. What drove you towards a business like green hydrogen where clarity on adoption is still unclear?
Rajat Seksaria: We intend to be an end-to-end green energy developer globally. Since we were present in solar, we are now forward-integrating into green hydrogen and green ammonia to an extent that usage of hydrogen and ammonia gets upscaled in India as well as abroad.
We have already developed a pilot-scale, fully-integrated green hydrogen and ammonia plant in Bikaner, Rajasthan. This project has given us lots of technical data and supply chain learning for our upcoming project in Oman.
Which are the other projects you are working on? What is the kind of investments we are looking at, given the projects are highly capital intensive?
Rajat Seksaria: We are setting up a large-scale 1.1 million tonnes per annum green hydrogen and ammonia plant at Duqm SEZ in Oman. The project will be set up in phases.
The first phase will have a 300 tonne per day capacity. Subsequently, it will be followed by 3,000 tonne per day of green ammonia capacity with 4-5 GW solar PV (photovoltaic) plant at the same site.
The overall project cost is estimated to be $5-6 billion. We will invest $650 million in the first phase with a Norwegian equity partner, Scatec, which has taken 50% equity in the Oman project.
Subsequently, based on our requirement, we have large equity partners who want to be part of this journey. At this point, tying up the investment is not difficult as the world is transitioning towards carbon-reducing projects.
In India, we have signed an agreement with the Tamil Nadu government for a similar-sized plant like in Oman. We have kickstarted the pre-development work. An MoU is also signed with Karnataka.
Similarly, we are in talks with the government of Egypt and Australia to secure locations to set up such plants. We seek to have 5 million tonne per annum of operational green ammonia capacity by 2030. We are looking at all high radiation zones. This is because lower the cost of electricity, more competitive would be the end product–green ammonia.
Ammonia cylinders at ACME's Bikaner Plant, Rajasthan. (Source: ACME Group)
How soon will the plant be revenue-accretive? Which sectors/companies have lined up for orders?
Rajat Seksaria: We expect the first phase of the Oman project to go on-stream in 2024 or early 2025. It will be either first or one among the first commercial-scale projects globally to deliver green hydrogen and green ammonia. Our offtake for the first phase is already tied up. Its usage is likely to be for the fertilizer industry and power plants, probably in Japan.
A big challenge in adoption of green hydrogen and ammonia is the high cost per kg of fuel?
Rajat Seksaria: The most important cost component is the source of renewable power, which will primarily depend on global horizontal irradiance (GHI) of the project location.
All our locations in Oman, India, Egypt and Australia are high radiation zones. Once that is selected, cost of the end-product can be effectively reduced through higher capacity utilisation.
Second, it is important to secure long-term, low-cost debt. These projects may not be feasible at 10-11% loans. We are trying to raise long-term dollar funds.
Third factor is the cost of equipment, such as electrolyser, modules, etc. Our estimate is that we can generate green hydrogen at $3 per kg compared to $4.5 per kg if we have high radiation locations.
In the future, we believe that if the equipment cost and rate of interest are optimised, it would be fair to estimate that cost may fall to $2 per kg in the next five to six years.
ACME's solar plant in Bikaner, Rajasthan. (Source: ACME Group)
According to you, what would be the optimum price for it to become the fuel of the masses?
Rajat Seksaria: The optimum price will vary from one sector to another. Shipping will not be that price sensitive, because IMO (International Maritime Organization) has adopted mandatory measures to reduce emissions of greenhouse gases from international shipping.
In the overall cost of transporting of goods by ships, fuel price would be a small component given that they are burning dirty oil and they have to replace it soon.
Similarly, for power it will be different for different countries. In India, the cost of power is low and it may not get replaced by green hydrogen. But in countries such as Japan, that imports expensive gas, green hydrogen at $3 and $2 will make good economic sense.
For the fertilizer sector, which is very price sensitive, at current spot prices we are 40% cheaper compared to price of ammonia that companies are paying.
An Electrolyzer unit at ACME's Bikaner Plant, Rajasthan. (Source: ACME Group)
How important is the cost of electrolyser in the overall cost of project? Besides, there are questions raised over the dichotomy of using green power to produce green hydrogen which is then used to regenerate power.
Rajat Seksaria: Cost of electrolyser is an important component as it constitutes around 40% of the capital cost. So, the end cost significantly depends on it. The cost of electrolysers will depend on the scale and demand. There is scope for it to be optimised, both from the technological and the supply chain perspective.
As far as dichotomy in usage of green power to generate green hydrogen for purpose of generating power again may appear counterintuitive, it has strong potential and relevance in countries like Japan where resources to generate green solar or wind power are negligible.
Japan buys solar energy in the form of green hydrogen or ammonia. Also, due to the intermittent nature of wind and solar power, green hydrogen and ammonia can play the role of a battery where stored energy can be reconverted into 24x7 power.
What are the challenges in terms of setting up green hydrogen infrastructure across India?
Rajat Seksaria: Pipeline and transport is the biggest challenge due to difficult hydrogen molecule, as it’s explosive. A more practical solution, which is more scalable, would be green ammonia. Green hydrogen can be easily converted into liquid green ammonia and can be easily transported globally. More so, there is a possibility of blending green hydrogen with natural gas in city-gas distribution network. However, we need to be careful on the point of blending.