Mukesh Ambani, the chairman of Reliance Industries Ltd., has recently committed $10 billion to clean power and fuel, making it his “most challenging” mission yet.
In June 2021, Ambani upped his green wager sevenfold after India made a bold pledge to switch to non-fossil-fuel sources for half of its energy needs by the end of the decade. However, despite Reliance Industries’ recent growth spurt across business lines and strong financial performance, the conglomerate’s green technologies are not getting much attention from investors, who remain unconvinced or nervous about the ambitious plan.
Reliance Industries’ flagship Reliance Industries Ltd. is currently facing challenges in the stock market, with its shares valued at 24 times profit, sharply lower than the price-to-earnings multiple of 37 in 2020. This is in contrast to Ambani’s previous successful fundraising efforts from Facebook Inc., Alphabet Inc., and Silver Lake Partners for his digital and retail ventures, which made his balance-sheet shockproof against the impact of Covid-19. Despite the positive financial performance of Reliance Industries, green technologies, which are the centerpiece of Ambani’s strategy, are not receiving much attention from investors.
One reason for the skepticism from investors is the uncertainty surrounding the feasibility and potential impact of Reliance Industries’ green energy plan. Ambani’s goal is to make blue hydrogen from syngas, a combination of hydrogen and carbon monoxide, at a competitively priced $1.2 to $1.5 per kilogram. However, large-scale production of green hydrogen by using renewable energy to split water molecules, and realizing Ambani’s vision of “1:1:1,” a price of $1 for a kilo over a decade, looks challenging. Currently, green hydrogen costs between $6 and $7 globally, rendering it uncompetitive as an industrial feedstock and fuel against both gray and blue variants. The only way it may become competitive is with rising carbon prices in Europe, and even then, it may only be by 2035, according to the CRU Group, a commodity research firm.
Despite the challenges, Reliance Industries is pushing forward with its green energy plan. The conglomerate aims to achieve 100 gigawatts of solar-power installations by 2030, a significant portion of India’s overall goal of 450 gigawatts, which is a sevenfold increase from last year. Additionally, Reliance Industries is investing in electrolyzer manufacturing, fuel cells, and energy storage, including sodium-ion technology that could be cheaper than lithium-ion batteries used in electric vehicles. Reliance Industries sees green energy as a new and relatively untapped industry globally, which has great potential.
However, the transition to green energy in a largely fossil-fuel-powered economy of 1.4 billion people like India is not without its challenges. While the Indian government is supportive of the transition, it will require significant investments in infrastructure, technology, and regulatory frameworks to achieve the ambitious goal of switching to non-fossil-fuel sources for half of the country’s energy needs by the end of the decade.