RIL’s goal of having net zero carbon emissions by 2035 includes their green hydrogen push. Green hydrogen costs will decrease due to declining renewable cost and scale economics. Foreign stockbroker Jefferies stated in a study that given the capex intensity, RIL’s solid financial sheet and backward integration puts it in the driver’s seat in the US$ 74 billion potential.
The value of RIL’s hydrogen business is $8 billion (Rs 100 per share), which represents a 20% discount from European benchmark.
Access to inexpensive land, backward integration with solar PV and energy storage systems, and GW-scale renewable generation facilities will reduce the cost of renewable energy, making the cost of hydrogen production competitive. The research stated that RIL’s fully financed financial sheet is a crucial competitive advantage because the annual capacity of 1 mmt green hydrogen requires $ 25 billion in capital expenditure.
By 2030, India wants to create 5 mmt of green H2 annually, which will cost an estimated US$ 130 billion in capital expenditures. Adoption should be aided by policy assistance such as capital subsidies, the elimination of fees on renewable energy, required usage in fertilizer and refining, increased financing for fertilizer subsidies, and the creation of a market for carbon trading. Even if the cost of renewable energy for green H2 has lately decreased, other areas still require improvement.
“We place a 20% discount on the European benchmark for the value of RIL’s electrolyzer manufacturing business and add the capitalized value of its captive H2 use. To obtain a Jun-23E fair value of US$ 8 billion, we discount its FY30E fair value at a 12 percent WACC. We maintain Buy and update PT to Rs 3,080 “stated the report.
Governments in major economies are speeding up the use of green H2 despite its greater cost to reduce carbon emissions. The EU recently defined 20 mmtpa consumption target in 2030 and expenditures of EUR 63–78 billion in the H2 ecosystem, supported by a finance strategy.
Four sectors that cause pollution can switch the grey H2 they produce in their facilities for green H2, which accounts for 98% of the world’s H2 consumption. Usage in transportation and energy generation is difficult due to high transportation costs, a lack of pipelines, and low well-to-wheel efficiency compared to batteries.