“Reliance is investing in providing green infrastructure solutions to fuel this transformation through silicon and hydrogen – a $60 billion value creation opportunity,” Morgan Stanley said in a report.
Morgan Stanley said billionaire Mukesh Ambani’s Reliance Industries Ltd plans to transform its energy business to offer decarbonization solutions globally at a competitive price in a potentially ₹5 trillion market by 2030.
“Over the next few decades, the world will need to radically reshape the way energy is produced and consumed. Reliance is acknowledging this change and is acknowledging this change through silicon and hydrogen,” Morgan Stanley said in a report. Investing in providing green infrastructure solutions to drive change.
“The strategy is to provide supporting infrastructure in the areas of hydrogen, integrated solar PV and grid batteries – all sectors with high entry barriers, technological advancements and good returns,” it said.
The oil-to-telecom conglomerate plans to build four giga-factories offering the full spectrum of renewable/distributed energy solutions, as it capitalizes on India’s quartz and silicon resources.
The focus on the hydrogen value chain offers significant opportunities to decarbonize energy operations, compliment energy storage with batteries and potentially export green ammonia.
“Reliance’s approach is unique in that it is taking a leaf out of European oil companies to become a catalyst of electrons, with less focus on their production, and like the US majors it is taking a leaf out of synergistic decarbonization areas (existing operations) will focus on capture, hydrogen and even biofuels,” the brokerage said.
The plan will make Reliance the largest renewable infrastructure producer with the potential to become an alternative technology supplier to the world within the current geopolitical framework, as it exports high-grade refinery fuel.
“Over the past decade, Reliance investments in technology drove $125 billion in value creation from scratch and we see investments in green energy infrastructure as the key to outperforming the next decade,” the firm said from the entry to the offering. Adding to the success of Telecom data in the last decade and a half, the market has been stunned.
And silicon and hydrogen are expected to emerge as the ‘new oils’ of the next decade for Reliance, with the potential for up to $60 billion in value creation by 2025 if things go downhill.
“The new energy Ebitda capacity is now as large as the contribution from Reliance’s petrochemical business, but we expect it to be many times larger,” Morgan Stanley said.
Noting that there are many catalysts in the near term, it said chemical prices are rising, gasoline margins are at multi-year highs and demand is starting to improve. In addition, broadband subscribers are increasing and gas production is increasing at a time when global gas markets are tightening and prices are changing.
“The investments are not without risk in execution/technology changes. However, given the large domestic market and global focus on diversifying sourcing of solar panels and batteries, the hurdle for Reliance to take market share is not as high but the cost Competition versus China is important.
“Adoption of untapped technologies such as the rapid fall in the prices of liquid metal and hydrogen electrolyzers are other challenges,” it added.
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