Acme mulls options for green ammonia offtake deals

Indian solar power company Acme is expanding into green fuels and is developing projects in Oman, India, Egypt and elsewhere. Argus spoke to its president and director for green hydrogen and ammonia, Ashwani Dudeja, about offtake deals, electrolysers and policy support.

What is the main barrier to developing green ammonia projects?

Offtake is the key to everything, because without an offtake deal there will be no project finance. Only the multinational oil and gas majors with deep pockets can sponsor projects without project financing. Most renewable players trying to get into the green ammonia and hydrogen space will require project financing, which in turn is linked to long-term offtake.

How will offtake agreements be structured?

An offtake deal with a fixed-price long-term contract is what every developer will strive for — not because developers want it, but because the lenders want it. Most buyers are not willing to sign 20-year contracts on a fixed-price basis. They want some flexibility as well as volatility, so they want the ammonia price to be linked with either the grey ammonia price or the oil price or something else that is more liquid and can be hedged, if required. We will have to come up with some formulas that are acceptable to the buyer and allow the lenders to provide project financing. We don't know whether we will be successful or which model could be successful, but we have to keep trying. Fortunately, we now have templates, so future agreements should move faster. We think it could be a benchmark for others to follow. We would also be happy to follow if there was an industry move towards a green ammonia price index — let's say fob Oman, fob Middle East, fob US Gulf coast — that can help bring liquidity. Regional prices would also need to take into account the different subsidies in different locations.

Would Acme consider going into electrolyser manufacturing as well?

We are keeping our options open. We have multiple projects, and electrolysers are a key component. If we have some control over supply chain and subsequent maintenance that would be an advantage. We are in discussions to collaborate with multiple counterparties, but there are no concrete plans yet.

What effect could India's recent policy initiatives have?

India's national hydrogen mission could have a similar effect to US legislation by incentivising production, although of course it's a much smaller package of around $2bn. There is a lot of work going on for incentivising the demand side — soon there will be policy either in the form of subsidies or mandates for certain sectors. It will take a longer time to develop a market in India so initially our focus will be on export, but we are not shying away from demand creation in India as well and we are exploring possibilities for using hydrogen in industries and the mobility segment.

How will EU legislation affect projects that want to supply Europe?

The legislation hasn't come as a surprise, but we had hoped they would be more lenient on things like temporal correlation. They've given some breathing space up to 2029, but after that projects must follow an hourly correlation. It's not impossible, but it increases the cost because you need to store not just hydrogen molecules but also the electrons. That increases capital expenditure and ultimately the cost of end products for consumers.