L&T to work across green energy value chain; to pump in $2.5 bn in 3-4 yrs

Investment to help it tap the entire value chain from manufacturing to EPC projects

Engineering major Larsen & Toubro (L&T) has prepared a blueprint that will help it capitalise on emerging opportunities in clean and green energy. This is an area that is seeing significant interest from corporate houses, including Reliance Industries and the Adani group.

L&T's plan will include a $2.5-billion investment (nearly Rs 20,000 crore) in green energy, including green hydrogen, over the next 3-4 years as well as tapping the entire value chain in the sector. That is, from producing the fuel to manufacturing critical components such as electrolysers and advanced cell batteries to undertaking engineering, procurement and construction (EPC) projects in this space.

The company’s joint venture (JV) with Indian Oil Corporation (IOC) and ReNew Power, signed in April, is expected to drive its agenda on green energy, company officials said. One more JV with IOC has been signed for producing electrolyers, a key component.

“We will invest $2.5 billion in our green (energy) portfolio over three-four years. This will depend on how the market evolves,” said Subramanian Sarma, whole-time director and senior executive vice-president, energy, L&T.

The investment will also include Rs 5,000 crore that the company had earmarked earlier to implement and adopt green energy into its manufacturing and construction sites. This would help it achieve water and carbon neutrality targets by 2035 and 2040, respectively.

Parallely, the company has also put in place a core team of around 15-20 senior personnel to focus on offshore wind farms. This is a segment that is gaining traction, given India’s long coastline and the need to switch to non-fossil-fuel sources in the future.

Some of the players in this space include Siemens-Gamesa, Suzlon, GE and Vestas.  

“One part of the plan on offshore wind farms would be to leverage our expertise in the area and cater to requirements of the Indian market, mainly off the coast of Tamil Nadu and Gujarat, where the wind velocity is good. The second would be to support the international market in terms of fabrication and component needs that we can supply from India,” Sarma said.

On Saturday, the company took the first big leap in green energy, setting up a green hydrogen plant, capable of producing 45 kg of the fuel per day, at an investment of Rs 25 crore, at Hazira in Gujarat. The company is talking to a slew of players, including cement and steel makers as well as refineries, to set up similar plants.

“Everyone today is evaluating green energy. The need for green products, such as green steel, is only growing in view of the need to reduce carbon emissions,” Sarma said.

At a broader level, the need for green hydrogen also comes as the Energy Conservation (Amendment) Bill, 2022 — tabled and passed in Parliament earlier this month — mandates the use of non-fossil-fuel sources for industrial activity. It penalises those who don’t do so.

Currently, most companies — from cement and metals to petrochemicals — depend largely on thermal power or fossil fuel sources for their energy requirements. The share of thermal energy for manufacturing companies, according to industry executives, is almost 90-95 per cent. A small share of about 5-10 per cent comes from renewable energy sources. 

This split though could change in the future, with sector leaders such as UltraTech, Vedanta, Hindustan Zinc (HZL) and JSW Steel putting in place clear plans to transition into green energy.

Industry estimates suggest that by 2030, large manufacturing companies could have around 20-25 per cent of their captive power needs coming from non-fossil energy sources.

“To achieve India’s net-zero pledge, ultimately all industrial energy use will need to go low-carbon. The question is of timing. The phased development of the green energy market will ensure sufficient time for a comfortable transition,” said Vaibhav Chaturvedi, Fellow, Council on Energy, Environment and Water — a New Delhi-based insights and research company.

In its latest annual report, JSW Steel chairman Sajjan Jindal said the company had set aside an investment of Rs 10,000 crore to increase the use of renewable energy. It is to replace thermal power at its manufacturing units in the next few years. HZL will invest nearly Rs 8,000 crore in the next five years to make its mining operations environment friendly. UltraTech would source 100 per cent of its electricity requirements from renewable energy by 2050.

Green Push

• L&T will compete with RIL and Adani in the green energy sector
• It will produce green hydrogen, manufacture key parts, such as electrolysers, and take up EPC projects for clients
• Joint venture partners Indian Oil Corporation and ReNew Power will lend expertise and knowledge
• L&T on Saturday launched its maiden green hydrogen plant in Hazira (Gujarat) for captive use
• Firm also working on tapping offshore wind farms; core team in place