The entities will also develop green hydrogen derivatives, such as green ammonia, to decarbonise Posco’s power generation and steel manufacturing processes.
The agreement also aims to serve other South Korean clients of Posco.
“The partnership with Posco Holdings, a giant in their field, represents our firm commitment towards working with like-minded partners to support global decarbonisation efforts, and the critical and timely achievement of net zero targets as per the timeframes set by the Paris Agreement,” said Paddy Padmanathan, vice chairman and chief executive of Acwa Power.
“This collaboration is yet another significant step forward in ensuring a cleaner, greener future for all, one that is going to be achieved through transformative clean energy solutions.”
The global hydrogen industry is expected to be worth $183 billion by 2023, up from $129bn in 2017, according to Fitch Solutions. French investment bank Natixis estimates that investment in hydrogen will exceed $300bn by 2030.
Hydrogen has the potential to cover 12 per cent of global energy demand and cut 10 per cent of the carbon dioxide emissions by 2050, International Renewable Energy Agency said in a report in March.
Green hydrogen and ammonia produced through new greenfield investments will also support Posco’s target of producing 500,000 tonnes of hydrogen by 2030, Acwa Power and Posco said in a joint statement.
Its output will be used in applications across diverse industries, including the company’s own power generation needs, construction, energy and support other industrial off-takers in South Korea, the statement said.
As of last year, Posco has the capacity to produce 42.9 million metric tonnes of steel, making it the sixth-largest producer in the world and the largest in its home country.
Acwa Power, which operates in 12 countries across the Middle East, Africa, Central Asia and South-East Asia, raised $1.2bn from its initial public offering last year, making it one of the biggest listings in the energy space after Saudi Aramco's record IPO on the Tadawul in 2019, which raised $29.4bn.
In May, it teamed up with Oman’s OQ energy company and New York-listed Air Products industrial gas supplier to create a multibillion-dollar green hydrogen-based ammonia production unit in Oman's Salalah Free Zone.
In 2020, Air Products signed a $5bn deal with Acwa Power and Neom to build the world’s largest green hydrogen-based ammonia production unit in the kingdom's $500bn futuristic city Neom.