Green is the new black

Indian industrialists, among the richest in the country, if not the world, are no longer aiming for the moon. They are aiming for the sun. And wind and water. Because, after dominating multiple industries, they have now turned their sights to green energy. And that can only be good news for India’s target of generating 450 gigawatts (GW) of renewable energy by 2030.

The latest entrant in the race was Mukesh Ambani, the chairman of Reliance Industries and the richest person in Asia. On June 24, at the company’s annual general meeting, he announced two ambitious targets: for Reliance to generate at least 100 GW of solar energy by 2030 and become net carbon zero by 2035. That does two things. First, it pits Ambani against Gautam Adani, chairman of the Adani Group and the second-richest person in Asia, whose ambitions are nothing short of making his company the world’s largest solar power company. Second, the heft of the two billionaires and other industrial powerhouses could propel India’s switch to renewable energy sooner than expected.

Adani Green Energy, Adani Group’s renewable energy arm, has a portfolio of 15.4 GW of renewable energy across 11 states, of which about 25%, or 3.7 GW, is operational and the rest under construction. Finally, the Tata Group-controlled Tata Power has a capacity of 12.8 GW, of which currently 31%, or 3.9 GW, is from clean energy. It plans to boost that contribution to 80% by 2030.

But that pales in comparison with Reliance’s ambition. Ambani has committed `75,000 crore to “establish and enable” at least 100 GW of solar energy by 2030. That alone is a little over a fifth of India’s 2030 renewable energy target and double of Adani’s. Adani Green Energy aims to add 5 GW of green energy every year over the next decade and, to hit that target, it has been striking deals. The latest was acquiring SB Energy India from SoftBank Group and Bharti Group this May, which helped it hit its renewable portfolio target of 25 GW four years ahead of schedule.

“This acquisition is another step towards the vision we stated in January 2020, wherein we laid out our plans to become the world’s largest solar player by 2025 and thereafter the world’s largest renewable company by 2030,” Gautam Adani said in a statement announcing the deal.

Yet another player, JSW Energy, the renewable energy arm of Sajjan Jindal’s JSW Group, has a power generation capacity of 4.6 GW, of which 1.6 GW is from renewable sources. Its subsidiaries, JSW Future Energy and JSW Hydro Energy are in the process of constructing projects to generate 2.5 GW of renewable power, with an ultimate aim of 20 GW by 2030. Meanwhile, Tata Power, the country’s largest integrated power company, is aiming to hit 15 GW of renewable energy generation capacity in the forthcoming years and ultimately shut its coal-based plants by 2050.

These projects and plans are in tune with India’s pledge at the Paris Agreement in 2015 to tackle climate change by generating 40% of its installed power capacity from clean energy sources like solar, wind, small hydropower, and bio-power. To that end, the government has set a target of installing 175 GW of renewable energy capacity by December 2022. Its current installed capacity is 92.5 GW—the fourth largest in the world—and projects already commissioned or in the pipeline are worth nearly another 167 GW. That’s still way off India’s target of 450 GW by 2030.

“It's a mountainous task,” says Kashish Shah, a research analyst at the Institute for Energy Economics and Financial Analysis (IEEFA). “And because of Covid-19, we might delay this objective by a couple of years. But I’m very optimistic about India’s potential in renewable energy as India has one of the highest electricity demand growth. So renewables will boom, sooner rather than later.”

That boom could come as Reliance marches ahead with the “Jiofication” of the power sector, much like it did with the telecom sector a few years ago. But unlike then, its peers view Reliance’s entry in a positive light. “The power sector has been in the news for the wrong reasons for the last four-five years, but see the kind of participation from big industrial houses. Capital is not at all a constraint and, despite knowing that there are many other constraints, we are very optimistic about the sector,” says Prashant Jain, joint MD and CEO, JSW Energy.

IEEFA’s Shah explains why Reliance’s entry into the sector is welcome. “India’s renewable energy ambition needs an investment of $500 billion-$700 billion in the next decade. Their entry will bring critical mass to the industry. Reliance has a track record of delivering and bringing costs down. It’s definitely good for the industry. The capacity requirement of another 350 GW is too high for anyone to monopolise and there are other big players too,” argues Shah.

Besides the industrial houses, these players include Gurugram-based cleantech startup ReNew Power. It has more than 200 solar installation sites across 16 states and has raised around $2.3 billion so far to fund its ambitions. Close on its heels is New Delhi-based Azure Power with more than 190 rooftop solar installations in 23 states. Then there is the state-owned National Thermal Power Corporation (NTPC), which has about 1.5 GW of renewable capacity and another 3.5 GW under construction. It recently doubled its capacity addition target to 60 GW by 2032, and aims to have an equal mix of thermal and renewable power over the next decade.

All said, public and private players have invested more than $70 billion in renewable energy over the past seven years, according to the power ministry. India also has a liberal foreign direct investment (FDI) policy for renewables, allowing 100% FDI through the automatic route. That can only help boost the technology infrastructure, especially storage capacity, given the intermittent nature of renewable energy.

Technology will be a key enabler with utility-scale storage solutions allowing greater penetration of variable renewable energy by storing excess generation and firming up the renewable energy output,” says Praveer Sinha, CEO and MD, Tata Power. And what’s the situation now? “Right now for India, the battery costs are too high and the cost is prohibitive,” says IEEFA’s Shah.

One of the reasons for that, in the solar sector, is that nearly 90% of solar modules come from China. India imported solar wafers, cells, modules, and inverters worth $2.5 billion in 2019-20 alone, official figures show. To reduce that dependence and boost domestic manufacturing, the government took the twin steps of raising import duties and launching a `4,500 crore production-linked incentive (PLI) scheme to manufacture solar photovoltaic (PV) panels locally. The aim is to create an additional 10 GW capacity of integrated PV manufacturing plants in the country, and make domestic players more competitive. The government also has a ₹34,422 crore programme, called ‘Kusum’, to encourage farmers to switch to solar from diesel.

“The development of solar parks, viability gap funding support for domestic cells and modules, PLI scheme for manufacturing, grid-connected solar rooftop program, and ‘Kusum’ are a few schemes that enable companies to plan more effectively towards achieving their renewable energy targets,” argues Tata Power’s Sinha. “Technology, policy upgrades, and infrastructure support play a critical role in this journey of fast-paced renewables growth and we continue to expect government support in enabling this transition.”

The government’s efforts have already yielded results. A decade ago, solar tariffs were around ₹11 per unit. Now, the lowest tariff was ₹1.99 in an auction in January. Then, just last year, the Solar Energy Corporation of India held India’s first tender for “around-the-clock” clean power, requiring developers to produce a mix of solar, hydro, and wind energy worth at least 80% of a plant’s total capacity. Power companies say that such kind of policy support marks a new dawn in India’s transition journey.

“The transition has not been challenging, rather it has been very exciting for us. And the pandemic has made people adapt to change very quickly,” JSW Energy’s Jain says. “And that’s very good in the long run for this transition to take place.”