India turns on the sun
Modi lures top fossil-fuel companies to back solar boom. By Anindya Upadhyay and Debjit Chakraborty in New Delhi
India’s biggest energy companies are moving beyond their roots in fossil fuels to invest in renewables, backing Prime Minister Narendra Modi’s goal to build up alternatives to the most polluting forms of energy.
Indian Oil Corp, a prominent refiner, along with Oil India Ltd, are working to build a 1-gigawatt solar farm in Madhya Pradesh. They join India’s largest conventional electricity generators such as NTPC Ltd and Tata Power Co, which are aiming to be the biggest players in clean energy.
India’s biggest oil explorer is also getting in on the game.
“We already have some wind capacities, and now we want to position ourselves big in solar,” said Dinesh Kumar Sarraf, chairman of Oil & Natural Gas Corp. “Investments in renewable energy are not for mere demonstration, but also because of business reasons. We are working toward giving renewables a reasonable share in our overall business mix.”
Modi’s support, along with a plunge in the cost of wind and solar technology, is making more renewable projects economical to develop. That’s making clean energy a bright spot in an industry where state power retailers are struggling to pay their own bills after amassing 2.5 trillion rupees (US$37 billion) in debt.
“More renewables than coal power will be built in Asia over the next 25 years, and most of it will be built by these big conventional power companies,” said Justin Wu, Asia Pacific head of Bloomberg New Energy Finance in Hong Kong.
The Indian companies are catching up to counterparts in Europe and Asia, where big energy companies have already moved into renewables. China Guodian Corp, the country’s fourth-biggest conventional power company, is the largest wind-asset owner in the world through its subsidiary China Longyuan Power Group. Other leading renewables developers include utilities Enel of Italy, Iberdrola of Spain and Fortum of Finland.
In India, companies are just starting to recognise the opportunity.
Tata Power, one of the country’s large private power producers with 7.3 gigawatts of capacity, signed the biggest renewables deal in India in June, acquiring 1.1 gigawatts of clean-energy capacity valued at $1.4 billion from Welspun Renewables Energy.
Government-owned NTPC, India’s largest power generator with coal-based installed capacity of 35 gigawatts, intends to transform itself into the largest green power producer in coming years, according to its website. NTPC and its power-trading subsidiary, NTPC Vidyut Vyapar Nigam Ltd, also act as the buyers for most solar auctions sponsored by the central government.
Another private coal-based power project developer, RattanIndia Power Ltd, told Bloomberg earlier this year that it was converting a parcel of land initially intended for conventional energy projects to solar.
Indian Oil is planning to consume part of the clean energy produced for its own refineries and sell the remainder to other public-sector enterprises such as Steel Authority of India, said Manu Srivastava, managing director of Madhya Pradesh Urja Vikas Nigam Ltd, the agency overseeing renewable policies in the province.
“The state government will provide land to the oil companies for this project and we’re looking at district Chhatarpur for the same,” Srivastava said.
Indian Oil said its project was in the preliminary stages and it was too early to comment. Officials at Oil India were not available for comment.
CLP India, a unit of Hong Kong-listed CLP Holdings Ltd, also has 1.1 gigawatts of renewable capacity either working or being planned in India.
Both local and foreign companies are being drawn by Modi’s promise to support more wind and solar developments through subsidies and auctions of power-purchase contracts. His target is to expand clean energy in India to 175GW by 2022 from 45GW currently.
Still unanswered is whether investors are able to profit from their clean energy investments. India’s power retailers are suffering losses, partly because they’re forced to sell electricity below the cost they pay for it. Their reliance on loans and subsidies has made them slower to embrace solar and wind.
“If power distribution companies don’t improve financially in next three years, clean power projects will be in danger of turning into non-performing assets,” said Nitin Zamre, managing director at the consulting firm ICF International.
Even so, Modi has mandated that utilities buy more renewable power to stimulate the industry. The government has targeted 8% of total consumption of electricity, excluding hydropower, from solar energy by March 2022.
“The fall in the price of clean energy is driving massive capacity build across Asia and that is an opportunity that even conventional energy firms can’t ignore,” said Ashish Sethia, head of Asia-Pacific gas and power analysis at BNEF.