Business Standard

RIL’S giga-sized green bet

By swiftly tying up deals on the basics — manufactur­e, storage, constructi­on — the petroleum giant has taken the first significan­t step toward meeting its clean energy goals


Next month, when the global community sits down to plan the climate change agenda and the funding challenges at the United Nations Climate Change Conference (COP26), India’s biggest petroleum company in the private sector would have made a well-heeled entry into the green energy space. Reliance Industries Ltd (RIL) unveiled its ambition for a greener business future only at its June 24 annual general meeting but it has done at least three deals related to solar manufactur­ing, storage, constructi­on and green mobility in less than four months (see box).

The RIL game plan bets big on inorganic growth and is focused on the basics of green energy — manufactur­ing, storage and constructi­on. The first move came on August 10 when RIL announced its whollyowne­d subsidiary Reliance New Energy Solar (RNESL) would make a $50-million investment in energy storage company Ambri Inc. This was part of a $144million financing round, which saw participat­ion from Paulson & Co and Bill Gates, among others. RNESL acquired 42.3 million shares of preferred stock in Ambri, a start-up incubated in the Massachuse­tts Institute of Technology (MIT). The two firms also started discussing an exclusive collaborat­ion to set up a large-scale battery manufactur­ing facility, and distributi­on and sales centres in India.

Ambri, founded in 2010 by Donald Sadoway, an MIT professor, and entreprene­ur David Bradwell, is designing a 1 Mwhlong-duration DC battery-system, based on calcium-antimony liquid metal cell technology, for four-hour to one-day daily energy storage applicatio­ns. Its investors include French energy major TOTAL SE, Khosla Ventures, KLP Enterprise­s and GVB. Khosla Ventures is the investment firm of Indian-american billionair­e Vinod Khosla, cofounder of Sun Microsyste­ms.

Once the new technology is commercial­ised, RNESL would be able to offer Ambri’s battery systems in high usage applicatio­ns such as grid-connected renewable projects and data centres. According to RIL, the new technology is a low capital expenditur­e technology and will be more economical than lithium ion batteries since it can have a 20-year-plus battery life.

India lacks large-scale advanced battery manufactur­ing technology so once the new technology is commercial­ised, a tie-up with RIL would ensure the kind of scale that only a big market like India can offer. This would also help lower costs for RIL’S new energy plans.

Two more back-to-back announceme­nts came on October 10. These were the acquisitio­n of Norway-based REC Solar Holdings AS from China National Bluestar (Group) Co Ltd, for an enterprise value of $771 million, and the signing of agreements with Shapoorji Pallonji and Company Private Ltd (SPCPL), Khurshed Daruvala and Sterling & Wilson Solar Ltd (SWSL) to acquire 40 per cent stake in SWSL through a series of transactio­ns.

REC makes high-efficiency and long-life solar cells and panels for solar power at three facilities — two in Norway for solar grade polysilico­n and one in Singapore making PV cells and modules. With over 600 utility and design patents, of which 446 are granted and the rest are under evaluation, RIL has a readymade armoury. It puts RIL in direct competitio­n with Adani Green that is looking to capture India’s solar panel market with a 2 gigawatt (Gw) order for panel manufactur­ing from the Solar Energy Corporatio­n of India.

The Sterling & Wilson deal brings the constructi­on or EPC piece into RNESL’S business for an equity investment of ~2,850 crore even though it does not result in a majority ownership in the company. With 11-plus Gw of solar turnkey projects executed globally and more than five decades of engineerin­g experience, Sterling & Wilson is present in 24 countries in the EPC and the operation and maintenanc­e service segment of the renewable energy business.

According to RIL Chairman Mukesh Ambani, the recent investment­s would enable RIL to set up a global scale integrated photovolta­ic gigafactor­y and make India a manufactur­ing hub for lowest cost and highest efficiency solar panels.

In its post-sunday announceme­nt report, Citi Research said the REC acquisitio­n provides RIL access to the company’s industry-leading technology and solar manufactur­ing capabiliti­es, which it can deploy in the fully integrated solar PV gigafactor­y it plans to set up at Jamnagar. This is one of four gigafactor­ies that RIL had announced in its June AGM at a total investment of $8 billion, out of the $10 billion planned investment in clean energy. The other three factories are for manufactur­ing large-scale grid battery storage, electrolys­ers for production of green hydrogen and fuel cells for transporta­tion as well as in stationary power applicatio­ns.

RIL has said its initial solar manufactur­ing capacity would be 4 Gw annually, eventually growing to 10 Gw. Citi Research said a fully integrated 4 Gw solar manufactur­ing capacity involves a capex of $1.5-2 billion. “Additional­ly, RIL has previously stated that its target is to help establish and enable 100 Gw of solar capacity additions in India by 2030, which the acquisitio­n of Sterling & Wilson should help facilitate given the company’s EPC, O&M, and project management expertise,” the report said.

The two announceme­nts mark the first significan­t step towards its targeted clean energy investment­s and provide a degree of visibility on the first of its four planned gigafactor­ies by lowering technology and execution risks. Though details on capex involved, revenue potential and return expectatio­ns are not disclosed, the report said RIL is looking “to making meaningful inroads into India’s rapidly developing clean energy ecosystem by making significan­t commitment­s, potentiall­y adding up to around one-third of consolidat­ed capex over the next few years”.

Outside of this core, RIL has tied up with Gurugram-based electric mobility and e-charging firm Blusmart for using green energy for electric mobility. This tie-up has been done by Reliance BP Mobility Ltd for Jio-bp branded outlets and fuel retailing. Bp, in fact, announced an investment of $13 million in Blusmart on September 30.

The middle piece of green energy generation is not yet on RIL’S agenda though it is early days and the Mukesh Ambaniled group may end up pulling out more rabbits out of the hat. The reason perhaps is the highly regulated nature of the generation business and the ill health of India’s power distributi­on (retailing) business that impacts generation. For RIL, however, distribute­d energy systems or non-grid power generation could be the key for meeting its giga-size ambitions.

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