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.